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Tech-risk coverage is not a substitute for traditional coverage. However, depending on your business, and the risks you face, certain types of tech-risk coverage could be essential. We have all seen the headlines: Denial-of-service attacks cripple Internet businesses; hackers steal databases of credit card numbers; Web surfers whose personal information is misused sue for invasion of privacy or deceptive trade practices. These dangers were unknown only a few years ago. Not surprisingly, traditional insurance policies do not cover many liabilities created in a technology-driven economy. In response, insurers have created policies to fill the gaps. Internet companies and dot-coms are not the only businesses that need coverage. Any company that relies on technology should evaluate these new policies. Here’s how traditional policies fall short: � Property policies do not cover damage to intangible property like computer data. � Business interruption policies require a complete interruption, so a temporary Web site crash, no matter how catastrophic, would rarely be covered. � General liability policies will not cover lawsuits by Web surfers if the business uses its Web site for advertising, to transact business, or to perform other common functions on the Internet. Because of these and other shortcomings, insurers have developed policies designed to cover technology risks. These policies are offered by large conglomerates like AIG of Zurich, Switzerland; Chubb of St. Paul, Minn.; CNA and Lloyds of London. There are also innovative policies from smaller and solid-rated insurers like Atlanta-based InsureTrust.com. These policies are new and, for many insurance agents, unfamiliar territory. If your agent still hasn’t found the power button on her computer, don’t expect her to be able to explain the differences between, say, AIG’s netAdvantage policy and the Lloyd’s e-Comprehensive policy. Instead, find an agent or broker who understands both the risks associated with technology, and the insurance coverage available. Several traditional insurance brokerages have niche groups devoted to technology risk insurance, including Atlanta-based Palmer & Cay ( palmercay.com), Virginia-based AH&T ( ahtins.com), Sherwood based in Los Angeles ( shrwd.com), and Charlotte, N.C.-based Cameron Harris ( camharris.com), to name a few. Big national brokers like Aon ( aon.com) and Marsh ( marsh.com) also provide specialized consulting on technology risk insurance. Finally, there are several specialty tech-risk brokers set up on the Internet including e-perils.com, Insurecast.comand CyberCover.com. Network security coverage, one of several types of tech-risk policies, is a case in point. A policy that covers attacks by hackers did not exist two years ago. Yet damage from a malicious hacker, whether outside or inside a company, is one of the most serious risks a technology business faces today. Consider the case of CD Universe, based in Wallingford, Conn. Early last year, a hacker broke into the database of customer names and credit card numbers maintained by this e-retailer of music CDs. The hacker then demanded a ransom for a return of the information. When the demand was not met, the hacker published this information on the Internet. If CD Universe had bought a network security policy, the damage caused by the hacker would have been covered. If the policy included coverage for crime and cyber-extortion, the insurer would have paid for a private investigation and ransom demand. Depending on the policy, a reward could also have been posted for information leading to the arrest of a cyber-criminal, and funds would have been available immediately for public relations and crisis management services. A network security policy would also have covered CD Universe for any suits related to the hacker, such as claims by credit card companies stuck with fraudulent charges. In addition, the business interruption coverage built into network security policies would have covered CD Universe for revenue lost from online transactions it could not complete due to the attack. Network security coverage can be expensive. How expensive depends upon a number of factors, most notably the size of a company’s technology infrastructure. The larger the technology operation, the greater the risk. However, if a company can demonstrate through an outside audit that it has taken reasonable security measures, this can often reduce the premium. In addition to network security coverage, companies that depend on technology should evaluate other types of tech-risk coverage. For example, every company that provides technology consulting services should consider specialized errors and omissions coverage. In addition, policies that cover intellectual property infringement can help a company manage these risks in an unpredictable legal environment. Tech-risk coverage is not a substitute for traditional coverage. However, depending on your business and the risks you face, certain types of tech-risk coverage could be essential. Tech-risk coverage completes the insurance picture for companies trying to manage the risk that technology poses. Joel Rothman is an attorney and shareholder Seiden Alder Rothman Petosa & Matthewman. He can be reached at [email protected]or (561) 416-0170.

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