Cyber Liability – What is Tangible Property?

By Remmie Butchko, CIC

Georgetown Insurance Service, Inc.

Silver Spring, MD

 

Virtually every business owner purchases General Liability insurance at some point.  This can also be referred to as GL (General Liability), BOP (Business owner Policy), or CGL (Commercial General Liability) insurance.  For the purposes of this discussion, it will be referred to as “GL.”

GL policies traditionally cover Bodily Injury and Property Damage caused to third parties.

Several years ago, the insurance industry began to change the definition of what is covered as Property Damage on their GL policies.  Policies have been re-worded with verbiage so that only “tangible property” is covered under a standard GL policy.

Today, almost all GL policies specifically state that electronic data is not considered to be “tangible property.”  As a result, if policyholders damage a third party’s data there is no “property damage” to trigger coverage under GL coverage.

Items that are excluded (i.e. GL will not pay if you cause damage to) include, but are not limited to:

-Any electronic data

-Information (including Intellectual Property)

-Facts

-Programs

-Media used in conjunction with electronically controlled equipment

As of now, the insurance industry is fairly fragmented as to how to handle the issue of Electronic Data Liability.  Some underwriters will include it in their GL rate while others will write the coverage, but with a sublimit less than the typical $1,000,000 GL limit.  Some underwriters will not, or cannot, write the coverage at all.

This is a large challenge, as most businesses, big or small, have the ability to inadvertently cause damage to a third party’s Electronic Data.   In fact, based on Chubb’s 2013 Private Company Risk Survey, 39% of business owners feel as though they are currently covered by their GL policy for the accidental damage to a third party’s data.  However, this is typically not the case.  You should speak with your agent to make sure you have the expected coverage.

Based on a standard GL policy, if you accidentally damage or destroy a computer, multiple computers, or a server, then the “Property Damage” is covered…since it is considered hardware. Yet in today’s world, what is more valuable — or carries a greater duty of care — the computer hardware or the information that it holds?

Insurance is not always exciting (especially Cyber Insurance), but it is definitely nice to have it when you need it!


Disclaimer: All data, information, and opinions provided on this article, newsletter, or blog is for informational and educational purposes only. While every caution has been taken to provide readers with the most accurate information and honest analysis, please use individual discretion before making any decisions based on the information in this article, newsletter, or blog. Georgetown Insurance Service, Inc. is not responsible if its readers happen to experience loss, injury, or damage resulting from its display or use. All information is provided on an as-is basis. This article, newsletter, or blog does not represent the thoughts, intentions, plans, or strategies of any specific Insurance Carrier, Georgetown Insurance Service, Inc. partner or affiliate.

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