Cyber Liability: Do You Need To Safeguard Your Firm Against Cyber Crimes?

It’s no secret that cyber crime is on the rise. From identity theft, to credit card fraud, cyber criminals become more sophisticated by the day.  That means that data breaches are skyrocketing and victims of online theft are multiplying exponentially.  Furthermore, there is an emerging trend in cyber crime that is slowly starting to make headlines.  That being that victims of cyber crimes are no longer just major credit card companies or large businesses.   In fact, according to an article published in the Wall Street Journal in July of 2011, a whopping 63% of data breaches occurring in 2010 were at companies with less than 100 employees.

There are plenty of reasons that more and more hackers are targeting smaller businesses.  But at root it boils down to the fact that smaller businesses generally don’t have the resources to afford the level of security needed to prevent hackers from stealing their sensitive information.  Moreover, small companies (particularly those that aren’t in direct sales businesses) generally don’t see the threat of cyber theft as something they need to be overly concerned about.  Yet these types of businesses—say for example, law firms—may very well find themselves on the hook for damages caused by cyber theft, or in worse cases, find themselves as defendants in a lawsuit stemming from a breach of information.

It is important to note that any sensitive or personal information that is stored on any computer belonging to the firm, or an attorney with the firm, that is leaked or stolen can ultimately wind up costing thousands of dollars and countless hours of headache to you and your firm.  That’s without taking into account damages your attorneys or your firm may suffer as a result of being publicly named in any sort of defamation lawsuit.

However, due to the fairly new emergence of cyber liability insurance, you can protect yourself and your firm from just such a nightmare.  Here are five things you should consider in regards to cyber liability protection.

1. You Have A Lot To Lose

Imagine a hacker breaks into your computer and steals all of your client data.  Names, addresses, phone numbers, bank accounts, Social Security numbers, and credit card accounts may be just the tip of the iceberg of sensitive information that is now out in the open.  Should any of this information be used to harm your clients, and an investigative audit traces the breach to your server or system, you may be financially liable for damages.  In cyber liability speak, this is considered a third-party loss, which specific policies will cover.

You also have a lot to lose personally.  If your computer stores your firm’s finances, account numbers, credit card information, and so on, your own sensitive information can be stolen, resulting in a “first-party loss.”  Again, you can protect against this with a customized policy.

2. You Can Cause A Lot of Damage (and Be Held Accountable for It)

As unfair as it sounds, if any computer belonging to your firm sends an email or link containing a virus to another company, you may be financially responsible for the loss of wages or earnings suffered by any party the virus affects.  That means that you may have no idea you’ve transferred a virus, but still have to foot the bill if the cyber trail leads back to your firm.

3. Most Business Insurance Does Not Cover Cyber Liability

Unless specifically noted in your business policy, chances are that no financial protection is offered to you if you fall victim to cyber theft.  Likewise, the cost of defense needed to fight any lawsuits stemming from a cyber breach is almost certainly not covered under your firm’s policy.  In fact, some carriers explicitly state that data and technology risks are excluded from coverage.

4. A Stolen Laptop Can Be Incredibly Costly

It’s important to note that not all cyber theft occurs as a result of hacking. Consider a common scenario such as leaving a laptop in the car even just momentarily while running to grab a cup of coffee. In less than five minutes your laptop is gone, and any private information you had stored on it—yours or a client’s—is up for grabs. Before you can even get the theft claim into your insurance carrier, and before your I.T. specialist can fortify your system with additional security, you can find yourself in a mess of legal problems, and not just stemming from viruses or sensitive information.

Although it sounds like a stretch, harmful or malicious postings online by anyone accessing your social media accounts, websites, or blogs can have you in the hot seat, facing potential libel or defamation claims.

5. Cyber Liability Insurance Doesn’t Have to Cost a Fortune

As with any type of insurance, the cost of cyber liability insurance will depend upon the size of your firm, the level of risk, and the type of coverage you need.  But generally speaking, policies may be as little as $1500 for the year.

These five item considerations should be deemed a very general overview of the necessity of Cyber Liability Insurance.  There are dozens of additional benefits to such coverage.  Likewise, there are many more potential pitfalls that may arise from not protecting your firm’s sensitive information. To remove the potential financial trouble that can occur from not being protected, consider that any sort of lawsuit against your firm may very well result in negative publicity, which can have devastating consequences on your future livelihood.

An ounce of prevention is often worth a pound of cure, and that’s certainly the case when it comes to protecting your attorneys and your firm from cyber crimes.  However, you’ll need to work with a trusted insurance broker to determine just what type of Cyber Liability Coverage is right for you.

Steve Brooks

Steve Brooks is President of B & B Premier Insurance Solutions, Inc, a renowned independent insurance agency in Southern California. B & B provides coverage in the areas of property and casualty, including: personal insurance (auto, home, earthquake and umbrella coverage for jewelry, collectibles and artwork); as well as business/commercial insurance (general liability, workers compensation). Steve is also one of the nation’s most recognized independent insurance agents, speaking frequently at conventions and colleges, while also regularly contributing articles to national and regional publications. He welcomes questions at 818-223-8383 ext 212 or via email at steveb@bbpremierins.com

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