Understanding Basics of Media and Cyber Liability Insurance

The digital era has brought immense opportunities for businesses, enabling them to expand operations and reach audiences globally. However, with this growth comes a surge in cyberattacks that can jeopardize a company's reputation, operations, and financial health.

According to a Check Point report, cyber-attacks are increasing worldwide, with a 30% increase in weekly attacks in Q2 2024 compared to Q2 2023 and a 25% rise compared to Q1 2024. In 2023 alone, there were 3,205 data compromises, affecting over 353 million individuals in the U.S., while Texas has experienced 819 data breaches since 2005, exposing approximately 295 million records. 

Cybersecurity breaches, defamation claims, and intellectual property disputes are no longer rare occurrences-–they’re growing concerns for organizations of all sizes. And who can forget the recent cyberattack on the oilfield services giant Halliburton in August 2024, which impacted its operations in Houston and disrupted global connectivity networks?

These statistics illustrate that no organization is immune to cyber threats. The financial repercussions, legal liabilities, and reputational damage from such breaches can be devastating. Therefore, businesses must adopt comprehensive risk management strategies, including robust cybersecurity measures and appropriate insurance coverage.

To safeguard against these threats, businesses are turning to Cyber Liability Insurance and Media Liability Insurance. But what exactly do these policies cover, and why are they crucial? In this article, we’ll delve into the essentials, helping you understand how these coverages work and how they can secure your business in the digital age.

Understanding Cyber Liability Insurance Coverage

Most recently, in February 2024, Change Healthcare, a prominent healthcare technology company in the U.S., experienced a significant cyberattack that disrupted electronic payments and medical claims processing. The attack resulted in nearly $870 million in damages (including ransom worth $22 million) and over 50 lawsuits. This underscores the importance of having cyber liability insurance coverage in place.

Cyber Liability Insurance is a specialized policy designed to protect businesses from financial losses due to cyber incidents such as data breaches, ransomware attacks, or network disruptions. As companies increasingly store sensitive data online, the stakes have never been higher. Cyber insurance provides the financial (legal fees, notification costs, and system repairs) and legal resources needed to navigate the aftermath of a cyberattack. It ensures that it doesn't cripple business operations.

Types of Cyber Security Insurance Coverage

• Network Security and Privacy Liability Coverage - This coverage addresses liabilities arising from unauthorized access to confidential data, whether through hacking, employee negligence, or physical breaches. It includes costs for legal defense, investigations, settlements, and regulatory fines.
• Network Business Interruption Protection - If a cyberattack disrupts your operations, this coverage compensates for lost income and additional expenses incurred to restore business functionality. According to IBM’s 2022 report, the average cost of business interruption due to a cyber incident was approximately $1.42 million, underscoring the need for this protection. 
• Media Liability Specific to Cyber Incidents - This aspect protects against claims related to online content, such as defamation, privacy violations, or unintentional copyright infringement. It's essential if your business engages in digital marketing or content creation.
• Errors and Omissions Regarding Digital Services - This coverage safeguards against claims of negligence or failure to deliver promised digital services, protecting your business from lawsuits alleging inadequate work or unmet expectations.

Common Exclusions of Cyber Liability Insurance

While comprehensive, cyber liability insurance policies often exclude:

• Future Lost Profits - Profits lost due to losing customers after a cyberattack are not covered by the policy,
• Upgrades and Improvements - Costs associated with enhancing security systems post-breach are typically not covered.
• Insider Threats - Losses due to intentional acts by employees may be excluded.
• Prior Acts - Incidents occurring before the policy inception are generally not covered.
• Pre-existing Vulnerabilities - Losses incurred because the organization failed to address a previously known vulnerability are excluded.

After having thoroughly discussed cyber liability insurance coverage, next, we'll explore media liability insurance coverage, which addresses liabilities arising from media and advertising activities.

Understanding Media Liability Insurance Coverage

Nowadays, businesses are not just service providers but also content creators. Whether through marketing campaigns, social media engagement, or publishing, companies disseminate information that can expose them to various legal risks. 

Media Liability Insurance, designed mainly for digital marketers, publishers, and broadcasters, safeguards against potential lawsuits arising from the content a business produces. It protects against claims related to media activities, such as defamation, intellectual property infringement, and privacy violations. 

Let’s have a better look at these key components:

• Coverage for Defamation - Defamation, encompassing both libel (written defamation) and slander (spoken defamation), can have legal repercussions if found to harm another's reputation. For instance, Johnny Depp sued his ex-wife, Amber Heard, for defamation over a 2018 op-ed she wrote in The Washington Post, claiming it damaged his reputation and career. For this, the jury awarded him $10 million in compensatory damages.
• Invasion of Privacy - Invasion of privacy refers to intruding upon someone's personal life without consent. Creating and publishing such content can lead to significant legal challenges for businesses. 
• Copyright and Intellectual Property Infringement - Using copyrighted material without proper authorization in your content can lead to infringement claims. This includes unauthorized use of images, music, or written content. Under the U.S. Copyright Act, infringement can lead to statutory damages ranging from $750 to $30,000 per work infringed and up to $150,000 for willful infringement.
• Libel, Slander, and Emotional Distress - Your business must be cautious about the statements it makes publicly. False statements can lead to claims of libel or slander, causing emotional distress to the affected parties. 

