Part 2: Cyber Insurance Third-Party Coverage

Jeff Ryan - CLU, ChFC, AIA, CIC, CPCU

March 27, 2023

Part 2 of a 3 Part Series

Cyber insurance policies typically offer two types of coverages: first-party and third-party coverages.

This piece reviews some third-party coverages that protect the insured's legal liability to clients, prospects, or other stakeholders they have in their database. Examples of third-party coverages commonly included in cyber insurance policies include:

Data breach liability: Provides coverage for legal fees and damages awarded to clients, prospects, or other stakeholders following their private information being compromised.
Network security liability: This coverage provides indemnity for legal fees and damages awarded to third parties due to a security failure that allows unauthorized access to their systems or data.
Media liability: Compromised date can result in patent and intellectual property infringement. Media liability covers the cost of litigating and compensating for online defamation and infringement of those property rights.
Cyber extortion liability: This coverage responds in event of cyber extortion incurred by a third-party following the release of their private information.
Errors and omissions liability: When the insured makes poor technological decisions that result in damages to their clients, cyber errors and omissions coverage steps in.

Overall, third-party coverages protect businesses from legal liability to third parties resulting from a cyber incident. Because cyber insurance is not standardized, specific coverages vary depending on the insurer and policy. It would be wise to employ the services of a knowledgeable insurance professional to carefully review their options to ensure they have adequate protection.

About the Author: Jeff Ryan has been a licensed insurance agent since 1978, later becoming a full-time insurance professional in 1983. Since then, he has been the principal of The Ryan Agencies with offices in Hornell, Jasper, and Wellsville. The agencies serve approximately 15,000 clients in New York and Pennsylvania. Jeff holds numerous credentials including the Chartered Property & Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC), Accredited Advisor in Insurance (AAI), Chartered Life Underwriter (CLU), and Chartered Financial Consultant (ChFC) designations. He holds a Master's Degree from the American College. Jeff enjoys writing about all things insurance and welcomes your questions and feedback.

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