Businesses increasingly rely upon external and internal communications networks to operate their businesses. For example, in my business, a law practice, more and more courts are moving to mandatory electronic filing of court documents.
What happens if the network is disrupted? What if the network is out for a substantial period of time? Fortunately, there are insurance products available to protect the business in just such an occasion. These policies are in addition to your standard commercial property insurance and business interruption policies. In most cases standard policies will not recognize a loss of network claim and additional coverage can be a valuable addition to your risk management program.
This insurance has a variety of names, but is typically sold as a network risk or data loss risk policy. It can be sold as a stand-alone insurance product or as an endorsement to standard policies. You will want to read all of the fine print regarding the coverages and go through several "what if?" scenarios with your insurance professional to make sure the policy covers your needs.
A network risk policy covers various types of network losses:
- Business Interruption Caused by Loss of Network: This coverage will cover losses of income and extra expenses caused by a network outage. Make sure the policy includes coverage for point of service attacks, physical network damage, hacker attacks and, most importantly, employee attacks or malicious insider attacks.
- Digital Data Protection: This coverage will cover the costs and damages incurred by the loss of physical data or information caused by network outage.
- Compliance Cost Coverage: When a network outage occurs or a malicious attack puts private information in your database at risk, several federal and state laws require notification to customers and others affected by the potential security breach. This notification can be expensive. The policy covers the costs associated with such compliance.
- Cyber Crimes Coverage: You will want coverage for specific intentional acts such as cyber terrorism or extortion.
- Third Party Lawsuits: If your network fails and causes damage to a third-party for whatever reason, and that party sue your business, your network risk policy should cover these losses and provide for a defense.
This insurance is specialized and your business may not need such coverage based on your risk exposure. For example, a flower shop with an E-Bay store may suffer losses for network outages - but, how much in comparison to premiums? On the other hand, a commercial web development company that "loses" a database of customer supplied information can face substantial exposure. The point is, do not purchase this coverage just because of perceived threats reported in the media, but consider the coverage if your real experience and real business require it.
