CGL May Cover Less Than You Think
Commercial general liability insurance (CGL) is a must-have for businesses. It protects them from financial losses associated with a wide range of exposures. But as comprehensive as CGL policies are, they don’t cover everything.
Many are surprised to learn that CGL does not cover cyber exposures, despite the growing need for insurance coverage in that area. Because CGL policies aren’t designed for cyber, separate cyber liability coverage is needed. Learn the difference between the two and what you need to get covered.
What Commercial General Liability Insurance Covers
CGL policies are designed to cover non-professional negligence, which could include anything from a customer falling at your businesses to a class action lawsuit against your advertising practices. For more detail, here’s what most standard CGL policies cover:
- Coverage A: Bodily Injury and Property Damage Liability
This covers costs associated with customers who are injured while on an insured’s business premises or have their property damaged. Specifically, it protects the insured from legal liability associated with bodily harm and damage to any item of value. A CGL policy will also often include compensation for the affected customers for lost income, doctor visits, and physical therapy. It is important to note that bodily injury is not limited to physical injuries or incidents. Even in the absence of physical harm, commercial general liability insurance policies can also cover mental injuries and emotional distress.
- Coverage B: Personal and Advertising Injury
CGL policies also cover insureds if they are accused of “personal or advertising” injury when promoting goods and services. This includes:
- Malicious prosecution
- Misuse of another’s advertising idea
- Invasion of privacy
- Copyright infringement
- Wrongful eviction or entry
Lawsuits filed against the insured in association with these damages are covered under a CGL policy.
- Coverage C: Medical Payments
CGL policies also cover medical costs for injuries sustained by non-employees on the business premises of an insured. No legal action needs to be taken for this coverage to take effect. This can quickly settle smaller incidents and claims without the need for litigation. Unlike Coverage A above, this applies to no-fault scenarios and does not include legal defense coverage.
What Commercial General Liability Insurance Doesn’t Cover
After learning more about CGL policies, many people ask us, does CGL cover cyber liability? In most cases, CGL policies do not fully cover cyber liability. In fact, the idea that CGL policies include comprehensive cyber coverage is a common misconception. This is an issue because cyber liability is a growing problem for businesses today and should be part of every risk management plan.
Cyber risk is a significant business liability. Cybercrime is expected to cost $6 trillion globally by 2021. That’s more profitable than the current market for every illegal drug in the world combined. And while large corporations are certainly at risk, businesses of all sizes will be affected. In fact, security experts suggest that small businesses are more attractive targets for cybercriminals than large companies. There has never been a more important time for businesses to make sure they have insurance to cover their cyber liability.
Contrary to what many may believe, most CGL policies do not include cyber coverage. Many businesses learn this the hard way after they experience a cyber attack or data breach. Sony is one high-profile example; in 2011, Sony’s PlayStation network was hacked, affecting some 77 million customers and costing the company an estimated $171 million in initial costs. Sony was under the impression its CGL policy with the Zurich American Insurance Company covered these damages, only to learn that the policy only covered physical property damage.
Even when a company successfully gets a cyber claim covered under a CGL policy, it often only means partial coverage. Portal Healthcare is one example of this. After a data breach led to patient records from Portal Healthcare being published online, the company attempted to get its cyber claim covered under an existing CGL policy. The case went to court, and in April 2016, the Fourth Circuit sided with Portal, resulting in partial coverage.
Despite their court victory, Portal Healthcare did not get the full benefits of dedicated cyber liability coverage. They did not get the extensive coverages for 1st and 3rd party costs that cyber liability insurance offers. And most importantly, they did not get the panel of experts that comes with a dedicated cyber liability policy that cover everything from IT forensics to specialized public relations expertise.
In short, CGL policies don’t include comprehensive cyber coverage. For that, you’ll need a separate cyber liability insurance policy like the ones offered by ProWriters.
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 insurance policies will cover both 1st and 3rd party costs associated with a cyber breach. The 1st party costs these policies cover include:
- IT Forensic Costs
- Notification Costs
- Credit Protection Costs
- Crisis Management Costs
- Crime and Social Engineering Costs
Cyber liability insurance also covers 3rd 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 / ransomware, business interruption, and digital damage assessments. Given that the average global cost of a breach is $3.86 million, having cyber liability coverage can be the difference between whether or not businesses survive a cyber attack.
Cyber liability policies are wide-ranging and comprehensive. They cover the cyber exposures that a CGL policy won’t, which is becoming increasingly important as cyber criminals step up their attacks against businesses of all sizes. To learn more about what these policies can do for you, schedule a call with a ProWriters cyber expert today.