Cyber Liability Insurance is made up of several different coverage parts, broken down by either a third party legal liability exposure or a first party cost to the Insured arising from a third party legal liability claim. In order to better understand a cyber program, and therefore better explain it to a prospective customer, the agent needs to be able to identify and then explain each coverage part. Understanding each part makes understanding what is needed as a whole an easier task.
A Cyber Liability Program is made up of these parts:
- Media Liability
- Network Security & Privacy Liability
- Employee Privacy Liability
- Notification Costs
- Privacy Regulatory Fines
- Loss of Data or Digital Assets
- Cyber Extortion or Terrorism
- Business Interruption
Today we focus on one of the first party costs coverage an Insured can purchase – Business Interruption coverage.
Business Interruption coverage part is not universally offered by every carrier writing Cyber coverage. Many in fact do not offer it. Yet, its three major components which make up the coverage are very important to many industry classes, regardless of size. Since BI is typically a coverage written under a P&C portfolio as a result of a property loss peril, a natural inclination is to dismiss its value to a Cyber program. Yet, as I have been saying for some time, your Insured faces a much greater dollar loss potential from a Cyber claim than they do from a single property claim.
Business Interruption’s three components, defined differently across the various carrier forms, are basically as follows:
- Loss of Income
- Extra Expenses
- Forensic Expenses
Loss of Income is as it sounds. It provides to the Insured a limit of coverage for income lost as a result of total or partial interruption or degradation of its computer system(s).
Extra Expenses, also referred to as “Interruption Expenses”, provides to the Insured reimbursement for expenses incurred by the Insured to avoid a partial or total interruption in services as a result of a covered Loss, including renting/leasing of external equipment or systems, substitution of other production procedures, additional staff or labor costs, etc.
Forensic Expenses, sometimes called Special Expenses, are the most important of these Business Interruption coverage part components. This particular extension is so important as it reimburses the Insured for its out of pockets costs, not otherwise included in Extra Expenses, to prevent, preserve, and minimize further damage to computer systems or digital assets, including the hiring of outside forensic consultants, which can be very costly. Many other covered costs include those to preserve evidence of any criminal wrongdoing, purchase replacement licenses corrupted or damaged, and public relations expenses.
As you can see, the wide range of reimbursable costs the Insured may be paying out on their own without this coverage part can be very, very high. Are you making sure your customer is quoted this coverage?
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