Cyber Liability

Like nearly all other organizations, cities rely on digital information and advanced computer systems. While technology has changed our lives and society, it also has brought increased risks. Public entities are especially at risk due to the nature and volume of information that is received, sent and stored. Additionally, there are significant regulatory requirements imposed upon political subdivisions in the opera­tions of their digital and computer systems.

The term “cyber” generally refers to computer operations and information stored or sent by way of computer. “Cyber liability” encompasses a range of issues involving computer and Internet operations. A non-exhaustive list includes:

  • Virus attacks
  • Improper release of information
  • Identity theft
  • Damage to reputation
  • Copyright infringement
  • Damage to computer systems

Significant expense or demands may result from lost produc­tivity or damage claims by third parties. Costs may be incurred to comply with regulations that require notification to citizens or customers if the security of a computer system is breached.

Third-Party Claims

A potential exposure is in the form of “third-party” damage claims. A third-party claim is a claim made by an injured or dam­aged party against the member. Third-party cyber liability claims can arise from:

  • Privacy Liability – Theft or unintentional release or loss of personal data such as driver’s license numbers, social security numbers and credit information
  • Internet Liability – Defamation, domain, trade name or copyright infringement
  • Breach of Network Se­curity – A virus, hacker or denial of service attack that may originate from an email or Internet site
Types of Coverages

Cyber Liability Coverage
A “Cyber Liability” endorse­ment provides coverage for third-party cyber liability claims. The definition of “cyber liability” includes the failure to control access to a computer, denial of autho­rized access, failure to prevent unauthorized disclosure or dissemination of electronic data, failure to protect the introduction of or the transmission of malicious code or computer virus or failure to comply with any federal, state or other law governing electronic data.

Coverage for Damage To Data, Hardware Or Software
Coverage is provided for the repair, replacement or restora­tion of electronic data in the event that electronic data is lost or damaged and a loss was suffered as a result.

Cyber Breach Expense Coverage
This type of endorsement provides for the payment of expenses incurred for the loss, theft or accidental release of electronic data that personally identifies an individual. The expenses covered would generally include costs incurred to:

  • Notify affected individuals.
  • Establish a toll-free help line.
  • Provide credit monitoring to affected individuals for up to a year.
  • Provide victims with identity restoration services for up to a year.
  • Respond to unfavorable publicity related to cyber breach.

Public entities should ensure that they have the appropriate policies, practices and security systems in place to protect themselves and the public. Cyber liability coverage cannot protect against all types of claims or losses that may occur. Constant education, training and upgrade of systems are required to fully protect cities from claims, damages or penalties.

Tips for Preventing Cyber Liability Claims
  1. Use security software, and update it frequently.
  2. Scan computer systems to look for any bugs.
  3. Be alert for emails that ask for personal informa­tion.
  4. Scan USB devices used for transferring data.
  5. Keep web browsers and operating systems up to date.
  6. Use encryption technology.
  7. In the event of a possible security breach, im­mediately evaluate the problem and involve legal counsel to ensure compliance with notification requirements.

Information provided by Robert Gehring, a partner with Crabbe, Brown & James in Cincinnati, OH and practices in the areas of governmental law, torts, insurance and busi­ness litigation. Gehring provided the information on behalf of the Iowa Communities Assurance Pool (ICAP). Learn more about ICAP at

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