ONLINE REFERENCE DOCUMENT
CYBER LIABILITY INSURANCE
As technology becomes increasingly important for successful business operations, the value of a strong Cyber Liability Insurance policy will only continue to grow. The continued rise in the amount of information stored and transferred electronically has resulted in a remarkable increase in the potential exposures facing businesses. Regulations, such as the Data Protection Act must also be considered, because a loss of sensitive personal information may subject you to fines and sanctions from the Information Commissioner. In an age where a stolen laptop or hacked account can instantly compromise the personal data of thousands of customers or an ill-advised post on a social media site can be read by hundreds in a matter of minutes, protecting yourself from cyber liabilities is just as important as some of the more traditional exposures businesses account for in their general commercial liability policies.
WHY CYBER LIABILITY INSURANCE?
A traditional commercial insurance policy is extremely unlikely to protect against most cyber exposures. Standard commercial policies are written to insure against injury or physical loss and will do little, if anything, to shield you from electronic damages and the associated costs they may incur. Exposures are vast, ranging from the content you put on your website to stored customer data.
Awareness of the potential cyber exposures your company faces is essential to managing risk through proper cover.
POSSIBLE EXPOSURES COVERED BY A TYPICAL CYBER POLICY MAY INCLUDE:
Data breaches – Increased online consumer spending has placed more responsibility on companies to protect clients’ personal information.
Business/Network Interruption – If your primary business operations require the use of computer systems, a disaster that cripples your ability to transmit data could cause you or a third party that depends on your services, to lose potential revenue. From a server failure to a data breach, such an incident can affect your day to day operations. Time and resources that normally would have gone elsewhere will need to be directed towards the problem which could result in further losses. This is especially important as denial of service attacks by hackers have been on the rise. Such attacks block access to certain websites by either rerouting traffic to a different site or overloading an organisations server.
Intellectual property rights – Your company’s online presence, whether it be through a corporate website, blogs or social media, opens you up to some of the same exposures faced by publishers. This can include libel, copyright or trademark infringement and defamation, among other things.
Damages to a third-party system – If an email sent from your server has a virus that crashes the system of a customer or the software your company distributes fails, resulting in a loss for a third party, you could be held liable for the damages.
System Failure – A natural disaster, malicious activity or fire could all cause physical damages that could result in data or code loss.
Cyber Extortion – Hackers can hijack websites, networks and stored data, denying access to you or your customers. They often demand money to restore your systems to working order. This can cause a temporary loss of revenue plus generate costs associated with paying the hacker’s demands or rebuilding if damage is done.
Cyber Liability Insurance is specifically designed to address the risks that come with using modern technology; risks that other types of business liability cover simply won’t. The level of cover your business needs is based on your individual operations and can vary depending on your range of exposure. It is extremely important to work with a broker that can identify your areas of risk so a policy can be tailored to fit your unique situation.
As reliance on technology continues to increase, new exposures continue to emerge. As your business grows, make sure your cyber liability cover grows with it. Hamilton Leigh is here to help you analyse your needs and make the right cover decisions to protect your operations from unnecessary risk.
DIRECTOR’S & OFFICERS’ LIABILITY
“D&O is an essential element of your insurance programme in today’s increasingly litigious society”
Executive and non-executive directors are increasingly accountable for their actions under changing legislative and regulatory frameworks and given evolving attitudes and expectations regarding corporate performance.
The main external changes underlying this increase in the personal liability of directors are changes in legislation and regulations in the areas of corporate governance, employment law, health and safety, etc. and the increasing powers of regulators. Moreover, there is a new focus on the communication of information to shareholders, and a greater willingness of shareholders and other third parties to sue.
Some of the more frequent causes of claims against directors and officers include:
- Stock price volatility
- Poor financial condition
- Mergers and acquisitions (M&A) activity
- Insider trading
- Financial restatements
- Failure to disclose problems relating to the purchase of a subsidiary
- Accounting irregularities
CRITICAL QUESTIONS THAT YOU NEED TO CONSIDER
Have you recently reviewed the scope of cover granted under your D&O policy? D&O is a complex product, with a wide variation in the breadth of cover from different providers.
The Extradition Act 2003 provides the USA and other countries with extensive powers to instigate extradition proceedings against UK directors and officers. Will your D&O policy cover the costs associated with resisting these proceedings?
Are your board members fully aware of the conditions and exclusions of your D&O policy? Non-executive directors in particular are keen to understand the amount and scope of cover available, to satisfy themselves that they will have access to sufficient defence costs in the event of a claim.
