Game of Unknowns: Cyber Liability & Staffing Firms
Winter is coming, and it’s bringing a spike in cyber-attacks. Much like Jon Snow prepares to protect Westeros from the Night King, companies are protecting themselves from cyber-attacks by ensuring they have proper cyber liability coverage in place. Many companies are rewriting their contracts and requiring staffing firms, specifically those who make IT placements, to carry cyber liability coverage.
While it isn’t a bad thing that cyber liability is becoming a more frequent request in client agreements, it’s important for staffing firms to understand how cyber liability coverage responds in the event of a claim so they’re adequately insured and aren’t purchasing unnecessary coverage.
One important aspect for staffing firms to understand is the insuring agreements that make up this coverage and how first and third party coverage responds to a claim. A staffing firm’s loss of digital assets and non-physical business income, as well as extra expense, are considered first party coverage. If a loss occurs, the insurer will indemnify the staffing firm for the loss as a direct result of damage, alteration, corruption, distortion, theft, misuse or destruction of their own digital assets.
Third party cyber liability, such as network security coverage, provides coverage in the event of a security or privacy breach of a staffing firm’s computer system. If a loss occurs, the insurer will pay the amount the staffing firm is legally obligated to pay as damages or claims expenses arising from the firm’s acts, errors or omissions. In this case, the third party is the party whose personal data was stored by the staffing firm and compromised.
Some frequent requirements staffing firms may see in their clients’ contracts are to carry third party cyber liability coverage or provide “primary” cyber liability coverage in the event there’s a loss due to a temporary employee’s failure to perform his or her professional duties. One misconception of cyber liability is that it provides coverage to a staffing firm’s client if the above-mentioned claim scenario occurs. However, cyber liability specifically excludes coverage should a claim arise out of the rendering or failure to render professional services.
The proper coverage to protect against a claim that arises out of a temporary employee failing to perform his or her professional duties is professional liability. Furthermore, staffing firms making IT placements should ensure their professional liability policy specifically provides coverage for technology services in addition to staffing services.
Don’t be left out in the cold when winter arrives. Make sure you have the proper cyber and professional liability coverage for your staffing placements. If you’re not sure whether you have the proper coverage based on your clients’ requirements, contact the ‘A’ Team.
- Cyber Liability E-Book
- Staffing Companies and Cyber Exposures
- Reality Check: Cyber Liability for PEOs
- Stocking Up on Staffing Coverages
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