Monday, December 8, 2014

Commentary: Law Firm Cyber Risk Insurance -- Rumor vs. Reality

The folks at Paragon Brokers have submitted an interesting white paper : "Is Reputation Damage Insurable in Cyber Insurance for Law Firms?"

Evidently, there was a slide in a presentation at the ILTA conference this Summer that suggested that reputation isn't insurable under a cyber policy, and they wanted to set the record straight. (I guess that just delivered the spoiler to the question at hand... but the full paper is worth a review nevertheless.)
  • "A data breach, network security or cyber event  could render client or proprietary records unreadable, leave networks unavailable, expose sensitive data or transmit malware to others. In addition to exposing a law firm to increased costs of  doing  business,  potential  liabilities  and  regulatory  scrutiny,  a  data  breach,  network  security  or  cyber  event  could have an adverse impact on a law firm’s process,  service, reputation, results of operations and financial condition."
  • "Possibly  one  of  the  biggest  'cyber' exposures  a  law  firm  faces  is  to  its  reputation  and  there  is  a  common misunderstanding that reputational damage cannot be insured in a cyber policy. This is not entirely correct, reputation loss can be insured when framed within  the prerequisites of insurability, i.e., that loss is  a) fortuitous, b) calculable & c) definite.
Read more for Paragon's commentary on the following questions:
  • How do insurers establish an insurable value to reputation?
  • How do insurers establish reputation loss is “definite” i.e. that  takes place at a known time, in a known place, and from a known cause?
  • How is reputation loss of income adjusted?
  • How can Cyber Insurance for Law Firms help?

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