Cyber Liability and Data Breach Expense Coverage

Cyber Liability and Data Breach Expense Coverage is an insurance coverage that has come along in the past 10 years as a response to the significant amount of sensitive data that is stolen every year by criminal hackers. While it started out as a separate policy, it is now integrated into most Business Owner Policy packages, although it can be purchased as a stand-alone policy if your insurer does not offer it through your BOP.

Whatever your business, we all handle some form of sensitive information ranging from credit card or checking account information, to social security numbers, to account passwords that allow access to additional sensitive information. We also know that regardless of how good your security system is, you cannot defend against a determined hacker. Over the past five years, we have all seen large corporations, prominent retailers, the US government, and various health care companies who have fallen prey to data breaches ranging from electronic intrusion to significant lapses in good judgment by employees that has led to sensitive data loss, and triggered a significant financial and public image nightmare for each of those organizations.

Cyber Liability provides coverage for your business for a number of things. First, and usually most expensive when a breach occurs, is third party liability coverage for information security and privacy coverage. It also provides coverage for expenses related to regulatory defense and penalties, and last and most important to your customers, privacy breach response services. In plain English, that means that if your company experiences any of these…..

  • A theft, loss, or unauthorized disclosure of your customer’s personal information
  • If you were attacked and experienced destruction of data,
  • If your computer systems were the target of a denial of service attack or virus transmission, or if the hackers used your systems to transmit viruses or perpetrate a DOS attack on someone else

……..then this coverage will cover the costs of legal defense, penalties, and costs associated with any claims of liability that are brought against you, as well as the costs of response to a regulatory proceeding resulting from any alleged violation of privacy law including security breach.

In the case of personal information in your systems that may have been compromised, this policy will provide forensic and legal assistance from a panel of experts to help determine the extent of the breach and the steps needed to comply with applicable laws, notify customers who must be notified by law, and a discretionary notice to individuals potentially affected by a breach in such a way that notification isn’t required by law. It will also pay to cover the expenses of providing support to affected customers in the form of things like credit monitoring.

In addition, many insurance companies offer help and resources free of charge so that clients can see what they need to be doing to protect themselves before they are the target of a cybercrime, and how to educate their employees to avoid incidents in the first place.

The Insurance industry estimates that half of all cybercrime incidents will be against businesses with less than 1,000 employees…..and a third against businesses with less than 100 employees. Your small business is a target because 80% of small businesses do not secure their data or their networks, making them easy targets. Furthermore, roughly half of all electronic intrusion events are successful because an employee acted with poor judgment.

These are sobering statistics and until a better way of policing the web is found, it remains up to individual businesses to protect themselves and their customers. Coverages like Cyber Liability are key in providing that protection, so if you don’t have it yet, give your insurance agent a call and ask why not!


This post was written by Aaron Nicklay, Agent with Farmer’s Insurance. If you would like more information on cyber liability and data breach expenses and how Aaron can help protect you and your business, contact him at or call (952) 229-5155.

Leave a Reply

Your email address will not be published. Required fields are marked *