CGL May Cover Less Than You Think
Commercial general liability (CGL) insurance is a must-have for any business. CGL offers protection from financial loss due to injuries or property damage that occur on the premises. While CGL is considered comprehensive business insurance, it does not cover all types of risk. In fact, you might be surprised to learn that CGL policies do not cover cyber exposures, despite the upsurge in cyber incidents in recent years.
Since CGL policies don’t cover cyber incidents, businesses must acquire cyber liability coverage as a separate policy. The good news is that cyber policies are relatively inexpensive to maintain, yet they pack enough punch to save you thousands, or even millions, of dollars in the event of an incident.
Read on to learn exactly how CGL insurance works and why you should prioritize getting an additional cyber policy.
What Does CGL Insurance Include?
Commercial general liability insurance protects your business from financial loss due to lawsuits that arise from everyday activities. It also covers non-professional negligent acts. Negligence refers to the principle that everyone must take reasonable measures to avoid injuring others.
- Professional negligence means that your work caused physical or financial harm to a customer. For example, if your accounting company makes an error on a tax return that triggers a costly IRS audit, the client could sue you for damages. Thus, CGL would not cover you in the case of professional negligence.
- Ordinary negligence applies to the general public and occurs when a company fails to prevent injury to others. For example, if you neglected to put proper signage on your business property during construction and that resulted in a customer’s injury, you might be accused of ordinary negligence. A CGL policy would cover you in the case of ordinary negligence.
There are four different types of ordinary negligence that CGL insurance policy covers: third-party bodily injury, third-party property damage, product liability, and advertising injuries.
- Third-party bodily injury
If a customer is injured in an accident involving your business, CGL insurance can help pay for medical expenses, including compensation for lost income, doctor visits, and physical therapy due to the accident. It also protects your business from the legal liability associated with bodily harm, should the customer decide to sue over the injury. Even if no physical harm has occurred, CGL can cover the costs associated with emotional distress.
- Third-party property damage
CGL insurance covers expenses to repair or replace customer property, should it be damaged accidentally by your business.
- Product liability
Even if harm doesn’t occur on the business premises, you could still be sued for damages if you manufacture, distribute, or sell products. A general liability policy will typically cover the legal expenses associated with a product liability lawsuit.
- Advertising injuries
If someone sues a business owner or employee of personal/advertising injury, CGL will cover the legal expenses. Personal/advertising injury includes:
- Malicious prosecution
- Misuse of another’s advertising idea
- Invasion of privacy
- Copyright infringement
- Wrongful eviction or entry
What Does CGL Insurance Not Include?
CGL policies generally do not cover cyber liability. If they do, that coverage is minimal. Despite this, many people still hold the common misconception that CGL includes comprehensive cyber coverage.
Unfortunately, some businesses had to learn this distinction the hard way. Sony became a high-profile example when their PlayStation network was hacked in 2011. The breach affected 77 million customers, costing the company an estimated $171 million. Though Sony had assumed that its CGL policy through Zurich American Insurance Company would cover the costs, it only covered physical property damage.
Even though cyber exposure is a significant business risk, many companies remain woefully unprepared. Cyber crime is expected to cost $6 trillion globally by 2021. These incidents affect businesses of all sizes. As many as 43% of all cyberattacks are aimed at small businesses and cost them an average $200,000 per incident.
Even when a cyber claim is paid for under a CGL policy, that coverage is partial at best. The case of Portal Healthcare is illustrative. After a data breach led to patient records being published online, the company attempted to seek compensation under its CGL policy, and the case went to court. In April 2016, the Fourth Circuit ruled in Portal’s favor, but Portal was only granted partial cyber coverage. Portal did not receive the full benefits of a dedicated cyber liability policy, which would normally include first- and third-party costs, as well as a panel of expert services.
What Cyber Liability Insurance Covers
Cyber liability insurance is a specialized insurance product designed specifically with cyber exposures in mind. These policies cover damages related to malign cyber activity and are more comprehensive than ever before.
Cyber liability coverage will pay for both first- and third-party costs associated with a cyber breach. A cyber policy will pay for essential first-party costs, including:
- IT forensic costs
- Notification costs
- Credit protection costs
- Crisis management costs
- Crime and social engineering costs
Cyber liability insurance also covers third-party costs associated with a data breach. This includes:
- Breach of contract
- Negligent protection of data
- Network security breaches
- Transmission of software viruses
- Denial of service attacks
- Defense of regulatory actions related to a breach
- Fines, penalties, and assessments
Cyber liability policies also cover additional costs associated with cyber extortion, business interruption, and digital damage assessments. Given that the average cost of a breach is $3.86 million, having a cyber policy in the event of an attack could make the difference in the survival of your business.
To learn more about a cyber policy that will meet your needs, please schedule a call with a ProWriters cyber expert today.