Insurance Policy Evaluation
A lawyer can play a role in cyber insurance renewal applications by ensuring that a company’s policy aligns with its evolving cybersecurity risks and regulatory obligations.
– Policy Review & Risk Assessment – Lawyers analyze the existing cyber insurance policy to identify coverage gaps, exclusions, and sublimits that may impact the company’s ability to recover losses from cyber incidents.
– Negotiation of Policy Terms – Insurers may impose stricter conditions during renewal, such as requiring multi-factor authentication, endpoint security, or incident response protocols. Lawyers help negotiate favorable terms to prevent unnecessary restrictions.
– Claims History & Dispute Resolution – If the company has previously filed cyber insurance claims, insurers may adjust coverage or premiums. Attorneys assist in explaining past claims, resolving disputes, and ensuring fair renewal terms.
– Third-Party Liability & Contractual Obligations – Businesses often have cybersecurity obligations in contracts with vendors, clients, or regulators. Lawyers ensure that the renewed policy adequately covers third-party liabilities and aligns with contractual requirements.
Insurance Renewal Applications
Lawyers assist companies in accurately and strategically responding to security-related questions on cyber insurance applications to ensure compliance, minimize risk, and improve coverage terms. Cyber insurers often require businesses to disclose details about their cybersecurity infrastructure, including firewall protections, encryption policies, multi-factor authentication usage, and employee training programs. Misrepresenting or misunderstanding these responses can lead to coverage denials, premium increases, or even policy cancellations.
Attorneys help companies interpret technical insurance language and ensure their responses align with legal and regulatory expectations. For example, when insurers ask whether a business has an incident response plan, lawyers verify that the plan exists and meets industry standards before the company attests to it. They also advise companies on how to phrase responses—avoiding absolute guarantees that could expose them to liability while ensuring they meet underwriting criteria.
Beyond guiding responses, their expertise is particularly valuable when responding to questions about third-party risk management, where insurers inquire about vendor security practices and liability sharing.
Insurance Coverage Analysis
After a security incident, a lawyer should review the cyber insurance policy to determine whether reporting is required and coverage is available.
Claims Disputes
Claims disputes in cyber insurance often arise due to differences in interpretation between policyholders and insurers regarding coverage scope, exclusions, and financial compensation. Here are some common reasons for disputes:
– Ambiguous Policy Language – Cyber insurance policies vary widely, and vague wording can lead to disagreements over what is covered, especially for business interruption, ransomware payments, and regulatory fines.
– Exclusions & Denials – Insurers may deny claims based on policy exclusions, such as failure to maintain minimum security standards, pre-existing vulnerabilities, or nation-state cyberattacks.
– Misrepresentation in Policy Applications – If a company inaccurately reports its cybersecurity measures (e.g., claiming to use multifactor authentication when it does not), insurers may void the policy or deny claims.
– Disputes Over Business Interruption Losses – Companies may expect compensation for lost revenue, but insurers often limit payouts based on specific policy definitions of downtime and recovery periods.
– Failure to Follow Incident Response Protocols – Some policies require specific steps to be taken after a cyber event, such as immediate reporting, forensic investigations, and mitigation efforts. Failure to comply can result in claim denials.
– Cyber Extortion & Ransom Payments – Insurers may dispute whether ransom payments are covered, especially if the policy has sub-limits or if the payment violates government sanctions.
Insurance Notification Questions
Notifying cyber insurance of a cyber incident or data breach requires careful consideration of policy requirements, timing, and potential consequences. Most cyber insurance policies mandate prompt notification after discovering an incident, with specific triggering events outlined in the policy. Financial implications also play a role, as delays in notifying the insurer could impact compensation for business interruption losses or ransomware payments. Certain policies include reputational harm coverage with sub-limits, making early notification crucial to maximizing recovery. Strategic considerations involve assessing the severity of the incident and determining whether insurers require notification for suspected breaches. Additionally, early notification enables businesses to leverage forensic investigators, legal advisors, and crisis management teams provided by insurers.
Insurance Panels
Many cyber insurance policies mandate that businesses utilize pre-approved cybersecurity firms, forensic investigators, and legal professionals—collectively known as panel-approved vendors—to handle incident response and legal matters following a cyber event. These vendors are selected by insurers based on their expertise, reliability, and industry track record in addressing cyber threats, ensuring policyholders receive swift, standardized, and effective assistance.
