Cyber Liability for Non-profits

12/16/2014

Cyber Liability Insurance for Nonprofits Organizations

News of cyber-crime and instances of massive data breaches are increasing each year. The headlines have been grabbed by major data breaches at discount retail chains, restaurant chains, financial institutions, video game developers, health care providers, government agencies and more. The Pew Research Center estimated this year that 18 percent of adults who engage in online activities have been the victims of stolen information, including Social Security numbers, addresses, or banking information – an increase from 11 percent in 2013. 

And with each instance comes increased awareness of the need for cyber liability coverage, a painful but important lesson in the ways 21st century crime can infiltrate a business – and its customers’ wallets. These infringements are happening with increasing regularity, breeding mistrust among consumers and wreaking havoc with companies that are left scrambling to pick up the pieces from these financial (and public relations) disasters. As a result, some estimates indicate that cyber liability insurance sales will double in 2014 from $1 billion just last year. 

However, one group that has been relatively overlooked in conversations about data theft, firewall infringements, and complex malware programs associated with cyber liability is nonprofit groups – organizations that are particularly vulnerable because they often lack adequate manpower, are dependent on volunteers and frequently operate with limited capital. They may not have the resources to properly protect their infrastructure and, equally as alarming, detect when such a breach has occurred. Imagine how hard it would be for a nonprofit to raise funds following a breach of private information belonging to current donors. It may also be difficult to recruit new volunteers if the confidential information of current volunteers is compromised. The survival of the nonprofit organization would be at risk if a data breach weren’t handled quickly and appropriately. The typical cyber liability insurance policies in the marketplace include things like public relations expenses, forensics, notification, credit monitoring services, and call centers. Without that professional help from an outside group, the day-to-day operation of a nonprofit could come to a screeching halt.

Cyber crimes are not just the result of nefarious criminals in foreign countries executing complex and well-organized schemes. The data breach culprit could be someone who works for the nonprofit organization – a rogue employee, a disgruntled volunteer or even someone who holds no affiliation to the affected group. The most common instances of cyber crime are the result of a lost or stolen laptop that contains encrypted information that details organization finances or sensitive donor information. Along with hacker events, human error or negligence are leading causes of data breaches.  

Nonprofits have traditionally not been a targeted class for cyber liability insurance, but that’s changing. Because they may be at a higher risk for breaches, nonprofit groups are the subjects of increased inquiries and endorsements as part of cyber liability protection. For example, the State of Michigan requires that it be included as an additional insured, for vicarious liability purposes, in the event that a nonprofit group with which it is affiliated is a victim of hacking or information theft. Many carriers have not been aggressive in their writings for cyber liability protection for nonprofits because the exposure can be just as large as a for-profit organization, but nonprofits may not have the funds to pay the appropriate premium. 

Cyber crimes are only likely to increase, and no organization, regardless of its size, scope, or reach, is immune. As the demand for nonprofit cyber liability protection increases, it is important to know that there are a variety of very affordable solutions that exist to protect your client. From tweaking existing contracts, to adding additional insured clauses or co-defendant wording, your AmWINS Financial Services Practice is available to help you navigate this emerging and challenging coverage.


 
This article was authored by Kendra Schaendorf, an assistant vice president with AmWINS Brokerage of Michigan and member of the firm’s financial services practice.
Contact Us

To learn more about how AmWINS can help you place coverage for your clients, reach out to your local AmWINS broker.  If you do not have a contact at AmWINS, please click here.

Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.

(c) 2017 AmWINS Group, Inc.

Most Popular Insights

Insurance Impacts of COVID-19 on the Healthcare and Senior Living Industry

03/30/20

As the healthcare industry remains on the front lines of battling the COVID-19 pandemic, staying abreast of the changing landscape and how the insurance market is adapting is critical to ensure new exposures are covered and renewals are successfully placed. In this article, our specialists share what they are seeing in the Healthcare and Senior Care markets, tips for risk control and mitigation, and how to get the best results for insureds.

COVID-19 – Are Your Clients Covered?

03/19/20

The disruption to business and everyday life caused by the coronavirus (COVID-19) pandemic is resulting in an economic impact for insureds. Much of this disruption is likely not covered by insurance. We have consulted with several AmWINS insurance specialists across the Property, Casualty and Professional Lines sectors and offer a COVID-19 update.

From Seed to Sale: The Top 5 Issues Impacting the Cannabis Insurance Industry

09/19/19

​Over the last few years, the legal cannabis industry has seen rapid growth and had a significant impact on the U.S. economy. With states continuing to legalize its use, insurance needs for cannabis-related businesses are becoming a popular topic of discussion. This article examines the evolving cannabis industry by exploring five key issues impacting coverage.

Four Key Additional Insured Endorsements for Contractors

Construction contract negotiations, which determine the kind and amount of insurance required for a construction project, can be time-consuming, complicated and frustrating. Project owners require contractors on a project to name the project owner as an additional insured on the contractor’s casualty insurance program. It's important that both project owners and contractors understand the coverage provided by these additional insured endorsements. This article discusses four common ISO additional insured endorsements related to commercial general liability policies purchased by contractors, including their limitations, conditions and exclusions.

How Parametric Products Benefit Catastrophe-Driven Risk Transfer

03/19/20

Parametric insurance is an innovative product that functions differently than traditional insurance by covering the impacts of an event and not just losses sustained to an asset. Proceeds of the policy are paid quickly and can be used flexibly to cover any expense associated with the triggering event. Coverages can be designed to capture the impacts of natural perils and other forms of non-damage business interruptions such as future epidemics. Learn how the parametric landscape has and will continue to play a major role in improving coverage and the recovery experience.

Understanding Property Theories of Recovery and Ensuing Loss Clauses

​The theories of recovery, as well as the ensuing loss provisions, contained in property insurance policies are often complex and, at times, seemingly in conflict. Although a policy may not directly address these theories, their application by courts plays a significant role in the coverage determination process after the claim. It is essential that brokers understand the primary theories of recovery – Efficient Proximate Cause, the Concurrent Causation Doctrine, and the Anti-Concurrent Causation Doctrine – in order to navigate the challenging post-claim process and effectively serve their clients.

Sign Up For Our Monthly Newsletter

Sign Up