Public Companies Must Disclose Cyber-Liability Risks - Perspectives on Insurance Recovery Newsletter - Summer 2012

by Pillsbury Winthrop Shaw Pittman LLP
Contact

[authors: David L. Beck, Rene L. Siemens]

If you thought you did not need cyber insurance before, Uncle Sam may cause you to think otherwise. On October 13, 2011, the Securities and Exchange Commission (SEC) Division of Corporation Finance issued guidance on disclosure obligations relating to cyber security risks and incidents. The guidance, which is based on existing disclosure requirements and is effective immediately, emphasizes the need for SEC registrants to provide "timely, comprehensive, and accurate information about [cyber] risks and events that a reasonable investor would consider important to an investment decision."

The required disclosures highlighted by the SEC include:

1. Risk factors relating to a potential cyber incident, including known or threatened attacks
2. Costs or other consequences associated with known cyber incidents or the risk of potential incidents, where such costs represent a material event, through disclosure in the Management Discussion and Analysis section of the registrant's annual report
3. Cyber incidents that materially affect a registrant's products, services, or relationships with customers and suppliers
4. Material legal proceedings involving cyber incidents
5. Any material impact of cyber security, both pre- and post-incident, on the registrant's financial statements

Failure to make the above disclosures could subject registrants to various consequences, including SEC enforcement actions or lawsuits brought by shareholders.

The new SEC guidance provides yet another reason for companies that handle sensitive information to insure themselves against data security and privacy claims. Indeed, the SEC expressly notes insurance coverage as one of the relevant factors to be considered in assessing a company's potential cyber-liability risk. In recent years, a large market has evolved for insurance that is specifically designed to cover these risks—marketed under names like "privacy breach insurance," "network security insurance" and "cyber-liability insurance." This insurance provides both first- and third-party coverage for loss associated with a cyber security incident and includes coverage for costs such as restoring damaged data, responding to regulatory investigations, defense and indemnification against lawsuits arising out of cyber incidents, and loss of revenue for business interruption caused by a data security breach. While traditional insurance may cover some of these risks too, this new coverage should be seriously considered by any company—whether a registrant with the SEC or not—handling sensitive information.

In procuring cyber insurance, it is important to note that one size does not fit all. Every insurance company has its own unique policy forms, terms and exclusions. Therefore, it is important to consult with an attorney or other professional familiar with the coverages available and the needs of your business so as to ensure that you do not purchase coverages that you do not need or are inadequate.

Written by:

Pillsbury Winthrop Shaw Pittman LLP
Contact
more
less

Pillsbury Winthrop Shaw Pittman 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.
Feedback? Tell us what you think of the new jdsupra.com!