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Cyber Insurance Becoming a Necessity for Online Businesses

By Brett Snider, Esq. on April 22, 2014 | Last updated on March 21, 2019

FindLaw columnist Eric Sinrod writes regularly in this section on legal developments surrounding technology and the Internet.

This blog for years has highlighted the potential risks and liabilities presented by communications and activities on the Internet. The Internet provides the possibility of privacy violations, security breaches, intellectual property disputes, defamation, hack attacks, and even cyber warfare, among other threats.

So what should companies do to be as safe as possible as they conduct business over the Internet?

In addition to implementing security and protective measures, companies more and more are turning to cyber insurance policies in an effort to protect their exposure to Internet risks.

Indeed, according to a recent CNBC article, cyber insurance is now the fastest growing area of insurance. Companies buying cyber insurance policies increased a whopping 21 percent from 2012 to 2013, as reported by Marsh Risk Management. And companies seeking protection from major Internet risks also rose, as those companies purchasing coverage of at least $100 million increased substantially during this same time frame.

Cyber insurance certainly has not been around as long as more traditional insurance policies, such as homeowners, automobile, life and health insurance. Thus, these policies are not as standardized, and the terms of cyber insurance policies can be more likely to vary from one issuer to another. Therefore, care must be taken by a potentially insured company to closely review the terms of available cyber insurance policies to ensure a good fit for the risks faced by the company.

And while a company must be careful in analyzing the coverage provisions of a potential cyber insurance policy -- to ensure that the risks actually faced by the company would be covered -- equal care must be exercised in analyzing an insurance policy's exclusions. Why? Because what coverage provisions provide, exclusions may take away.

The Internet presents a brave new world, but at least cyber insurance can help mitigate possible risks faced by companies as they move forward in cyberspace with their business activities.

Eric Sinrod is a partner in the San Francisco office of Duane Morris LLP, where he focuses on litigation matters of various types, including information technology and intellectual property disputes. You can read his professional biography here. To receive a weekly email link to Mr. Sinrod's columns, please email him at with Subscribe in the Subject line. This column is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.

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