Commercial property insurance policies don’t automatically provide coverage for the loss of electronic data, programs and software. If a property policy includes coverage at all, the contract will contain a special clause that includes words such as “physical loss or damage to electronic data, programs or software, including physical loss or damage caused by the malicious introduction of a machine code or instruction.”
With the cost and frequency of cyberattacks on the rise, carriers now are beginning to change their language to narrow the coverage offered under property policies. For example, some insurers are attempting to restrict coverage triggered by “malicious code” to “code intended directly to harm the business property policy holder.” This change would eliminate coverage for a broad-based virus or cyberattack and limit it to only a targeted attack by, for example, a former or current disgruntled employee.
Some insurers are removing the words “malicious code” altogether. In such cases, the only coverage remaining for electronic data on a property policy would be from fire, wind, flood or other non-cyber covered perils.
In addition to changing language to restrict coverage, some insurers also are reducing coverage limits. This reduction can be severe—even as much as 90 percent in some property policies.
Review, Consult and Insure
As cyberattacks continue to alter the insurance landscape and how policies are being written, risk managers should consider:
- Reviewing current commercial property insurance policies to learn what, if any, coverage their carrier currently provides
- Consulting their broker or carrier about any changes that may be coming to their commercial property insurance policy
- Discussing whether a standalone cyber insurance program is needed to provide coverage in the event of data, program or software losses
Hylant’s dedicated property and cyber practice team members can review existing policies and make recommendations. Contact your Hylant service team member or your local Hylant office for assistance.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.