Plugging the Electronic Data Gap in Your CGL Policy
You might just be thinking about cyber-attacks and data breaches as it relates to your databases, especially with all of the recent media attention. However, there are more electronic exposures your company faces than just a cyber-attack. What about damaged or lost data? Or what happens when one of your contractors incidentally damages or shuts down a client’s system that’s integral for running the business?
Here are a few examples of unique loss scenarios for construction companies:
Example 1: A contractor is working at a hospital painting walls and ceilings. The contractor moves a scaffold from one area of the project to the other. While moving the scaffolding, the painter hits a sprinkler head causing the sprinkler system to go off. As a result, the sprinklers are set off on multiple floors causing water damage in the amount of $150,000. One of the floors is the administrative office where the computer system is located. The computer system becomes inoperable as a result of the water damage. As such, the hospital sustained loss of electronic data (records, billing statements, proprietary software, etc.) in the amount of $100,000.
Example 2: Your firm is doing underground work at a jobsite; an employee inadvertently hits and severs a fiber optic line that’s connected to an e-commerce operation located a half mile down the road. As a result of the severed line, the computers go down, creating a loss of electronic data. The company is unable to process orders and back-up data for a period of time. Your construction company sustains $10,000 in damages for the property loss and the e-commerce business suffers a $150,000 loss as a result of electronic data damage.
Minimizing Your Risk
If you have a standard General Liability insurance policy (CGL), your program would afford the coverage for the physical loss or water damage from the painting contractor, but NOT the $100,000 for the electronic data. The same rules would apply to the underground contractor; the $10,000 repair to the fiber optic line would be covered. However, the $150,000 loss to the electronic data for the e-commerce company would NOT be covered.
Under exclusions in the CGL policy, p. Electronic Data defines what’s included under this description:
p. Electronic Data
“Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data. However, this exclusion does not apply to liability for damages because of ‘bodily injury.’
As used in this exclusion, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.”
Fortunately, there’s a coverage solution. ISO has provided an Electronic Data Liability endorsement and/or coverage form that modifies the definition of property damage to include “electronic data” as long as the loss or damage follows a physical injury or damage to tangible property.
Unless a specific endorsement or coverage form has been added to the policy, carriers will view these electronic data losses as an exclusion in the policy and coverage can be denied.
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