According to Hartford Courant, an insurance industry journal, the Travelers Indemnity Co. of Connecticut is suing P.F. Chang's Chinese Bistro. The insurance company claims the restaurant's General Liability Insurance policy doesn't cover losses or legal expenses stemming from the restaurant's data breach. If Travelers wins the federal case, it could be a definitive blow for businesses that rely on policies other than Cyber Liability Insurance to cover cyber risks.
In other words, it's a lawsuit to watch, folks. Here's the skinny:
- Travelers sold General Liability policies to the restaurants that were active for 2013 and 2014.
- Between September 2013 and June 2014, hackers gained remote access to P.F. Chang's point-of-sale software.
- Customers brought a class-action lawsuit against the restaurant chain after the data breaches compromised their financial information.
- P.F. Chang's made a claim on their policy issued by Travelers.
- Travelers filed a lawsuit, claiming it does not have to defend or indemnify P.F. Chang's because the General Liability policies only apply to bodily injury or property damage — not data breaches or loss of electronic records.
The moral of the story (other than P.F. Chang's is being sued left and right!) is that you must understand what your insurance policies do and don't cover. In this case, the federal class-action lawsuit against P.F. Chang's alleges the restaurant failed to take adequate steps to prevent a data breach and protect customer financial information — claims a Cyber Liability Insurance policy can address, but not standard General Liability Insurance.
Let's explore the differences between these two policies so you can spare your business a similar insurance fiasco.
Where Physical Loss Ends and Digital Loss Begins: General Liability vs. Cyber Liability Insurance
It's easy to see why P.F. Chang's may have drawn on its General Liability coverage to address the data breach. After all, GL is often (mistakenly) thought of as a catch-all liability policy. And it does offer some pretty formidable protection by covering third-party lawsuits over…
- Bodily injuries on your commercial property.
- Property damage caused by your business.
- Advertising injuries (e.g., copyright infringement).
Perhaps P.F. Chang's was told that data is a form of property. Maybe the restaurant owners thought the lawsuits over compromised customer data would be addressed by GL's property damage liability coverage. However, GL only covers lawsuits over the loss of someone's physical property — e.g., a restaurant being sued over its kitchen fire that destroyed neighboring property.
Data is a separate beast entirely, and that's why it requires a separate policy to protect it.
Cyber Liability Insurance is designed to cover the specific nuances of data breaches. The policy comes in two forms:
- First-party response. This pays for the cost of responding to a data breach (e.g., credit-monitoring services, breach notification, security patches, and PR measures).
- Third-party defense. This pays for legal expenses when your business is sued for failing to prevent a data breach (hint: this is the kind of policy P.F. Chang's should have had).
Because data breaches are quickly becoming the norm, more companies are investing in Cyber Liability policies. You can learn more about it here: "Cyber Insurance: Why It Matters, Where You're Exposed."
Does Your Small Business Need Cyber Risk Protection?
You may want to consider investing in a Cyber Liability policy if your business…
- Stores sensitive customer information on its servers, devices, or network. It's grounds for a lawsuit if a customer's Social Security number or credit card information is accessed via your network.
- Is small. Small businesses are the most common targets for data breaches. Read more about that in the post, "'No Business Too Small' to Be Hacked, Says Security Expert."
- Belongs to the allied health industry. You can face double-whammy costs if hackers access your patients' health records. Patients can sue you and you could be fined for violating HIPAA or HITECH laws. (Related reading: "Allied Health Professionals: Why Your Data Isn't Safe.")
To get free quotes on Cyber Liability Insurance today, complete a quick online application. Our insurance experts know the policies that keep your business protected from the financial doom-and-gloom of data breaches and will explain your coverage to you so there's no second-guessing.