In the changing claims environment, have you reviewed the adequacy of limits and programme design?
Will your policy be able to meet the evolving needs of your business, especially if it ventures into new jurisdictions?
ENVIRONMENTAL LIABILITY
While UK organisations have become better at preventing pollution through physical controls, there
is still a tendency to overlook or underestimate less obvious forms of environmental damage.
Some organisations can discover too late that their environmental insurance cover within their policies may be very limited and not comprehensive enough and managers may not even be aware that they are personally liable for damage.
In addition, organisations may unknowingly assume environmental liabilities. Business transactions such as mergers and acquisitions can involve historical liabilities being passed from one party to another, for example.
Society is increasingly unwilling to tolerate harm to the environment, and those businesses that are perceived to be irresponsible can expect considerable censure from the media and public.
CRITICAL QUESTIONS YOU NEED TO CONSIDER
- Are you aware of the available insurance solutions that can close off historical liabilities in M&A transactions?
- Do you have adequate cover for the new EU Directive on Environmental Liability, which carries new responsibilities for remediation?
- Have you weighed the cost of your insurance cover with the potential financial liabilities that you face if you do not have adequate insurance protection?
INTELLECTUAL PROPERTY RIGHTS
WHAT IS INTELLECTUAL PROPERTY RIGHTS INSURANCE?
Intellectual Property Insurance coverage protects companies for copyright, trademark or patent infringement claims arising out of the company’s operation. It pays the defence costs and any judgement up to the policy limits.
WHEN DO I NEED INTELECTUAL PROPERTY INSURANCE?
You need Intellectual Property insurance if the threat exists that you could be sued by a competitor for infringing on an idea or intellectual property belonging to someone else.
As long as you are not aware of any known infringements or violations, you can apply for insurance to protect your trademark or patent. However in order to get coverage, you will be required to prove that you have completed an Intellectual Property search, or have filed a registration for a trademark, service mark, copyright or patent.
THE POLICIES CAN OFFER YOU SUCH WORDINGS AND INSURANCE AGAINST THE FOLLOWING AREAS:
- Legal expenses to defend your rights
- Legal expenses to enforce your rights
- Legal expenses to defend your agreements
- Damages awarded if your defence is unsuccessful
- Expert witness, enquiry and attendance expenses
- Intended to apply to UK registered companies, firms or individuals within UK law
- Claims against non-UK companies etc should be allowable if under UK law
- Cover for non-UK companies etc may be available
- Cover for Customs and Excise fees to monitor imports for surveillance of counterfeit goods
WHY DO I NEED INTELLECTUAL PROPERY INSURANCE?
A competitor can financially wreck your company if you do not have the funds to hire a solicitor and pay the cost of all the legal fees associated with defending your right to a patent or trademark. An Intellectual Property policy will pay the costs to defend you if someone tries to claim the rights to the same business model, process, or application.
More than ever before, intellectual property claims involving infringement of patent, copyright and trademark are being filed and litigated at a tremendous cost to both parties.
Few standard insurance policies protect businesses from loss or damage to their intellectual property; however, a growing range of policies aimed specifically at intellectual property are available and businesses would do well to consider whether such a policy is available that is right for them.
A number of criminal and civil offences exist in copyright law. Careful consideration needs to be given to determine if the offence is indeed criminal or if it is a matter that can be resolved under civil law. Intellectual property laws vary greatly from country to country. Many developing countries and even some former Soviet and eastern European countries have insufficient protection for copyright holders, either due to a reluctance to enforce existing intellectual property laws or because such.
PROFESSIONAL INDEMNITY
Professional Indemnity should be considered and may even be compulsory for some businesses that offer a professional service. This includes traditional professionals such as architects, solicitors and accountants, but also new professionals such as technology service providers, environmental consultants, publishers and some manufacturers.
There is also an increasing need for companies providing design or informal technical advice to hold suitable indemnity cover against errors and omissions.
A Professional Indemnity policy will generally include protection against claims arising from:
- Breach of professional duty or civil liability
- Legal costs in defending a claim
- Libel and slander
- Liability for loss of documents
- Liability for unintentional breach of copyright.
Professional Indemnity policies vary considerably in wording and it is essential that cover is arranged to protect fully against the risks run by the business.
Hamilton Leigh has over 20 years’ experience working with clients to ensure that the correct scope of cover is arranged, utilising a number of specialist Professional Indemnity Underwriters.
