Cyber Liability Risks
The increasing number of online crimes is very alarming. Crimes can now be made by
criminals while staying in the comfort of their own home. By simply using their
computers and hacking skills, they can infiltrate any website like the government or
companies computer systems. If the computer systems are hacked or the customer,
employee, or partner data is otherwise lost, stolen, or compromised, the costs of
response and remediation can be significant. The company can be exposed to the
- Liability - Companies may be held liable for the costs incurred by customers and
other third parties that was a result of cyber-attack or any other IT-related
- System Recovery - This happens when the company has to repair or replace
computer systems or when they lost data, which can result in significant costs.
In addition, during the system recovery the company may not be operational
because the system is down, thus resulting to further loss.
- Notification Expenses - In several places, it is required to notify customers if a
data breach has occurred or is even just suspected in a company. After the
company has undergone system recovery, they should also inform their
customers. This activity is quite costly especially if the company has a large
number of customers.
- Regulatory Fines - There are several federal and state regulations that require
companies and organization to protect their consumer data. If a data breach
occurred, which was resulted from the company’s failure to meet compliance
requirements, therefore the company may incur substantial fines.
- Class Action Lawsuits - This happens when there is a large scale data breaches.
The lawsuit is filed on behalf of customers whose data and privacy were
With these kinds of risks that companies are exposed to, they are investing with cyber
liability insurance. Some businesses have the standard insurance policy as Business
Owners Policy or BOP, which may provide coverage for certain types of cyber incidents.
However, they also purchase a stand-alone cyber liability policy in order to customize
the needs of their company. This type of policy can cover several types of risk
including: loss or corruption of data; business interruption; multiple types of liability;
identity theft; cyber extortion; and reputation recovery.