A new installation corrupts your client's database.
A hacker pulls off an unauthorized entry into the credit files you're storing for a retail customer.
Both of these are examples of data breaches, and chances are that they’ll eventually affect your business. When they do, they've got the potential to sink you if you don't have adequate Cyber Liability Insurance.
What Is Cyber Liability Insurance?
Your firm can be held responsible for an array of third-party and first-party costs in the aftermath of a data breach. (Find out why small firms are more susceptible to data breaches in "Why Small Firms Are More Vulnerable to Data Breaches.") You can expect the highest costs in the form of legal fees to defend against lawsuits brought by clients and others. Beyond those costs, there's a substantial price for auditing and containing the breach, notifying your customers, and paying government fines. Further data breach liability involves losses from your damaged business reputation, the loss of clients, and business interruption.
Standard business insurance doesn't cover these liabilities, and that's where Cyber Liability Insurance steps in. Also called Cyber Risk Insurance and Data Breach Insurance, this specialized coverage protects you in the event of numerous cyber-related mishaps. Your insurance agent can tailor the coverage to fit your technology firm. Your policy coverage can include coverage for a number of potential expenses, including…
- Business interruption.
- Replacement of data or systems.
- PR and crisis management.
- Cyber terrorism or extortion.
- Regulatory compliance.
- Libel / slander suits arising from e-content.
- Introduction of damaging code.
- Lost and / or corrupted data.
- Invasion of privacy.
- Data tampering.
Epsilon Data Management became all too aware of data breach liability exposures when it experienced one of largest data breaches of all time. A client list including Best Buy, Chase, Kroger, JP Morgan, Target, TiVo, and Walgreen's relied on the firm to manage their email communications.
Unfortunately, hackers managed to gain unauthorized access to Epsilon's client data of names and email addresses. An estimated 60 million records were affected before the breach was contained. The costs for auditing the incident, paying fines and legal fees, and covering lost business ran into the billions.
Other Costly Data Breaches in the News
The owners of T.J. Maxx and Marshalls endured a data breach that took place over a period of more than 18 months. TJX Companies reported that cyber thieves captured more than 45 million of its customers' credit card numbers. The company eventually settled with 41 states for a price tag in the millions.
TD Ameritrade also suffered a data breach that led to the cyber theft of private, third-party information. The estimated loss for the compromised account data surpassed $6 million.
The hard-luck stories pile on, and they're not reserved for just the largest of companies. A court found Boston-based Briar Group, a restaurant management firm, liable for its failure in following basic cyber security protocol after hackers gained entry to customer credit and debit card information. The company's cost for inadequately securing sensitive, third-party data ran into six figures.
Managing Your Cyber Risk
These days, leading-edge technology and leading-edge liability go hand in hand. You can't avoid risk, so it's critical you safeguard your business on two levels. You can minimize risk by following industry-standard, security best practices. The second, imperative key is to manage the risk by safeguarding your company with Data Breach Insurance. (Read more about why Data Breach Insurance is growing in importance.) The policy you put in place today is the best defense against the data breach that's coming tomorrow.