Cyber breach insurance: What, me worry? - Part of counsel’s job may be to ensure that the department in the company that “owns” the cyber liability portfolio is aware of all the departments where an event could trigger that coverage.

by Gilbert LLP

One of us recently asked an in-house counsel friend in charge of litigation for a major company what questions he had about cyber insurance. His response, besides a blank look, was “I’m sure someone else in the company worries about that.” For him, and for you, here are answers to a few key questions.

I know someone in my company has responsibility for cyber insurance issues. Why should I also know about it?  

Data and privacy breaches can impact numerous groups within a company including IT security, the privacy program, regulatory compliance, securities disclosure, and customer relations as well as the company’s overall reputation. Part of counsel’s job may be to ensure that the department in the company that “owns” the cyber liability portfolio is aware of all the departments where an event could trigger that coverage — and, vice versa, that those departments know what events should trigger a report to the owner of the cyber liability program, and also know whether the policy has special requirements for the company’s response to an event such as a privacy breach. The easiest example is where a carrier requires certain vendors to be used in a breach response — ensuring that the relevant departments have information about the policy requirements before a crises hits will protect the coverage the company has purchased. 

What does a risk assessment for cyber insurance look like?

In view of the almost weekly news reports of major hacks or privacy breaches, no one has to tell corporations today the importance of performing comprehensive data security and privacy program risk assessments to identify weaknesses and gaps. However, that assessment is only part of a risk assessment to ensure that the cyber liability coverage protects the company’s financial resources against losses that could occur directly to the company from a cyber breach, or that could occur because a cyber breach causes harm to others. Besides evaluating the gravity of those risks, companies need to evaluate how a breach might harm the company’s customer relationships, reputation and business continuity. A cyber liability risk assessment should include asking:

  1. Are all the operational, legal and regulatory risks identified?
  2. Is everyone who needs to be, whether inside or outside the company, covered? For example, what is the impact of a breach at a contract cloud provider?
  3. Is everything covered that needs to be? For example, a privacy breach may have costs involved in customer notifications and regulatory fines.
  4. Are there legal issues arising from the policy language used, and how do the insurance policies in the portfolio interact? For example, certain policies might have overlapping coverage or gaps that a cyber insurance policy could mitigate. 
  5. Is the company recognizing cyber insurance coverage as controls to mitigate risk?

Adobe, Facebook, Yahoo, Twitter, Google, and LinkedIn all got hacked -- but my company doesn’t hold user names and passwords for customers, so why should I care?

First, hackers can access any electronically stored information. Therefore, any sensitive information, including that of your own employees, may be subject to an attack. Furthermore, what most people don’t know about the Adobe incident is that hackers also stole parts of the source code which might allow the hackers to copy Adobe’s techniques. Although your company may not store customers’ usernames and passwords, hackers could steal important trade secrets or other sensitive information, which could in turn greatly affect how well the business does in the aftermath of a cyber attack. In this day and age, where almost everything is stored electronically, it is important for all companies to have a plan in place in case of a cyber intrusion, which may include having cyber insurance to protect the company in the event of an attack.

My company hasn’t had a cyber breach problem. Is cyber liability insurance something that my board of directors needs to know about?

In short, yes. A cybersecurity breach imposes significant costs on a corporation that may materially affect its finances and its reputation.  Depending on the nature of the breach, a company may need to comply with government-imposed notification requirements, and also may face significant civil liability. Consider the far-reaching impact of the major breach Target Brands, Inc. experienced in November and December 2013, when hackers gained unauthorized access to payment card data stored by Target for approximately 70 million credit and debit card accounts. Target immediately commenced an extensive internal investigation to determine the scope of the breach and started to notify consumers regarding the theft of their personal-identifying information.

Boards of directors need to know about significant risks facing their companies and also about the controls in place to mitigate those risks. In today’s environment, especially for a company that handles a significant amount of personal identifying information (such as credit and debit card accounts), or holds key trade secrets, those risks will include cyber breaches. Boards of directors will expect that a discussion of those risks will include responses and controls that mitigate those risks – of which a key component may well be a cyber insurance policy that provides coverage for the investigation that may ensue as a result of a cyber-security breach, compliance with the federal and state notice requirements to consumers, and the financial impact of such a breach such as possible class actions or regulatory fines.

Written by:

Gilbert LLP

Gilbert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.