By requiring businesses to engage panel-approved vendors, insurers help streamline the claims process, ensuring cyber incidents are investigated and resolved in accordance with policy terms. This approach allows insurers to maintain cost control, reduce fraud risks, and ensure regulatory compliance, particularly when handling ransomware payments, regulatory inquiries, or third-party liability claims.
Failure to use the designated panel experts may result in coverage limitations, increased scrutiny, or outright denial of claims, as insurers prefer working with trusted professionals familiar with their policies and reporting protocols. Businesses seeking flexibility may need to negotiate endorsements or exceptions that allow them to select their own cybersecurity or legal advisors.
Breach Coaches
Cyber insurance providers have breach coaches to help businesses navigate the complex process of responding to a cyber incident. A breach coach typically specializes in data privacy and cybersecurity, acting as a central coordinator during a cyber event.
What Types of Cyber Insurance Coverage Are Sold?
– Cyber Liability Insurance – Standard insurance policy designed specifically to cover cyber risks, including data breaches, ransomware attacks, business interruption, regulatory fines, and legal defense costs.
– Errors & Omissions (E&O) Insurance – Often includes cyber liability coverage for technology service providers, consultants, and software developers, protecting them from claims related to negligence, system failures, or failure to secure client data.
– Tech E&O Insurance – A specialized form of Errors & Omissions insurance tailored for technology companies, SaaS providers, and IT consultants, covering legal claims arising from product malfunctions, service failures, and cybersecurity lapses.
– Business Interruption Insurance – Covers loss due to cyber incidents, such as network outages caused by cyberattacks, system failures, or denial-of-service (DDoS) attacks. Some policies also reimburse costs for temporary operational disruptions.
– Directors & Officers (D&O) Insurance – May include cyber liability insurance to protect executives and board members from lawsuits related to data breaches, cybersecurity, regulatory investigations, or shareholder lawsuits tied to cyber incidents.
– Professional Liability Insurance – Protects lawyers, consultants, financial advisors, and service-based professionals against claims of negligence or errors in their work, including cybersecurity-related liabilities.
– Crime Insurance / Cyber Crime Insurance / Commercial Crime Insurance – Covers financial losses due to fraud, embezzlement, cybercrime, wire transfer fraud, phishing scams, and invoice manipulation attacks. Many cyber insurance policies include crime-related provisions.
– Digital Assets Insurance – Designed for businesses handling cryptocurrency, NFTs, and tokenized assets, providing coverage for cyber theft, fraud, cryptojacking, smart contract failures, and digital asset loss due to cyberattacks.
– General Liability Insurance – Occasionally covers privacy or cybersecurity violations or data breaches in a limited fashion.
More Details about Particular Policy Types, Key Coverage, Area of Exclusions and/or Sublimits in Cyber Insurance
Phishing
Phishing insurance is a type of cyber insurance that helps businesses recover from financial losses caused by phishing attacks. Phishing scams involve cybercriminals tricking employees or individuals into revealing sensitive information, such as login credentials, financial details, or access to company systems, often through deceptive emails or fake websites.
Coverage under phishing insurance typically includes:
– Financial reimbursement for funds lost due to fraudulent transactions.
– Legal expenses related to disputes or regulatory investigations.
– Cybersecurity response to mitigate the impact of phishing attacks.
– Employee training and prevention programs to reduce future risks.
Some insurers offer phishing protection as part of broader cyber liability policies, while others provide specific coverage for social engineering fraud. Businesses should review their policies to ensure they have adequate protection against phishing-related financial and operational risks
Ransomware & Extortion
Ransomware and extortion insurance is a type of cyber liability insurance that helps businesses recover from financial losses caused by ransomware attacks and cyber extortion. These policies provide coverage for expenses related to ransom payments, system recovery, legal fees, and business interruption following an attack. Most cyber insurance policies include ransomware and extortion coverage as a sub-limit, meaning there may be a cap on the amount reimbursed for ransom payments. Businesses should carefully review their policies to ensure they have adequate protection.
