By Rene Siemens and David Beck, Attorneys, Pillsbury Winthrop Shaw Pittman LLP
This commentary observes that the rising threat of cyber attacks and data breaches as well as the proliferation of data security and privacy laws have made it more important than ever for organizations that handle sensitive information to insure against data security and privacy losses. The article further points out the most common cause of a data security breach remains the failure of employees, business partners or third-party outsourcing data processors to protect data. The article notes that there is a plethora of data security compliance laws in effect at both the state and federal level and discusses several of these statutes.
The article demonstrates that in recent years, a large and rapidly growing market has evolved for insurance that covers these so-called "cyber" risks. These policies vary widely. This article analyzes potentially available coverages under both the newer cyber insurance policies and more traditional lines of coverage. With respect to third-party coverage they include various crisis management expenses, claim expenses, and regulatory response costs. First-party coverages in cyber insurance forms typically include costs associated with the loss of data collected by the insured, and lost revenue caused by interruption of an organization's data systems due to a cyber attack or denial of service attack. These coverages are delineated. The article identifies issues that arise under cyber insurance coverage and exclusions. It features recommendations for negotiating optimal cyber insurance policy terms, and identifies some of the pitfalls to avoid when purchasing cyber insurance.
Mr. Siemens is a nationally recognized insurance coverage practitioner who represents policyholders in negotiations and disputes with their insurers. He also handles complex litigation matters including product liability, mass tort, environmental, and consumer cases. Mr. Siemens has helped clients recover over $2 billion from their insurers. Chambers USA has described him as "an encyclopedia of insurance law," the PLC Cross-Border Insurance and Reinsurance Handbook ranks him in the top tier of policyholder attorneys, and Legal 500 has described him as "the smartest guy in the room." His practice encompasses almost every kind of insurance issue, ranging from major disaster, environmental, asbestos, nuclear, and product claims to large property and business interruption losses; disputes under D&O, E&O, and fiduciary liability policies; and cyber-liability, advertising, aviation, bond, clinical trial, credit, employment, insolvency, IP, life, media, mold, and warranty coverage issues.
Mr. Beck is an associate in the litigation department of Pillsbury Winthrop Shaw Pittman LLP. Mr. Beck advises on the resolution of complex business and contract disputes, with particular emphasis in the areas of construction and engineering. In the area of insurance, Mr. Beck has handled numerous claims involving builders risk, commercial general liability, employment practices liability, pollution, professional and other policies. Most recently, he has handled insurance claims involving engineering and construction defects, environmental contamination, directors and officers liability, employment liability and other issues.
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