Cyber risk liability has become the hot product for commercial clients – but if the client gets burned by insufficient coverage, it could be the broker, not the insurer, who lands in hot water.
“When you get these emerging coverages, that is where it can become more complicated for the broker,” says Kirk Boyd, a partner with Borden Ladner Gervais in Ottawa who practises insurance litigation. “Insurers aren’t requiring the broker to identify it as a separate coverage to be optional. It is being included in some policies automatically. But that doesn’t mean that it is included. It is dangerous to just assume that it is in there.”
Although becoming more common on insurance policies, brokers need to be absolutely certain that the liability coverage for cyber risk is not only available, but specific to the needs of the client.
“From a brokers’ perspective, as someone who protects brokers from claims brought by their insureds with respect to these types of issues – it is really important for the brokers to have canvassed the availability of cyber risk insurance, and the need for it, in order to better protect themselves,” Boyd told Insurance Business online. “I think that what is going to happen is it isn’t going to come back at the insurers; it will be against the brokers.”
Acting on behalf of several insurers defending bodily injury and property damage claims, Boyd has a background in providing coverage opinions and advice concerning directors’ and officers’ liability insurance. (continued.)
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But the cases of cyber liability that are cropping up should be something that brokers need to address – now.
“I think the message that is the most important, it is a risk that is emerging,” says Boyd. “There aren’t a whole lot of cases – we have seen some larger cases where there have been significant privacy breaches, or potential breaches by large public institutions. But a lot of the same risks are faced by smaller businesses, and the way that the market seems to be developing, a lot of these seem to be add-ons to a CGL (Commercial General Liability).”
Including the right cyber liability policy for the client is what needs to be checked off on every broker’s checklist.
“Certainly what brokers should be doing, they should be looking the need for a cyber-risk policy when they are going through their check list of various coverages that the insureds would like to consider purchasing,” says Boyd. “If you think about it in the context of other insurance, the brokers are pretty good at identifying certain risks and making sure that that is included in the policy. Making sure it is standard, or making sure that it is added on.”
Boyd likens the emerging cyber risk coverage to that of earthquake risk.
“The news item you ran on the danger of earthquake,” he says. “Typically most policies have an earthquake exclusion, but clearly it is an optional policy. Most brokers aren’t going to review the option of purchasing earthquake coverage – if they don’t do that, they are exposing themselves to a potential claim by their insureds in the event of an earthquake.”