Social Engineering
Social engineering insurance is a type of cyber or crime insurance that protects businesses from financial losses caused by fraudulent manipulation of employees or executives. Social engineering scams involve cybercriminals impersonating vendors, clients, or executives to trick employees into transferring money, sharing sensitive data, or granting unauthorized access.
Data Recovery
Data recovery insurance is a type of cyber or business insurance that helps cover the costs associated with recovering lost or corrupted data due to cyberattacks, hardware failures, accidental deletions, or natural disasters. Businesses that rely on digital data—such as financial records, customer information, or proprietary files—can benefit from this coverage to minimize downtime and financial losses.
Typical coverage includes:
– Data restoration costs – Expenses for recovering lost files from damaged or compromised systems.
– Forensic investigations – Identifying the cause of data loss and ensuring security measures are in place.
– Business interruption compensation – Financial support for revenue lost due to data inaccessibility.
– Cybersecurity enhancements – Some policies may help fund security upgrades to prevent future incidents.
Insurance providers vary in their offerings, with some including data recovery as part of cyber liability insurance, while others offer it as an add-on to business insurance policies. Businesses should review their policies carefully to ensure they have adequate protection.
Reputational Harm
A reputation harm sublimit in a cyber insurance policy refers to a specific cap on the amount an insurer will pay for financial losses related to reputational damage following a cyber incident. While cyber insurance may provide broad coverage for various risks, sublimits restrict the payout for certain categories of losses, including reputation harm.
What Types of Cyber Insurance Coverage
Network Security and Privacy Liability Insurance—often referred to as Cyber Liability Insurance—protects businesses from financial losses resulting from data breaches, cyberattacks, and privacy violations. It covers both first-party and third-party risks, ensuring companies can recover from security incidents while also addressing legal claims from affected individuals or regulators
Media Liability
Media liability insurance is a specialized form of professional liability insurance designed to protect businesses and individuals involved in media, publishing, advertising, and content creation from legal claims. It covers risks such as defamation, copyright infringement, invasion of privacy, and misleading advertising.
Companies that produce or distribute content—such as news organizations, broadcasters, marketing agencies, and social media influencers—face potential lawsuits if their work is alleged to cause harm. Media liability insurance helps cover legal defense costs, settlements, and damages arising from such claims, including case of improper use of personal data or images.
Invoice Manipulation
Invoice manipulation insurance is a type of cyber insurance designed to protect businesses from financial losses caused by fraudulent alterations to invoices. This scam typically occurs when cybercriminals gain access to a company’s email system and manipulate invoices to redirect payments to fraudulent accounts. Unlike traditional fraud, invoice manipulation exploits legitimate business transactions, making it harder to detect. Coverage under invoice manipulation insurance may include: (i) Financial reimbursement for payments mistakenly sent to fraudulent accounts; (ii) legal expenses related to disputes over altered invoices; (iii) cybersecurity investigations to identify and mitigate vulnerabilities; and (iv) business interruption coverage if fraud disrupts operations. Many standard cyber insurance policies do not automatically cover invoice manipulation, so businesses should review their policies to ensure they have adequate protection.
Incident Response
Incident response insurance is a type of cyber insurance that helps businesses cover the costs associated with responding to a cybersecurity incident, such as a data breach, ransomware attack, or system compromise. It provides financial support for forensic investigations, legal fees, regulatory compliance, and recovery efforts following an attack. Coverage typically includes:
– Forensic analysis to determine the cause and scope of the incident.
– Legal and regulatory expenses to comply with data protection laws.
– Crisis management and public relations to mitigate reputational damage.
– Notification costs for informing affected customers or stakeholders.
– Cybersecurity enhancements to prevent future incidents.
Cyberterrorism & Cyber Wars
Cyber insurance coverage for cyberterrorism and cyber warfare varies depending on the policy and insurer. Traditionally, most cyber insurance policies exclude war-related events, including cyberattacks attributed to nation-states. However, some insurers are now offering specialized coverage for indirect losses caused by cyber warfare.
