Cyber Insurance in Commercial Contracts: Allocation of Risk, Coverage, Interplay With Other Insurance Requirements

Description

Nearly all commercial general liability policies since 2014 have excluded coverage for nonphysical loss due to data breaches. The emergence of cyber insurance policies has filled that gap. However, issues like the lack of uniformity in coverages and exclusions, and vague language addressing coverage requirements, create challenges for businesses procuring cyber insurance.

Cyber insurance can provide first-party coverage for a broad range of losses resulting from a data breach. Expenses associated with engaging forensic examination teams, outside counsel, and public relations firms to handle breach response and crisis communications or remittance of any fines, penalties, or extortion payments all may fall within the scope of coverage. Cyber insurance also can provide valuable coverage for third-party claims and regulatory investigations arising out of a data breach.

Counsel for insurers and policyholders must prepare to negotiate these and other specific terms such as retroactive dates and coverage for emerging data privacy risks, as well as the scope of any coverage exclusions. Likewise, practitioners must grasp the interplay between cyber insurance and other coverage like CGL, D&O, crime, commercial property, and technology E&O policies, and how to efficiently maximize the aggregated protection they afford.

Listen as our panel of experts provides critical guidance on drafting and negotiating these essential provisions of commercial contracts.