Data Breach & Cyber Liability: Real Risks in a Virtual World

In a world where all our devices are interconnected, it is not only conceivable but likely that a miscreant who gains access to one device could quickly access your whole virtual world – bank accounts, online memberships, employee records, and actual control of the devices you rely on every day. Even if you utilize a 3rd party to provide and administer all or part of your company’s technology services, ultimately, your client can sue you if a breach of private information occurs.  Also, it will be incumbent upon you to provide a defense that could cost tens of thousands of dollars, not to mention potential damages. Even if the vendor provides you with a ‘Hold Harmless Agreement’ with defense cost, the validity of such a contract is often adjudicated in court, which will cost you money upfront while you sue their insurance company.

Your Protection

Your first line of defense is maintaining adequate internal controls to prevent occurrences. Prevention is your best protection. Your security plan should draw from Executive Management, IT, Operations, and Finance. Simply throwing the task to IT could only leave holes in your security protocols if you involve all departments in your organization. If you are a small business owner and wear many hats, you must change hats and look at your security measures from various perspectives.

Your second line of defense should be a crisis management plan to contain and prevent further damage when a security breach occurs. The publicity surrounding a cyber breach can create severe and sometimes irreparable reputational damage. If you wait for an event to happen before you think about how you’ll handle it, a situation could escalate beyond your control while trying to figure out a plan of action. In the case of a breach, immediate response is the key to a successful outcome, so having a plan in place is paramount.

Your last line of defense is funding your catastrophe with a thoughtfully constructed Cyber Liability Insurance program. One that helps maintain your business’s viability. Once the cat’s out of the bag, it becomes a matter of money. The expenses associated with a cyber breach can be astounding.  According to a Ponemon Institute study,  it can cost $195 for every compromised customer’s data record, plus hiring consultants and possibly mounting a defense, which could cost $50,000 or more.

Risk Considerations

The following are four main areas that your business needs to address to ensure a comprehensive security plan is in place:

• Technology Errors & Omissions – ensure that your product or service does not have embedded flaws that could lead to a security breach for a client.
• Network and Information Security – preserve and protect customer and corporate data from an internet breach, lost/stolen devices (laptops, smartphones, etc.), and internal hard copy files. You must also protect against outside hackers and address the threat from rogue employees.
• Website Liability – secure your website so hackers cannot access sensitive information and cannot inject harmful or malicious code that could be disseminated from it.
• Advertising & Media – protect your business against claims of detrimental reliance from customers who claim your product or service did not live up to its promotional material.

Take Action

When a severe data breach occurs, you have the equivalent of a five-alarm fire in your house. You’ll need additional support to help your business put out the fire and rebuild.  To ensure that your security plan will sustain your business, you can’t afford to ignore the importance of having cyber liability protection, which isn’t covered by most basic liability policies. Choosing to ignore the risk is not a good plan. The threat to your business is real and increasing daily as we become more interconnected and reliant on technology.

Please Contact Us at Murphy Insurance to learn about Cyber Liability Protection and discuss your options.

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