Business and Technology Law

Many commercial liability policies do not provide coverage for data security breaches. However, some insurance providers are offering businesses new types of coverage specifically designed to assist with the new risks associated with technology, including costs associated with data breaches. Initially, many corporate identity or security breach insurance policies will defray the costs associated with investigating the breach to determine whether state laws require notification of the breach. Additionally, the insurance coverage will provide assistance to pay for the costs associated with breach notification requirements.

The new policies include coverage for the following claims:
• Failure of network security;
• Wrongful disclosure of private or confidential information;
• Failure to protect confidential or private information; and
• Violations of federal, state, or local privacy statutes.

Many companies face tremendous negative publicity after they experience a data loss or security breach. New corporate identity theft insurance policies will also assist with the costs associated with defraying damage to the company’s reputation following a security breach. The insurance coverage will provide crisis management and reimbursement for public relations expenses.

Most importantly, the insurance coverage will provide a defense in the event that a security breach results in a regulatory investigation or a civil lawsuit. For example, AIG’s Corporate Identity Protection offers a unique product that covers administrative expenses resulting from an administrative action related to a breach of personal information. Like a traditional commercial policy, the security breach policies contain provisions that the insurance company will be required to pay for an attorney to defend the company in the unfortunate event that the company experiences a data or security breach. Finally, the insurance products also cover the costs post-event services, like credit monitoring and identity theft education, to the individuals affected by the security breach.