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Press Release

Cyber Coverage a Must? Solace Insurance Says Data Breaches Future of Class Action Money for Lawyers

As cybercrime becomes more sophisticated, Largo-based insurance agency Solace Insurance says cyber insurance has become a necessity, as companies hit by hackers could be held accountable with class actions in court for large-scale data breaches.

PR Newswire

CLEARWATER, Fla., Nov. 14, 2013 /PRNewswire-iReach/ -- Cyberattacks are a top concern for businesses in 2013, but surprisingly, the attacks are no longer the only cause of distress. The legal consequences, such as class-action lawsuits on behalf of third parties affected by the cyberattacks, are a growing worry of business owners. Largo-based insurance agency Solace Insurance says that businesses without cyber insurance are vulnerable to cybercrime, and as a result, are a likely target for consequential litigation.

(Photo: http://photos.prnewswire.com/prnh/20131114/MN17339)

Of 258 executives polled in a recent study by market research firm Penn Schoen Berland, three-quarters said that legal compliance issues are making their organizations think more about cyber risks. And while the majority (85 percent) named cyberattacks as their greatest risk, less than 20 percent of companies purchase cyber insurance to protect themselves against this increasingly common cause of loss (1).

Cyber insurance is becoming widely available. Such insurance is designed to mitigate losses from a variety of cyber incidents, including data breaches, network damage and cyber extortion. The Department of Commerce has deemed cyber insurance an "effective, market-driven way of increasing cybersecurity," because it may help reduce the number of successful cyberattacks by promoting widespread adoption of preventative measures; encouraging the implementation of best practices by basing premiums on an insured's level of self-protection; and limiting the level of losses that companies face following a cyberattack (2). However, many businesses are choosing to forego cyber insurance, leaving themselves vulnerable to substantial financial damage.

Case in Point:

A class-action lawsuit was filed against Schnuck Markets Inc., a St. Louis-based grocery store chain that announced its point-of-sale network had been attacked by a "malicious computer code" designed to capture payment card details.

The lawsuit, filed April 8, seeks unspecified damages for consumers affected by the breach. It alleges Schnucks should have notified consumers immediately and directly about the breach. The suit also claims Schnucks' failure to adequately protect cardholder data exposed customers' personally identifiable information, ultimately resulting in deceptive and unfair practices, which is a violation of Missouri Merchandising Practices Act. As a result, affected cardholders run the risk of having their identities stolen, the suit argues (2).

Bob Childress, CEO of Solace Insurance, believes that the current landscape of cybercrime has created a future of class-action lawsuits. Childress says that businesses today need to protect themselves against cyber theft—such protection would involve many layers, including effective security training in place for employees, as well as cybercrime insurance coverage.

"Businesses know less about this type of insurance, yet it's a growing concern," Childress said. "Certain types of cyber coverage can help companies recoup losses if attacked—including litigation."

Many insurance agencies offer both first- and third-party insurance. First-party coverage insures for losses to the policyholder's own data or lost income, or for other harm to the policyholder's business resulting from a data breach or cyber-attack. Third-party coverage insures for the liability of the policyholder to third parties, including clients and governmental entities, arising from a data breach or cyberattack (3).

According to Childress, coverage availability and premiums always vary between insurers. This means that proactive business owners—especially those with small and mid-sized companies that are particularly vulnerable to cyberattacks—would do well to understand the potential security risks. While some standard policies may provide some protection from cyber risks, per Childress, it is important to understand what coverage, if any, may be available under existing policies.

How to Secure Adequate Coverage

Childress says that businesses can limit data breach risks, as well as litigation risks, by obtaining cyber coverage and following three simple steps:

Step One: Understand what coverage is available under any existing policies. General policies may provide some protection from cyberattacks—understanding existing policies enables businesses to purchase the type of cyber insurance that is needed to ensure that there are no gaps in coverage.

Step Two: Anticipate the potential costs of a data breach. The inherent costs of cyberattacks are often significant, so businesses should obtain coverage equal to its risk in the event of a breach. Consider all options and buy only what is needed.

Step Three: Lastly, be aware of any exclusions—when a policy contains a poorly-worded, unnecessary or otherwise improper exclusion, attempt to negotiate with the insurer, or seek another quote from a different agency.

Solace Insurance is an award-winning, independently-owned, full-service agency based in Largo, Florida, with over $1 billion in property insured. Childress states that a growing segment of his business is ensuring that businesses are protected against the inevitable cyberattack.

For more information about Solace Insurance and its services, visit www.restinsured.com.

About Solace Insurance:

As an independently-owned, full-service agency based in Largo, Florida, Solace Insurance has provided quality insurance products to customers for over 30 years. Solace is a licensed insurance agency with over $1 billion in property insured, and has been recognized by many as a top performing agency. This status is what allows Solace to offer its customers the most competitive and economical programs available, all while providing expert advice and quality service. From standard auto policies to the more complex multi-tiered insurance programs, Solace has the depth of resources to find just the right policy for each individual and company. For more information, visit Solace online at www.restinsured.com.

1. Anya Khalamayzer. "ABC's of Cyber Coverage." 25 September 2013 via Web PropertyCasualty360. propertycasualty360.com/2013/09/25/abcs-of-cyber-coverage.

2. Kitten, Tracy. "Schnucks Sued Over Malware Attack." Bankinfosecurity.com. N.p., 15 Apr. 2013. Web. 06 Nov. 2013. bankinfosecurity.com/schnucks-sued-over-malware-attack-a-5685/op-1.

3. Simmons, L.D. "A Buyer's Guide To Cyber Insurance." Law360.com. N.p., n.d. Web. 06 Nov. 2013. law360.com/articles/480503/a-buyer-s-guide-to-cyber-insurance.

Media Inquiries:

Karla Jo Helms
JoTo PR
888-202-4614 ext. 802
www.jotopr.com

Media Contact: Karla Jo Helms, JoTo PR, 888-202-4614, khelms@jotopr.com

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SOURCE Solace Insurance

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