Directors & Officers Insurance Can Lower Cyber Liability Exposure
Posted on: December 1, 2017 by Signature Insurance Group
Businesses typically acquire D&O insurance as a means to protect the company’s board from legal fees associated with alleged misdoings. Lawsuits may be brought by shareholders, regulatory agencies, creditors, customers, and even competitors. Many policies also cover the individual board members who might otherwise be held personally liable; this additional protection against personal loss is all but required to acquire and retain the top talent.
One area that is garnering a lot of attention now is cyber liability. Although there are also separate cyber liability policies that must be in place for nearly every business, these policies may not cover claims that directly point the finger at the board of directors. This is where directors and officers insurance is needed to fill the cyber liability gap.
Let’s look at a recent real world case to understand why D&O is a must-have for cyber liability protection.
In November 2017, popular ride-share app Uber admitted it been victim of a hack in October 2016 that stole over 57 million customers’ and drivers’ information, including names, addresses, phone numbers, and drivers license numbers. Uber’s new CEO, who was not on the board at the time of the incident, admitted the company paid the hackers a ransom of $100,00 to destroy the information—a call apparently made by the company’s chief security officer, who is now at the center of legal and ethical investigations.
Lawsuits are likely impending considering Uber failed to notify its customers and drivers of the breach until almost a year after the fact. Uber may also face fines and penalties from regulatory agencies that could be traced back to specific acts of negligence by the board. In many cases, states can fine a company per record breach, a burden no individual board member wants to bear.
Uber does have cyber liability insurance, which has helped to pay for consumer notification and credit monitoring services. It is possible, depending on their policy, that Uber’s cyber liability also paid for the $100,000 ransom. However, any action brought against the board, as a whole or as an individual member, by consumers, shareholders, or regulatory agencies may not be covered by a general cyber liability policy.
If there is not enough D&O coverage in place, Uber would have a hard time replacing the ousted executives due to new prospects’ fears of being held financially responsible for errors on the job. This bungling of Uber’s cyber attack has become a huge liability at an individual level, and serves as a timely lesson about the value of ensuring there are no insurance coverage gaps. It only takes one overlooked area of coverage to torpedo a business, and the rise of cyber attacks means we must make sure businesses are protected against losses associated with the aftermath of cyber crimes.
About Signature Insurance Group
Signature Insurance Group has been working since 1969 to provide comprehensive insurance solutions to individuals and businesses across the United States. We offer a range of insurance products and services in risk management, employee benefits, business insurance, and personal insurance, and we pride ourselves on our commitment to creating “Signature Relationships” with our clients where we commit to providing the best, most comprehensive service possible. To learn more about our goods and services, contact us today at (800) 464-3606.