By UNITEL Staff
Every business has unique risks that seriously can harm an organization’s operations if not properly protected against.
As a business utilizing technology to produce and deliver products and/or services, it’s important to recognize and take precautions against risks that your commercial general liability insurance coverage doesn’t include.
Technology professional liability coverage, also referred to as cyber liability coverage, is essential for companies using technology because it addresses a lack of protection in commercial general liability policies, which typically don’t cover claims of third-party financial harm.
Cyber threats are real, growing in number and sophistication. There is an increased potential for errors and omissions, copyright or trademark infringement and breaches of private information.
Technology businesses today are driven by data. With that comes the profound responsibility to protect customers’ private information, to prevent the inadvertent transmission of computer viruses and to ensure that authorized users are able to securely access your website or computer network.
The theft or misuse of private or confidential customer information occurs daily.
Who needs cyber liability coverage? Any communications company engaged in providing computer services, Internet services or those companies using the Internet in its everyday course of business.
Here are some activities that can create cyber risk:
- Use of Email
- Support of Webmail
- Internet Service Providers
- Dependence on Network Services
- Electronic Storage of Customer Information
- Storage of Third-Party Trade Secrets and Data
- Online Advertising and Marketing
- Web Site Design, Development and Ecommerce
- Web Site Activities (Content, Links)
- E-Commerce
- E-Brochures/E-Catalogs
- E-Bill Payment
- Internet/Digital Media
- Electronic Bulletin Boards or Social Interaction
What does tech error and omissions (E&O) or cyber liability cover?
Tech E&O manages risks, resulting from providing a product or service to a third party that are not covered by a commercial general liability policy.
Specifically, tech E&O protects your business in the event that a third party suffers a financial loss due to your product or service not performing as it was intended or expected, including the event of an error or omission committed by your company.
These policies also cover defense costs in the event of litigation.
Tech E&O coverage would apply in the following situations:
- A mistake was made and an error in the code of a website or program your company produced isn’t found before it is implemented. A third party depends on this product or service to operate its business and its operations are stalled due to the error, causing them a financial loss.
- A part your company produces is installed in a piece of equipment. After a short amount of time, the component simply stops working, causing the equipment to fail, but otherwise not damaging anything or hurting anyone. The third party that relies on this equipment for its business has to stop operations and suffers a financial loss.
- An employee of your company recommends that a client make an adjustment to its network. The client follows the advice and its network crashes as a result, causing a time and financial loss for its operations.
In all of these cases, commercial general liability coverage would not cover a claim or any costs of litigation because of the presence of an error and the lack of resulting physical damage to the third party’s property.
It should be noted that tech E&O policies usually exclude product recall, but some will accept damages for loss of use of a failed product. They also generally exclude non-financial losses and intentional or dishonest acts.
A lot can be done to reduce or eliminate exposures through better understanding of the coverages you have and do not have. Not all exposures require an insurance policy to control or avoid a loss.
Contracts also can have a dramatic impact on your exposure to liability as a result of the acceptance or transfer of risk. However, some exposures are best solved by a technology errors and omissions policy (cyber liability).
Often we think of war being fought with bombs and bullets, but there is a silent attack called cyber attack, using only a computer. With the increase in electronic productivity our lives are more exposed than ever to an attack that can grind our business to a stop.
The number of cyber threats we face daily are becoming staggering. Remember planning for cyber attacks should be considered when putting together your company’s emergency plan.
It is essential to conduct a risk analysis to identify exposures you may have and to what extent they exist. Purchasing a cyber liability policy may not meet your needs at all. In fact, without a thorough analysis of risk and coverage you may end up buying a cyber liability policy that only partially meets your needs.
UNITEL can offer special pricing, coverage and risk management tools to INCOMPAS members.
RELATED: INCOMPAS 2016: Privacy, Security Highlight Day 2 Education
