A business associate of mine Domenic Martino recently shared a great article on small business insurance, of course at The Technology Coach our goal is to ensure data loss in your business never happens, but as with any other insurance, this type of protection is always recommended for those "just in case" scenarios.
So here’s a short article regarding insurance that may be of interest to small business owners, It has to do with a policy exclusion, known as “DATA EXCLUSION CLAUSE”. An exclusion in an insurance policy, simply means that there is no coverage for whatever is excluded.
Most policies specifically exclude coverage for losses resulting from loss of data. Read on....
Understanding Data Exclusions
You should know that, today, most business insurance does not cover the loss of or damage to data used and stored by your business. Here's what the Canadian insurance industry defines as data, why it's now excluded, a little background on the issue and some related problems from an insurance perspective.
What is data?
"Data" has been defined as "representations of information or concepts, in any form" in the federal Personal Information Protection and Electronic Documents Act. This definition has also been chosen as the standard by the industry's advisory body, the Insurance Bureau of Canada (IBC) as:
It stands on its own, and provides no reference to other definitions; and It is concise - fewer words mean fewer possible interpretations.
Why exclude data from coverage?
An increasing number of occurrences that have resulted in an economic loss for businesses can be traced to data, in one form or another. Data can be compromised by employees within the business or unknown parties outside the business, who, intentionally or unintentionally, delete, add, change, or misinterpret it. The basis of much of what we do today, and more of what we will be doing in the future, data is captured every time an individual uses a credit card, makes a telephone call or turns on a light switch. From a business perspective, data may form part of the company's billing system, provide insights into consumers' habits or form a part of the business' management information.
Stepping back and looking at how often data is used - cash registers, telephone call displays, word processing, the Internet and so on- you can see that, as a society, we have become completely dependent on data.
This is what makes cyber-world problems unique. The decision to exclude data from insurance policies was determined by the recognition that, while data is everywhere, its corruption, destruction, etc. may cause catastrophic losses.
Background
Early in 2001, reinsurance markets around the world indicated that "cyber risk" would be excluded from catastrophe treaties in 2002. IBC took on the task of reviewing the existing wordings in insurance policies to address the situation.
The reinsurers' primary concern was that a single event such as a virus attack could shut down all of the computers in a building, a city, a province or even a wider area. Should such an event occur, the loss could conceivably exceed the insurers' and reinsurers' ability to pay - effectively bankrupting the companies and damaging the economy. To prevent this, specific data exclusion wordings were drafted for each standard insurance form that provides coverage for direct damage and business income. Now, only certain damages resulting from specific perils will be covered.
Some issues to consider
The greatest area of concern is the lack of security. Many cases of attacks such as the "I Love You" virus and more recent versions have received widespread publicity and brought the concerns to everyone's attention. It is for this reason that we recommend frequent and regular checks and updating of security systems.
The law requires that personal information be protected. Individuals and companies that deal with personal information, such as your name, address, telephone number etc., are expected to take the necessary precautions to protect it.
Intellectual property is another area where there are legal issues to be dealt with. Software programs may be illegally copied, installed or posted on the Internet.
The Internet is accessible on a worldwide basis, which means that considerations have to be given to determine which country's laws apply. For example, if you live in Canada, purchase an item on the Internet from Sweden and you encounter a claim, there is a question of whether Canadian or Swedish law applies.
Another factor of the worldwide impact is the concern that what is acceptable in one country may not be in another. It may be a question of ethnic dress, a photograph of something or someone, or just words.
Insurers are also concerned with the cost of defending claims that may arise from these situations. While the claim may have little chance of success and be settled in favour of the insured, it could still cost millions of dollars to defend.
Article Shared from:
Domenic Martino, RIBO
Commercial Lines Account Manager
TRIPEMCO BURLINGTON INSURANCE (Halton) GROUP LIMITED
440 Elizabeth St,, Suite 303
Burlington ON, L7R 2M1
Tel: 905.333-3076
Fax: 905.333.4904
Toll Free: 800.373.1106
Cell: 416-834-1611
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