Cybersecurity and privacy risksare on every business-savvy lawyer's mind—or (heads up!) they should be. Lawyers seeking to advise corporate clients effectively must understand—at least at a high level—both the risks and the tools available to manage those risks. Cyber insurance is one instrument that belongs in the risk management toolbox.

While “cyber insurance policies” are relatively new, today's “cyber” policies bear close resemblance to the technology errors and omissions policies of yesteryear—sporting updated nomenclature that references data breaches and network or system failures. Cyber policies, like the risks they insure, are evolving at the speed of light based on market demands. In response to increasingly sophisticated cybersecurity risks, insurance companies competing for market share are trying to balance innovation with profitability.

To date, cyber policies remain largely untested. The first widely-reported cyber insurance decision was issued a little over a year ago and only a few lawsuits have followed. While uncertainty may be prompting compromise resolutions in lieu of litigation, there are some lessons to be learned from the handful of cyber coverage lawsuits filed to date.