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ICFE eNEWS #16-12 - April 27th 2016

Federal Appeals Court Throws into Doubt What's Covered by Your Cyber-Liability Insurance

Time to Review Your Coverage on Data Breaches

For the past several years, Commercial General Liability ("CGL") insurers have been communicating with their insured clients regarding coverage for "cyber" events, such as data breaches. Generally, these communications have been sent at the time of annual renewals, and notify the insured that such events of loss are no longer considered to be covered by the CGL policy. They usually have also offered to quote and provide such overage for an additional premium.
However, a recent federal appellate court decision in the Fourth Circuit casts doubt on the ability of a "CGL" insurance carrier to refuse to provide legal defense for the insured against a class action based on damages resulting from a data breach.

Specifically, the case is styled as The Travelers Indemnity Co. of Am. v. Portal Healthcare Solutions, L.L.C. This "unpublished" opinion can be found online.
The case arises out of a pending class action in New York State court, and involves Portal, a medical records company, which allegedly failed to maintain the confidentiality of patient records in its system. The apparently unsecured server allowed the records to be accessed by the public.
Travelers is involved due to the CGL policy written for Portal requiring Travelers to defend the insured under specific enumerated circumstances. The parties differ on whether the facts of the case fulfill the requirements of the language of the coverage.

It is noteworthy that the Fourth Circuit Court's decision holding Travelers liable for providing the defense against the action, under the terms of the CGL policy, differs from the positions taken by other courts in other jurisdictions.

While this case is very specific regarding the jurisdiction, terms used in the insurance contract, and nature of the claims made in the class action, it has potentially vast implications for both insurance carriers and their insured clients.

It is a certainty that this decision will result in a fundamental review of the language employed in CGL policies, with the intention of avoiding such diverse interpretations.

For businesses and other holders of personally identifiable information, including "protected health information" under HIPAA, it is imperative to review and factor in the risks of deliberate or inadvertent breaches, the potential damages, and the specific nature and extent of insurance coverage.
This subject, and related risk management exercises, are covered in more detail in the Certified Identity Theft Risk Management Specialist® (CITRMS®) XV course from the Institute of Consumer Financial Education.

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Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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