Home About Us Available Coverages Resources Apply Now Contact Us  
InsureCast
a division of TRT & Associates, Inc. 
Technology Insurance
Loss Scenarios for IT Firms
  Breach of security.
A telecommunications firm is sued by a customer claiming they were sold a defective system with inadequate security protections. The customer claims the faulty system allowed individuals to access their phone system and, as a result, they incurred fraudulent overseas charges.
Indemnity Paid: $3,450,000
  More...
   
 

The Cost of Litigation

 

The cost of litigation to information and network technology companies has risen dramatically in recent years as a result of product and service disputes. Why are we seeing this sudden influx of lawsuits?

More and more customers are willing to sue long established business partners for performance failure problems. The result: an increase in business partner litigation.

Dramatic increases in the average size and length of contracts raises the plaintiff's chance that a performance failure “will be worth the fight” and result in a large jury award.

As market competition continues to increase, there is a greater chance that marketing and sales pressure will invite over-promising of supplier capabilities.

With companies putting more reliance on information technology solutions, it increases the likelihood that software solutions will be core business solutions. As a result, much more is it at stake if the solution fails or doesn't perform as promised.

Today companies are crossing borders to conduct business which brings a host of new exposures due to foreign laws and regulations.

Information and network technology companies need timely solutions that have evolved with their industry and the new exposures being presented. InsureCast's information and network technology errors & omissions (E&O) insurance offers such solutions and can help protect your firm from the devastation of a lawsuit. Please go to our online CoverageCoach questionnaire to get a free no obligation Technology Errors & Omissions Insurance quote.

Take a look at these loss scenarios and then ask whether you have the proper insurance protection.

 

Product Scenarios

  • A hacker overwhelmed several large Web sites through multiple distributed denial of service (DDOS) attacks. The culprit hijacked various computers throughout the world to bombard targeted servers with seemingly legitimate requests for data. It is estimated that the DDOS attacks, which interrupted the sites' ability to efficiently conduct their business, caused over $1.2 billion in third-party liability claims and lost business income.
  • A disgruntled employee of a major consulting firm downloaded malicious code onto the networks of the firm, its clients and vendors. The code launched confidential information into the public domain and destroyed some critical corporate applications, resulting in more than $10,000,000 in third party claims.
  • An online news service created its web site by framing the content of other media companies within their site. By doing so, the service created the illusion that the content was all their own. The other media firms sued the site for copyright and trademark infringement on the basis that the firm was a “parasitic…site that republished the news and editorial content…in order to attract both advertisers and users.”
  • An e-tailer brought suit against a Web designer for damages the e-tailer sustained as the result of the unauthorized access of its private data files by a “hacker”. The suit alleges that the Web designer negligently designed the e-tailer's Web site by not providing adequate safeguards to prevent such type of intrusion.
  • A hacker stole approximately 300,000 customer credit card numbers from an online retailer. The hacker then attempted to use the stolen information to extort $100,000 from the company. Upon the firm's refusal to cooperate, the hacker posted 23,000 card numbers online. As a result of credit card cancellations and re-issuance, the online retailer suffered approximately $2,000,000 in lost income and third-party damages.
 
 

Claim Scenarios: Internet Liability, Cybercrimes, and Ebusiness Interruptions

 

Fraud and Extortion

  • Eight banking web sites in the United States, Canada, Great Britain, and Thailand were attacked resulting in 23,000 stolen credit card numbers. The hackers proceeded to publish 6,500 of the cards online causing third-party damages in excess of $3,000,000.
  • A hacker stole approximately 300,000 customer credit card numbers from an online retailer. The hacker then attempted to use the stolen information to extort $100,000 from the company. Upon the firm's refusal to cooperate, the hacker posted 23,000 card numbers online. As a result of the charge denials, credit card cancellations and re-issuance, the online retailer suffered approximately $2,000,000 in lost income and third-party damages.
  • Two hackers cracked the computer systems of a major market research firm and subsequently obtained confidential corporate records. The stolen files included employee photographs, network passwords and personal credit card numbers of numerous senior managers. The hackers threatened to reveal the security breach to the company's clients unless the Board of Directors paid them a “consulting fee” of $200,000. Upon retaining expert cybercrime investigators, the hackers were apprehended and prosecuted. The research firm spent approximately $1,000,000 in investigative and public relations fees.
 

