Cyber Insurance

Businesses that use electronic and digital technology – which includes most law firms – are at risk for cyberattacks or data losses that can lead to costly business disruption as well as significant legal, regulatory and privacy breach expenses when client data gets compromised. This insurance is designed to help offset these financial impacts.

Cyberattacks such as phishing, ransomware, impersonation schemes, and artificial intelligence security scans are increasing both in frequency and sophistication. Law firms are prime targets because of the amount of sensitive client data they manage on their computers and digital devices, such as clients’ intellectual property, financial documents, and personal data. These are all potentially lucrative assets for cybercriminals to steal your clients’ personally identifiable information (PII) or personal health information (PHI). Such thefts can result in:

• costly business interruptions & recovery efforts
• cyber extortion
• security breach investigation & response expenses
• client & vendor lawsuits
• regulatory fines & penalties

That’s why it is so important to have cyber liability insurance to help protect you from these financial risks.

This insurance helps cover the defense costs for client or vendor lawsuits due to a privacy breach or technology-related incident, regulatory fines and penalties, as well other assessments and damages. These are known as 3^rd Party Liability Coverages.

It also helps cover lost income from a network outage, technology recovery and replacement costs, paying a ransom for captive data, and data privacy costs such as breach investigation, notification, credit monitoring, and PR. These are known as 1^st Party Liability Coverages.

Network Security Coverages are also included to help prevent cyber incidents, such as threat and credential monitoring, ransomware protection, and security software updates.

While cyber liability insurance helps cover replacement costs if your computer system was permanently damaged during a cyberattack or data breach, it typically does not pay to upgrade or improve your system. Lawsuits for potential liabilities before a breach occurs are also not covered. And while this insurance does pay benefits for lost income, it does not reimburse you for how such an attack or breach may affect the future profits of your firm. You should consider cyber liability insurance as an integral part of a broader, comprehensive protection plan.
 

Your cyber insurance cost will depend upon a variety of unique factors related to your specific business. These include:

• Number of clients
• Types of sensitive data
• Data transmission and storage methods
• Security level of your network
• Coverage needs & limits
• Claims history

The American Bar Association Formal Opinion 483 makes it clear that, “The potential for an ethical violation occurs when a lawyer does not undertake reasonable efforts to avoid data loss or to detect cyber-intrusion, and that lack of reasonable effort is the cause of the breach.”¹ 

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