Cyber liability is a hot topic, but the path to a solution can seem muddled. Many firms choose not to purchase cyber liability insurance because they think the cost is too high or the application process is too cumbersome.
A data breach can subject a lawyer’s office to the costs of notification of clients as well as other remedial measures that can be prohibitively expensive. The average cost of a data breach incident is typically over $200 per compromised record. These costs alone can easily bankrupt a practice – studies have shown that over half of small businesses that have a data breach go out of business within a year of the incident.
There are various insurance policies designed to cover the costs of cyber liability. The challenge is finding one that provides suitable coverage at an affordable price.
Some insurance companies have added a ‘Cyber Liability Endorsement’ that provides a relatively low level of coverage (say $25-$50K) to various professional liability policies. Such an endorsement might be relatively easy to obtain and affordable, but would likely not provide enough coverage for most data breach incidents.
Obtaining a policy with higher limits, such as $1 million or more, requires extensive underwriting and perhaps significant technological upgrades. Both the upgrades and the cost of coverage can be quite expensive. Nevertheless, this is the best option for larger firms with a substantial amount of client data.
A happy medium, or ‘sweet spot,’ for small to medium size firms is to add Cyber Liability as an endorsement to your firm’s Business Owners Policy (BOP). Not all BOP’s offer such an endorsement. Our policy (from a very strong company with an excellent claims handling reputation), will allow you to obtain $100K response (first party) limits and $500K for defense and expenses (third party).
It’s impossible to say whether these limits are sufficient for a worst case scenario, but this solution provides substantial protection at a more reasonable cost, and with fewer underwriting requirements than a higher limits policy.
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Adam Pierce, AAI, is the Director of P&C Operations at Lawyers Insurance Agency. For more information, contact Adam at 800.662.8843 or firstname.lastname@example.org.