The Development of Data Breach Insurance Leaves a Glaring Hole

by | Jan 29, 2016 | Insurance

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The inclusion of Data Breach insurance reached record highs in 2015. The first three months of 2015 were some of the most popular times to receive data breach insurance, and that goes against the claims that too few companies are adopting the insurance type.

But, there is one massive glaring hole that is leaving policyholders in trouble. The Columbia v Cottage case has helped illuminate a staggering issue with data breach coverage that is leaving a lot of policyholders asking questions.

Cottage Health Systems had a Data Breach that leaked tens of thousands of patient entries. The company had insurance coverage, but there was a problem. The information was not properly stored. It could be accessed through the web and was not encrypted. The result? A counter lawsuit from Columbia Casualty that initially agreed to fund for damages.

Therein lies the problem. The other party might not have to pay for damages if the initial data was not properly protected. In short, a company needs to encrypt their data, store it properly and have substantial security measures set in place.

Unfortunately, all of the above is largely subjective. What is “substantial” security? Is there a clear line that says what is good protection and what is insufficient? It is known as the mistake exclusion. If a mistake in protection is founded by the policyholder, the policy may not go through. This is not stopping many companies from obtaining data coverage in the wake of major disasters at the big-business level. It is still a necessary component in coverage, but it does have its share of legal-based issues that need to be sorted out in the coming years.

website has protective measures set in place to cover for their client. This is still a developing issue. The reality is that any party with a large enough wallet can counter-suit. But, with the right team behind a client, the coverage can be defended and validated. It is a vital inclusion to modern business, regardless of the complicated matters it could potentially bring in the court of law. The alternative could be a company collapse- even jail time.

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