Small Company? Big Cyber Liability.

Cyber Liability for the average owner

During the age of technology, cyber liability is quickly emerging as perhaps the most important, and yet least understood form of insurance coverage. 

While many smaller companies often consider cyber liability to be exclusively for giants such as Target, or Sony, this is simply not the case.

As many as 70 percent of all cyber attacks on businesses world wide involve employees who unwittingly compromise security

In layman's terms: if you handle any sensitive customer data - you DO have a cyber liability exposure. A company that has a website, or transacts any e-commerce business is a clear candidate for cyber liability protection. Furthermore, did you know that any local business or bars that utilizes a point of sale (POS system), also have cyber liability exposure? 

Any business that accepts debit / credit card payments must be aware of their liabilities that arise from the 'Merchant Service Agreement' they signed. In the event their card processing company is breached and your client data is illegally accessed, you may become liable for expensive fines, a forensic audit, and legal / defense costs; no matter how frugal the case may be.  The reasoning behind this claim, is that although a third party was hired to handle the electronic transaction, the client originally entrusted the merchant with the security of their data. Moreover, companies can trickle down costs of fines or regulations to the merchant. Essentially, as explained by AmWINS Group Inc., "a Merchant Service Agreement places additional obligations on a merchant when a card company considers the merchant as the potential source of the breach". 

Other possible cyber exposures for small business are as follows:

1. Your employees utilize company laptops, smart phones or remotely access data from home. If any of their devices are lost, stolen or compromised, you will be liable for damages resulting from your failure to protect the private data they contain.
2. Misdirected emails sent by yourself or employees could lead to the inadvertent disclosure of information or data which would leave you liable.
3. A hacker takes your data or website hostage and demands a ransom for the return. With only general liability coverage, you would be left to cover these costs alone.  
4. After data is compromised, there are still additional breach response service costs to consider: client notification, credit monitoring and identity/credit repair to name a few.

In the ever evolving technological state we live in, it has never been more important to discuss your cyber liability coverage with your insurance broker. Be sure to evaluate the coverage you are offered even from the most reputable carriers as some of these policy forms carry a contractual exclusion. This common clause appears to exclude any claim coverage for liability which is derived from a contract or agreement - which would almost always be the case in a 3rd party or POS claim situation! 

Cyber is the breaking edge of coverage in 2016;

coverage any smart business owner will not ignore.  

Thank you for taking the time to read along! 

Until next time.

Best Regards,
Daniel Guiney
Your friendly neighborhood insurance broker

Info-graphic source: https://breachlevelindex.com/

Views expressed here do not constitute legal advice. The information contained within this article is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for actual language.