Technology, Cyber, and Privacy Coverages

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Technology, Cyber, and Privacy exposures pose major threats to the balance sheets of every organization. Most organizations do one or more of the following:
  a) provide technology services
  b) utilize the internet or computer networks
  c) collect confidential information
  d) store confidential information in digital or paper form
  e) contract with 3rd parties to do one or more of the above on their behalf.

The coverage an organization needs depends on the services it provides and the exposures it has to technology and information risk.

Listed below is a simple guide you can use to diagnose your company's technology and information risk:

Technology Errors & Omissions (E&O) - Coverage for organizations that provide technology professional services or technology related products.

Cyber Liability - Coverage focused on tackling the intangible risks of doing business over the internet. This includes the use of websites and networks for any business need.

Privacy Liability - Coverage for any organization for liability and direct costs associated with failing to protect personally identifiable confidential information and corporate confidential information.

By blending the three coverages, an organization can secure the appropriate balance of insurance to transfer any unique risks they may encounter.

What is Technology E&O and why is it needed?

Common Technology Classes* Software Development; Technology Consulting; Application Service Provider (ASP); Technical Support; Internet Service Provider (ISP); System Engineering; System Integration; Telecommunications; Technology Services Staffing; Web Design; Web Hosting; Data Processing; Hardware Manufacturer * Not an exhaustive list

Technology E&O is a vital coverage for any technology professional, regardless of the organization's size. It is a form of Professional Liability insurance that protects technology professionals from liability arising out of providing or failing to provide technology professional services or products. Negligence and unintentional breach of contract are common allegations directed toward technology professionals today.

Litigation in the event of a claim can be costly. The specialized nature of the work technology professionals perform, the sensitivity of the information they handle, and the impact an error can have on their business make them particularly vulnerable to a variety of claims. Defense costs alone could severely impact the viability their business. Technology professionals should not rely on contract requirements to determine their insurance needs. If services are provided or products are created, a Technology E&O policy should be pursued.

S. H. Smith Coverage Tips:

• General Liability policies do not cover technology professional services. Most Technology E&O policies provide more extensive Personal & Advertising Injury coverage for technology and internet exposures. They also can be extended to cover Bodily Injury and Property Damage arising indirectly from technology professional services.
• Many Technology E&O policies claim they cover intellectual property (IP). However, such policies only extend to internet media. Software Copyright is a key exposure that often goes uncovered.
• Technology professionals often provide non-technology services. Many forms do not address these exposures.
• Some products provide virus and unauthorized access coverage. The wording in these coverages can be quite narrow. Coverage forms should be selected based on the size and complexity of an applicant.

What is Cyber Liability and why is it needed?

Cyber Liability is an important coverage for any organization that utilizes websites or networks to provide professional services or to support their business. It is a form of Professional Liability insurance that protects organization from liability arising out of the use of the internet. Common coverages include Network Security and Internet Media. Network Security covers loss exposures due to virus and unauthorized internet access. Internet Media covers loss exposures due to personal injury and intellectual errors stemming from content disseminated by the organization. Traditional liability policies generally exclude intangible cyber exposures resulting in gaps in an organization's insurance portfolio.

S. H. Smith Coverage Tips:

• All policies available in the marketplace are not equal. "Cyber Liability" is often used as a generic term for any of the three categories of coverage noted above.
• Errors & Omissions (E&O) coverage is not offered in every form. If an organization provides a professional service online, they may not be covered.
• See "Coverage Tips" in the Technology E&O section above.

What is Privacy Liability and why is it needed?

Common Privacy Classes* Banks/Credit Unions; Hospitals/Clinics; Schools/Colleges/Universities; Law Firms; Municipalities; Insurance Agents/Carriers; Health Information Databases; Medical Billers/TPAs; Technology Companies; On-line Charities; Religious Organizations; Utilities * Not an exhaustive list

Privacy Liability seeks to protect organizations from risks associated with collecting and storing confidential information. While traditional exposures like losing confidential paper files still exist, advancements in technology with the Internet and wireless communication have heightened the potential for catastrophic loss. With the increased mobility of confidential information, securing that data poses new responsibilities for an organization. If one fails to meet this duty of care, the resulting financial and reputational damage could be costly.

Most organizations have two main categories of Privacy Liability exposure:

• Direct Exposures, commonly referred to as 1st party exposures, include but are not limited to breach notification requirements, public relations costs, and business interruption.
• Indirect Exposures, commonly referred to as 3rd party exposures, include customer/client law suits and regulatory investigations.

S.H. Smith Coverage Tips:

• Many products only cover breaches of digital information. Many forms also exclude the breach of employee information which is often a significant risk.
• Pricing for coverage is based on a variety of factors like class of business, gross revenues, and the number of records handled. Risk management has a significant influence on pricing. Applicants should focus on privacy controls prior to seeking coverage.
• Carriers offer varied limits of liability for 1st party and 3rd party coverages. It is important to compare the coverage specifics when evaluating price.

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Disclaimer:
The coverages noted above are meant to address the unique exposures created by the use of technology and the retention of clients' confidential personal information. S.H. Smith & Company is not in a position to determine how these coverages complement or conflict with the applicant's existing insurance program. It is incumbent upon the applicant to review their current insurance program to determine if and to what extent gaps and redundant coverages exist. S.H. Smith & Company recommends that the applicant discuss all coverage provisions and implications with their legal counsel as coverage issues may arise from circumstances we were not made aware of.

Note actual coverage will depend on the facts, allegations and circumstances implicated in a claim as applied to the terms, conditions and exclusions of the policy. Any subjective or descriptive comments describing insurer are for informational purposes. They have not been reviewed by the insurer and do not constitute a letter of intent.

For actual policy terms, conditions and exclusions please refer to the insurer's specific policy and endorsements.