Cyber Insurance Solves Coverage Limitations for Law Firms

As digitization increases, cyber policies provide ultimate exposure protection.

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Jun 04, 2015, 10:01 ET

KANSAS CITY, Mo., June 4, 2015 /PRNewswire/ -- Digital technology allows law firms to expand the way they gather, create, distribute, manage and store information, but it also allows for greater risk of cyber liability exposures. These exposures are primarily breaches to data and network security, which can harm employees, clients, opposing parties, and more. In addition, they can also cause a significant loss of revenue.

The potential for a Cyber attack on your law firm may be greater, and more expensive, than you think.

Unfortunately, these exposures aren't always covered by a law firm's professional liability (LPL) insurance. To trigger coverage under the LPL policy, there must be an alleged wrongful act in the conduct of legal services. Law firms could, however, be liable for data or network security breaches even in the absence of a wrongful act.

"There are distinct advantages to shifting coverage to a dedicated Cyber policy," said Michael Born, Vice President and Account Executive with Lockton Companies. "Cyber policies will often cover a breach, regardless of allegations of negligence or other wrongful conduct, so long as the firm was responsible for safeguarding the information breached."

In his newest white paper, "The Law Firm Cyber Landscape," Born explains how cyber insurance solves potential coverage issues and limitations, such as:

Direct Costs of Breach: Includes investigation, legal advice, notification, monitoring, and public relations.
Regulatory Actions: Resulting penalties related to failure to protect information or improper collection/use of such information.
Employee, Retiree or Applicant Information: Typically not covered by LPL policy
Outsource/Cloud Provider: Breach of network or data security may not be covered by LPL
Intentional Misconduct: Cover insureds not involved in wrongful conduct and provide defense for those alleged until final adjudication.
Network Security Liability Risks: Features virus transmission, service attack denial, damages to systems' authorized users.

It's important that law firms closely inspect how cyber exposures may affect their business and give serious consideration to transferring these risks to a dedicated Cyber Insurance Policy.

"Lockton is here to help with these issues," Born said. "Lockton understands exposures and offers some of the broadest data security and privacy liability coverage available in the marketplace, as well as customization of such coverage."

About Lockton

More than 5,300 professionals at Lockton provide 41,000 clients around the world with risk management, insurance, and employee benefits consulting services that improve their businesses. From its founding in 1966 in Kansas City, Missouri, Lockton has attracted entrepreneurial professionals who have driven its growth to become the largest privately held, independent insurance broker in the world and 10^thlargest overall. Independent researcher Greenwich Associates has awarded Lockton its Service Excellence Award for risk management for large companies. For six consecutive years, Business Insurance magazine has recognized Lockton as a "Best Place to Work in Insurance." To see the latest insights from Lockton's experts, check Lockton Market Update.

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SOURCE Lockton