Cyber Insurance Policy

Litigation – covers costs to defend lawsuits, including class actions, involving allegations of a failure to prevent the unauthorized use / access of confidential information or of a failure of system security to prevent or mitigate a computer attack, the spread of a virus, or a denial of service, and the payment of judgments, settlements and damages arising out of such a cyber-incident.

Governmental and regulatory – covers costs to respond to or defend against governmental investigations or proceedings, as well as the payment of fines and penalties, relating to a cyber-incident.

Credit and fraud monitoring – covers costs for customer credit monitoring, identity theft protection services, and fraud monitoring following a cyber-incident.

Multimedia – covers costs related to claims of online defamation, copyright and trademark infringement.

Similar to other types of insurance policies, cyber insurance policies often exclude certain losses from coverage. Typical exclusions include claims arising from war, breach of contract, theft of trade secrets, unfair trade practices, and employment practices. Cyber insurance policies also typically exclude coverage for willful, intentional, deliberate, malicious, fraudulent, dishonest, or criminal acts or omissions of the insured.

There are two kinds of cyber liability insurance: first party and third party.

First-party cyber liability insurance

First-party cyber liability insurance covers data breaches at your own business. For example, a hacker could steal clients’ credit card numbers from an IT consultant’s database. First-party cyber liability can cover expenses related to:

• Notifying clients or customers about the breach
• Credit monitoring services for affected clients
• Cyber extortion demands
• Third-party cyber liability insurance

When a client suffers a data breach or cyberattack, you could face a lawsuit if they believe you were negligent in preventing it. For example, your network security company could set up cybersecurity for a client who suffers a breach and sues your business.

Third-party cyber liability insurance

protects your business from expenses related to the client’s lawsuit, such as:

• Attorney’s fees
• Court costs
• Settlements or judgments

For technology, web, and IT businesses, third-party cyber liability insurance is usually bundled with errors and omissions insurance. Both policies protect against accusations of negligence. The package is called technology errors and omissions insurance, or tech E&O.