Common Exclusions of Media Liability Insurance?

While media liability insurance offers broad protection, certain exclusions typically apply:

• Patent Infringement - Claims related to patent violations are generally not covered. Businesses involved in technological innovations should seek specialized coverage for such risks.
• Intentional Misconduct - Deliberate acts of defamation or infringement are excluded. Insurance does not cover willful violations of the law.
• Breach of Contract - Disputes arising solely from contractual obligations may not be covered under media liability policies.

Get in touch with TWFG Khan Insurance to draft media liability insurance coverage that suits your business’s needs. Next, let’s examine the broader benefits of cyber and media liability policies, highlighting how they can contribute to your company's resilience in the digital age.

Benefits of Cyber and Media Liability Insurance

Cyber and media liability insurance policies are essential tools that provide a safety net against a multitude of cyber threats and media-related risks. Let's delve into the specific benefits of these coverages:

• Cost Mitigation for Data Breaches - Data breaches can lead to substantial financial losses, including costs related to legal fees, notification expenses, and system repairs. Having cyber liability insurance can help mitigate these expenses, ensuring that a single incident doesn't cripple your business financially.some text
  • For instance, in April 2024, Home Depot reported a data breach due to a third-party SaaS vendor that affected 52 million people in the U.S. and cost $215 million in damages. 
• Preventing Financial Instability After Claims - Without adequate insurance, the financial burden of responding to cyber incidents or media liability claims can lead to insolvency. Insurance policies can provide the necessary funds to manage crises without disrupting business operations.some text
  • As per an alarming statistic, nearly 60% of small businesses hit by a cyberattack shut down within six months. This was partly due to the hefty financial burden post-attack. 
• Improving Trust and Retention - Insurance coverage ensures that your business can respond swiftly and effectively in the event of an incident, maintaining your reputation. This way comprehensive policies foster trust and loyalty among clients by demonstrating a commitment to protecting data. some text
  • According to S-RM’s Cyber Security Insights Report 2022, the average amount of money companies had to pay due to reputation damage was $1.5 million.  

However, it's important to note that as cyber threats evolve, so do the solutions designed to combat them. Liability policies are continuously enhanced to address emerging risks and ensure your business remains resilient in the face of new challenges. Let's explore these advancements further.

Enhancements in Cyber Liability Insurance

As cyber threats become increasingly sophisticated, businesses must bolster their defenses beyond standard cyber liability insurance. Two critical enhancements offer additional layers of protection against evolving cyber risks:

• Social Engineering Coverage - This enhancement provides financial protection against losses resulting from deceptive schemes (e.g., phishing emails, pretexting, baiting, etc.) in which employees are tricked into transferring funds or divulging sensitive information. Coverage often includes reimbursement for direct financial losses and may extend to associated costs such as legal fees and crisis management. 
• Reputational Harm - Reputational harm coverage within a cyber insurance policy provides financial assistance to manage and mitigate the negative publicity following a cyberattack. This includes covering expenses related to public relations efforts, media campaigns, customer notification, and credit monitoring services for affected individuals. This coverage helps businesses restore stakeholder confidence and stabilize revenue streams.

With a comprehensive understanding of liability insurance, adopting proactive measures to minimize cyber risks is equally important. Let’s explore some actionable steps your business can take to mitigate cyber liability risks effectively.

Steps to Reduce Cyber Liability Risks

Addressing cyber risks demands a proactive and holistic strategy. Here are ten practical steps to strengthen your organization's cybersecurity:

• Use firewalls, encryption, and regular software updates to secure your systems.
• Deploy solutions like Intrusion Detection Systems (IDS) and Intrusion Prevention Systems (IPS) to monitor network traffic for suspicious activities.
• Regularly back up data to ensure business continuity in case of a breach.
• Strengthen access controls by requiring users to provide multiple forms of verification.
• Periodically assess your systems for vulnerabilities through comprehensive audits and simulated cyberattacks.
• Establish a detailed plan outlining procedures for responding to cyber incidents and conduct regular drills.
• Protect sensitive information by encrypting data both at rest and in transit.
• Adopt the principle of least privilege by granting users only the access necessary for their roles.
• Divide your network into segments to contain potential breaches.
• Train staff to identify phishing attempts and follow cybersecurity best practices.

Safeguarding the Digital Frontier with TWFG Khan Insurance

The stakes are high for your business to protect itself against rising threats. From navigating the aftermath of a data breach to addressing claims of copyright infringement, the right insurance policy can be the difference between recovery and irreparable damage.

At TWFG Khan Insurance, we understand these challenges better than anyone; especially for businesses in the high-risk oil and gas, maritime, and construction sectors. So, whether it’s protecting the crucial reports about your oilfields or the sensitive list of investors’ capital, we’ll provide comprehensive cyber liability coverage for you. 

With years of expertise in crafting tailored insurance solutions for Texas businesses, we take a proactive approach to safeguard your operations. Our top-notch policies are designed to mitigate risks, protect your reputation, and secure your financial future. 

Take the next step to fortify your online presence today – get a quote with us or contact our team to explore how our policies can protect your business in the digital age.