Electronic data liability coverage

Data liability coverage provides protection against the loss of electronic data. It’s sometimes referred to as an electronic data liability endorsement.

This coverage may include virtually anything you can store electronically, such as computer software, digitized documents, and employee or customer records. It’s the kind of information that could be stored on hard drives, thumb drives, or in the cloud.

Most small business owners have commercial general liability insurance (CGL) that covers risks like bodily injury to a customer, damage to a customer’s property, and advertising injury.

A CGL policy usually has an electronic data exclusion stipulating that your general liability coverage does not include the loss, corruption, or the inaccessibility of data.

If you damaged a customer’s laptop, your general liability insurance policy would help pay for repairing or replacing the computer itself—but not the data within. It also wouldn’t pay for a ransom, or any technical expenses needed to unlock your own computer after a cyberattack.

An electronic data liability endorsement is a claims-made policy that can add data liability coverage to your standard general liability policy, for an added fee.

For example, if you added this coverage to your general liability policy, it would expand your property damage liability coverage to include a loss of data caused by accidental damage to a customer’s computer, hard drive, etc.

Keep in mind that a data liability endorsement would only apply to situations where there was physical damage to a customer’s property, so an instance of cyber hacking or a ransomware attack would not be covered by this endorsement.

An electronic data liability endorsement can also be added to a business owner's policy (BOP), which allows small business owners to bundle both general liability coverage and commercial property insurance for a lower premium than if you purchased each policy separately. A BOP is especially helpful If you own or rent your workspace.

Any company or professional who relies heavily on technology, handles client data, works with a client’s network, or performs physical work near electronic infrastructure would benefit from electronic data liability coverage.

For example, if you’re an electrician or general contractor doing work on a client’s business property, accidentally causing a short circuit or power overload in the electrical system could damage the company’s computer systems. In other cases, if one of your employees accidentally cut a fiber optics cable leading to a network mainframe, your company could be liable for causing a business interruption.

In these instances, your insurance company would cover the cost of this property damage through your general liability policy. However, it would not cover any loss of data or Internet access, unless you have an electronic data liability endorsement.

A data liability endorsement on your general liability coverage insures a data loss when there’s damage to or loss of use of tangible property, such as a computer, hard drive, or server. The endorsement kicks in when that physical damage also affects a client’s data storage or Internet connection.

Cyber insurance covers instances such as cyberattacks and data breaches, where a company’s computers and data storage are compromised due to a targeted software attack, rather than physical damage to its network or storage devices.

A cyber liability policy may offer both first-party cyber liability insurance and third-party cyber liability coverage to policyholders.

First-party cyber liability coverage can help your business recover from a cyberattack or data breach. It covers the cost of notifying customers and offering credit monitoring services, which may be required in your state. First-party cyber coverage also includes the cost of PR and advertising to help manage your company’s reputation.

Third-party cyber liability insurance can help with your legal expenses if a client sues you for failing to prevent a cyberattack or a data breach at their business.

For some businesses, such as those who work in computer repair and installation, it may make sense to purchase both an electronic data liability endorsement and cyber liability insurance.

If you’re ready to buy insurance coverage for your small business, you can complete Insureon's easy online application today to compare quotes from top-rated U.S. carriers. An insurance agent can walk you through your pricing options and help with endorsements, including electronic data liability. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.