ELECTRONIC DATA LIABILITY - AN IMPORTANT COVERAGE GRANT IN AN ELECTRONIC SECURITY FIRM'S LIABILITY INSURANCE PROTECTION

Traditional commercial general liability ("CGL") insurance protection does not cover claims arising out of damage to or loss of electronic data. Additionally, a traditional liability policy definition of "property damage" specifies "electronic data is not tangible property."

Since a covered property damage claim under the CGL policy requires either (1) physical injury to tangible property, or (2) loss of use of tangible property that has not been physically injured, this reference to electronic data removes injury to such property from the policy's property damage coverage.

Electronic Data Liability provides a means for buying back liability coverage for damage to electronic data within a CGL Policy. The endorsement replaces the portion of exclusion "p" applicable to loss of or damage to electronic data with a narrower one that applies only when loss of data does not result from physical injury to tangible property.

The endorsement also adds a provision specifying that "loss of electronic data" is a category of "property damage." Such loss must, however, result from "physical injury to tangible property" - presumably some direct damage to software media or the computer hardware itself. The endorsement does not affect the portion of exclusion "p" that eliminates coverage of liability arising from a data breach - unauthorized disclosure of private information. Damages stemming from a data breach remain excluded altogether from coverage even when endorsement CG 04 37 is attached to the CGL policy.

Including electronic data liability in commercial liability insurance plans better protects your business and bottom line when available. It also creates an important bridge between the General and Professional Liability sections of coverage often combined in policies issued to Physical Security, Electronic Security and Investigative agencies.

Including Electronic Data Liability in your CGL insurance policy is good risk management and anticipates trends where security officers have increasing access to networks and client owned computers.