Denial-of-Service Attacks, Sabotage and Business Interruptions

  • A hacker overwhelmed several large web sites through multiple distributed denial of service (DDOS) attacks. The culprit hijacked various computers throughout the world to bombard target servers with seemingly legitimate requests for data. It is estimated that the DDOS attacks, which interrupted the sites' ability to efficiently conduct their business, caused over $1.2 billion in lost business income.
  • A disgruntled employee of a major consulting firm downloaded malicious code onto the networks of the firm, its clients and vendors. The code launched confidential information into the public domain and destroyed some critical corporate applications, resulting in more than $10,000,000 in third-party claims.
 

Viruses

  • In 1999, the Melissa email virus overwhelmed systems of thousands of companies around the world. The operations of at least 60 US -based Fortune 500 companies were brought to a halt due to the inability to handle the massive amounts of incoming and outgoing messages generated by the virus. The virus collectively caused millions of dollars in lost business income.
  • The Love Bug virus (also known as the “I Love You” virus) spread rapidly through corporate email systems, infecting networks of hundreds of companies around the world. This attack was followed a few days later by as many as 11 copycat versions of the virus. It is estimated that the series of attacks collectively cost billions of dollars in lost business income and extra programming time.
 

Personal Injury/Privacy

  • One of nation's largest health insurers inadvertently sent email messages to 19 members containing confidential medical and personal information of 858 other members. Although the company immediately took steps to correct the problem, the company is now exposed to lawsuits alleging invasion of privacy.
  • A utility admitted to a massive security breach that left debit card details of thousands of customers open to public scrutiny. A customer discovered the security hole when he went to pay his bill online - he discovered three files on the web server, containing the names, addresses and card details of more than 5,000 home and business users, including his own.
  • An e-tailer brought suit against a web designer for damages the e-tailer sustained as the result of the unauthorized access of its private data files by a “hacker”. The suit alleges that the web designer negligently designed the e-tailer's web site by not providing adequate safeguards to prevent such type of intrusion.
 

Intellectual Property Infringement

  • An online service allowed a famous author to advertise a book in one of its forums. The online service was sued for copyright infringement by an artist who claimed that the author used certain artwork on the cover of his book without getting the artist's permission.
  • An online news service created a web site inclusive of hyperlinks to alternate sites that were maintained by traditional print and broadcast media companies. When users clicked the links, they were linked to a framed copy of the site, rather than the site, itself. The traditional media firms sued the host site for copyright and trademark infringement on the basis that the firm was a “parasitic…site that republished the news and editorial content in order to attract both advertisers and users.”
  • An online insurance brokerage created a hyperlink that seemingly transferred its clients to additional pages on the site. It was later discovered that the brokerage "deep-linked" its users to the web pages of various insurance companies creating a seamless navigational experience. The insurance companies sued the online brokerage for copyright and trademark infringement.
  • In an effort to drive additional users to its site, an online retailer registered meta tags that identified its firm with the names of its competitors. Upon discovery of the incident, competitors sued the retailer for copyright infringement.
 

Negligent Security

  • On June 21, 2000, hackers penetrated a US sporting apparel's computer network and redirected its online traffic to a rogue anti-apparel site via servers domiciled at an overseas web hosting facility. The traffic swamped the overseas servers and subsequently impaired service to its real customers. The web host is suing the apparel firm for negligence in adequately securing its Internet domain.
 

Online Trespass

  • An online direct marketing company emailed solicitations on behalf of its clients to all users of a commercial Internet service provider (ISP). The ISP sued the marketing company for online trespassing. The court found that the marketing company was liable for trespass and damage to the ISP's reputation.
 
 
News & Articles
Multiple Places, Multiple Policies
Insurance Is Our Native Language
No Policy Covers Everything
Reality of Lawsuits
New Public Company Rules Hit Private Firms
But I Want to Fight, Not Settle Out of Court!
Professional liability insurance for IT Staffing Firms
Terrorism Insurance Finally Arrives
Business Risk Management Tips
Are You an Equal Opportunity Employer?
Lawsuit Costs
Privacy Disclosure Rules
Expanding Exclusions and Limitations
Is Your PR Hurting Your E and O?
Is Professional Liability Insurance needed?
Sufficient Limits Are Key
Overview and Current D and O Market Trends
Insurance Market Overview
Directors and Officers/EPL Market
Why IT Firms need EO?
If Disaster Strikes (PDF)
Why Private Firms should have D and O? (PDF)
Insurance Solutions for Private Companies (PDF)
 
© 2012 InsureCast -      All Rights Reserved.         Customer Service  Apply Now Contents