Businesses and organizations are under increasing pressure to proactively and effectively manage cybersecurity risk. The costs of a data breach can be staggering. For instance, Home Depot recently agreed to settle putative class actions stemming from the company’s extensive 2014 data breach by establishing a “cash plus” deal: Not only would Home Depot have to boost its data security practices and increase funding for identity protection services for consumers affected by the breach, the company also agreed to create a $13 million settlement fund to compensate consumers for out-of-pocket losses or unreimbursed expenses related to the data breach.
As another example, the data breach Anthem suffered in December 2014, which exposed nearly 80 million patient and employee records, has been estimated as likely to cost the company $31 billion. Faced with this stark new reality, companies and other entities are more frequently being encouraged to obtain cyber insurance coverage to help mitigate these risks, and it is critical that the consumer of such products understands their potential pitfalls.
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