01 Dec 2016

Cyber Implication On D&O Coverage

December 01, 2016Uncategorized

Any comprehensive Business Insurance policy should include protections against the most likely directors and officers (D&O) exposures. Overwhelmingly, most D&O insurance claims involve issues in which directors and officers steal intellectual property, breach fiduciary duty, or are sued for failing to comply with workplace laws or for misrepresenting customers. There’s another exposure that’s becoming increasingly common and garnering significant attention: cyber exposure.

In the past couple of years, there has been increasing news coverage about high-profile cyber-security breaches at retailers including Target, Home Depot, and the Wyndham hotel chain to name a few. Why the increasing news coverage? Because cyber-security breaches are becoming more common, more widespread, and more damaging. Large and midsized corporations may have IT departments tasked with keeping customers’ data safe. But at the end of the day when a devastating breach occurs and compromises sensitive customer data, it isn’t the guys in the IT department who are sued. It’s the company’s directors and officers.

As noted in an Insurance Journal article, when a catastrophic breach occurs and victims demand justice (and compensation), attorneys for the plaintiffs will follow the money and go after the policymakers who should have known the risks and taken steps to prevent it. Directors and officers are held to a high standard, as they should be. It’s their duty to ensure that their IT personnel have a mandate to make cyber security a priority, and have the tools and resources in place to put safeguards in place. If that doesn’t happen and a data breach occurs, directors and officers can be sued for breaching their fiduciary duty.

Unfortunately, the reality is that many directors and officers are too willing to delegate these critical responsibilities, rather than educate themselves and ensure the necessary precautions are taken. Companies should be vigilant about making sure their D&O underwriters work closely with their cyber liability underwriters to create a realistic risk exposure analysis.

About Euclid Exec

Euclid Exec understands that the risk of cyber attacks is growing and will only become more prevalent. Our policy allows for public, private and nonprofit companies to secure the best coverages for their unique risks. Our policy allows you to choose D&O insurance, Employment Practices Liability Insurance and Fiduciary Liability Insurance in any combination with shared or separate limits. For more information on the coverages we provide, call us today at 630.694.2276.