DDos Attack
DDoS attack insurance is a type of cyber liability insurance that helps businesses recover from financial losses caused by Distributed Denial-of-Service (DDoS) attacks. These attacks flood a company’s network with excessive traffic, disrupting operations and potentially leading to revenue loss. Coverage under DDoS attack insurance typically includes business interruption costs – compensation for lost income due to downtime caused by an attack. Businesses should review their coverage to ensure they have adequate safeguards.
Cryptojacking Insurance
Cryptojacking insurance is a type of cyber insurance that covers financial losses caused by unauthorized cryptocurrency mining on a company’s systems. Cryptojacking occurs when hackers hijack computing resources—such as cloud servers or employee devices—to secretly mine cryptocurrency, leading to higher energy costs, system slowdowns, and security vulnerabilities. Some cyber insurance policies include cryptojacking coverage, which may help businesses recover costs related to (i) increased electricity and cloud service expenses due to unauthorized mining; and (ii) system performance degradation and IT recovery efforts.
Other Areas of Importance: First-Party vs Third-Party
First-party and third-party cyber insurance cover different aspects of cyber risk.
First-party cyber insurance protects your own business from financial losses due to cyber incidents. It covers costs related to data breaches, ransomware attacks, business interruption, and reputational damage. For example, if your company experiences a cyberattack that disrupts operations, first-party coverage helps pay for recovery efforts, forensic investigations, and customer notifications.
Third-party cyber insurance, on the other hand, covers legal claims and liabilities arising from cyber incidents that affect others. If a client or partner suffers a data breach due to your company’s security failure, third-party coverage helps pay for lawsuits, regulatory fines, and settlements.
When a customer is added as a named insured under a cyber insurance policy, they generally receive first-party coverage for cyber-related incidents. This means they are entitled to financial protection for direct losses their organization incurs, such as data breaches, ransomware attacks, business interruptions, and recovery costs. However, their status as a first party or third party depends on the policy structure and wording.
First-party coverage under cyber policies for privacy counsel, forensic investigations, notification costs, credit monitoring, etc.
Data security-related claims associated with investigations by federal and state regulatory authorities.
Claims by banks, financial institutions, and other companies or individuals involving large-scale data security breaches involving sensitive health or financial information.
Claims involving network outages made by third parties against insureds.
Business interruption claims under cyber policies.
Ransomware and extortion claims.
Business email compromise or email schemes and wire fraud under commercial crime insurance policies.
Claims involving data security and other coverage lines, including general liability, E&O, and D&O policies.
Exposures of individuals, including directors and officers and attorneys, investment advisors, and other professionals.
What Role Does a Lawyer Play?
– First-Party Cyber Insurance Coverage – Evaluating whether policies adequately cover expenses such as privacy counsel, forensic investigations, regulatory compliance costs, customer notifications, credit monitoring, and data recovery after cyber incidents.
– Regulatory Investigation Coverage – Assessing coverage for federal and state regulatory actions, including defense costs, fines, and compliance-related expenses tied to GDPR, CCPA, HIPAA, and financial sector regulations.
– Denial of Coverage for Large-Scale Data Breaches – Assisting businesses with disputes when insurers deny claims related to major data security incidents affecting financial institutions, healthcare providers, or customers’ sensitive information.
– Network Outage Liability Coverage – Reviewing policies to determine whether claims from third-party vendors, partners, or clients for outages caused by cyberattacks or system failures are covered.
– Business Interruption Claims & Disputes – Examining whether cyber policies provide adequate financial compensation for lost revenue, operational disruptions, and recovery expenses following an attack or technical failure.
– Ransomware & Cyber Extortion Coverage – Ensuring that policies cover ransom payments, forensic investigations, security improvements, crisis response, and negotiator fees, and assisting in disputes if coverage is denied.
– Business Email Compromise (BEC) & Wire Fraud Protection – Investigating commercial crime insurance policies to confirm whether email fraud, invoice manipulation, or unauthorized wire transfers are covered and handling denied claims.
– Cross-Policy Cybersecurity Coverage – Reviewing how cybersecurity-related risks intersect with general liability, errors & omissions (E&O), directors & officers (D&O), and crime insurance policies to prevent gaps in coverage.
– Individual Liability for Cybersecurity Failures – Advising directors, officers, attorneys, investment advisors, and other professionals on their exposure to legal claims arising from data breaches, cybersecurity oversight failures, or privacy violations.