Insurance Cybersecurity Regulations – What Insurance Coverage Do You Need?

by Gilbert LLP
Contact

On February 12, 2013, President Obama issued an executive order detailing his plan to improve critical infrastructure cybersecurity. [1]  See Executive Order – Improving Critical Infrastructure Cybersecurity, http://www.whitehouse.gov/the-press-office/2013/02/12/executive-order-improving-critical-infrastructure-cybersecurity (February 12, 2013).  In the Executive Order, President Obama notes that it is the policy of the United States to “maintain a cyber environment that encourages efficiency, innovation, and economic prosperity . . . .”  The Executive Order states that this policy can be achieved “through a partnership with the owners and operators of critical infrastructure to improve cybersecurity information sharing and collaboratively develop and implement risk-based standards.”

More specifically, the Executive Order calls for the development of a Cybersecurity Framework by the Director of the National Institute of Standards and Technology.  The Cybersecurity Framework will provide “a set of standards, methodologies, procedures and processes that align policy, business, and technological approaches to address cyber risks” and “shall incorporate voluntary consensus standards and industry best practices to the fullest extent possible.”

Although the Executive Order requires owners and operators of critical infrastructure to adopt the Cybersecurity Framework, other entities may also be required to adopt the framework.  Section 8 of the Executive Order establishes “a voluntary program to support the adoption of the Cybersecurity Framework by owners and operators of critical infrastructure and any other interested entities.”  Further, the Executive Order provides that sector-specific agencies may “develop implementation guidance or supplemental materials to address sector-specific risks and operating environments.”

We do not yet know which sector-specific agencies will adopt the Cybersecurity Framework, but both the Securities and Exchange Commission and the Federal Trade Commission have already been active in the cybersecurity area.  In 2011, the Securities and Exchange Commission provided guidance regarding the disclosure requirements for public companies arising from cybersecurity risks.  Meanwhile, the Federal Trade Commission has actively prosecuted several actions within the last year against various companies based on their alleged failure to maintain appropriate cyber-security measures.  Given these agencies’ interest in cybersecurity, it seems likely that they will be among the sector-specific agencies that consider requiring regulated entities to implement the Cybersecurity Framework.

Even if a company is not currently considered part of critical infrastructure, the Executive Order acts as fair warning that cybersecurity regulation is soon coming.  Moreover, with the imposition of regulation, there likely will be increasing private litigation against companies that experience a cybersecurity incident, with the potential for significant losses resulting from governmental fines or damages awarded in litigation.

Companies should act now to protect themselves from such losses, including examining their insurance portfolios to ensure that adequate insurance coverage currently exists.  If a company does not have stand-alone coverage for cyber risk, companies should highly consider acquiring cyberliability policies that can protect against either third-party or first-party losses, or both.  Third-party cybersecurity policies may provide coverage for:

  1. liability for permitting access to identifying information of customers;
  2. transmitting a computer virus or malware to a third-party customer or business partner;
  3. failing to notify a third party of their rights under the relevant regulations in the event of a security breach; and
  4. potential “advertising injury,” i.e., harms through the use of electronic media, such as unauthorized use or infringement of copyrighted material, as well as libel, slander, and defamation claims.

First-party cybersecurity policies may provide coverage for:

  1. the costs of providing notice to individuals whose identifying information was compromised;
  2. the costs associated with determining the scope of the breach and taking steps to stop the breach;
  3. public relations services to counteract the negative publicity that can be associated with a data investigation;
  4. the costs of responding to government investigations;
  5. the costs of replacing damaged hardware or software;
  6. the costs of responding to parties vandalizing the company’s electronic data; and
  7. business interruption costs.

Moreover, cybersecurity insurance coverage is in its infancy and there has not been the standardization of policy language.  Accordingly, negotiation of policy language is possible and critical.


[1] The Executive Order defines critical infrastructure as “systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters.”

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gilbert LLP | Attorney Advertising

Written by:

Gilbert LLP
Contact
more
less

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):
hide

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.

Security

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 info@jdsupra.com. 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: info@jdsupra.com.

- 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.