What is the Difference Between Cyber Liability and E&O Insurance?

Posted on: December 7, 2017 by Signature Insurance Group

The sharp rise in major data breaches over the past few years has businesses asking how they can prevent a costly cyber attack. While it is important to review IT policies and ensure common sense measures are in place, the unfortunate truth is no cyber security strategy is fool-proof. Just ask Equifax, Target, Home Depot, Uber, and other industry giants who invested millions in their cyber security only to fall victim to an attack. That’s why every business should have a cyber liability insurance policy in place as soon as possible.

“But we have Errors and Omissions insurance. Isn’t that enough?”

The answer in most cases is “No.” Cyber Liability, as a standalone policy, is a relative newcomer to the insurance marketplace, and that’s because it fills a new and unique role. Some Errors and Omissions policies may include bits and pieces of the same coverage as modern Cyber Liability policies; however, there are some key differences in the types of costs these policies typically cover.

For example, Cyber Liability covers the major costs associated with the aftermath of a cyber attack, which may include attorney’s fees, investigation costs, government fines, credit card company penalties, notification costs, consumer credit monitoring services, repairing IT equipment, restoring data, and more. This is considered first-party coverage, as it covers the direct expenses the business incurs reacting to a cyber attack.

Some Cyber Liability policies take it a step farther by including other kinds of coverage. Common areas include media liability, which covers costs stemming from violations of intellectual property, trademarks, and copyrights, as well as slander and libel. Privacy is another common area for cyber liability coverage, though it covers offline data loss, too. In these cases, privacy insurance can cover costs associated with missing physical files, lost laptops, or even sending private information to the wrong e-mail address.

Errors and Omissions policies, on the other hand, are primarily designed to protect a business against legal accusations of negligence, preventable mistakes, incompetent work, and other professional errors.  That means Errors & Omissions covers only the legal costs associated with a lawsuit, including attorney’s fees, court judgments, and, in some cases, settlements. This is considered third-party coverage, i.e., costs brought on by the action of third parties, like clients, vendors, and government agencies.

As you can see, if a company suffers a cyber attack with only E&O in place, they will not have coverage for a significant portion of their actual expenses. This is why nearly every business will require both form of coverage to prevent financial ruin after a cyber attack.

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.

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