Cyber Liability Insurance

What Is Cyber Liability Insurance?

Often purchased as part of a Technology Professional Liability policy cyber liability insurance coverage is designed to protect IT businesses against liability and expenses arising from the theft or loss of data, as well as liability and expenses arising from a breach of data security or privacy, particularly when you are hosting client information. While your clients should carry their own cyber liability for the data and personally identifiable, confidential information stored on their servers, IT firms are wise to protect themselves with their own third-party coverage as well.

Cyber liability refers to an IT firm’s liability when it is responsible for the security and privacy of a client’s data stored on the IT firm’s servers. Cyber liability insurance policies typically include coverage for:

  • Denial of service attacks or inability to access websites or systems
  • Unauthorized access to, use of, or tampering with data
  • Disclosure of confidential data (invasion of privacy)
  • Loss of data or digital assets (malicious or accidental)
  • Introduction of malicious code or viruses
  • Cyber extortion or terrorism threats
  • Personal media injury (defamation, libel, or slander) from electronic content
  • Regulatory action, notification, or defense expenses
  • Crisis management and public relations expenses
  • Data or system restoration
  • Business interruption expenses
Why Do I Need Cyber Liability Insurance?

The costs associated with theft or misuse of client data can be immense: The average cost to a U.S. business for a data breach in 2009 was $6.7 million, according to the Ponemon Institute, a research center dedicated to privacy, data protection, and information security policy. Losses can include direct costs involved in investigating what happened, notifying those affected, credit monitoring, litigation, and government fines, as well as indirect costs such as lost business and damage to the company’s reputation and stock price.

If your client accuses your IT company of causing or failing to prevent a breach of data hosted on your systems, you could be held responsible for these expenses.

Cyber liability insurance protects IT businesses that host personally identifiable information or private data. Companies that provide software as a service, web hosting services or data storage services are at the most risk, but any IT service provider that handles private client information should consider purchasing this coverage. For example, an IT consultant who stores a client’s private employee files on a laptop temporarily is at risk for damages if that laptop should be stolen.

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Cyber Liability Related Resources