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TECHNOLOGY TRENDS IN CONSTRUCTION Cyber Liability: A Growing Concern for Contractors Phil Varni Jim Untiedt
By Phil Varni & Jim Untiedt, PentaRisk Insurance Services, LLC
When do you expect to be cyber at-
tacked? Notice the question was when, not if. Cybersecurity attacks have become not only more numerous and diverse, but also more damaging and disruptive. Contrac- tors are not immune from cyber attacks and the costs and liabilities caused by these attacks, so you need to be prepared when you face this new age dilemma. One of the single largest cyber attacks
happened in 2013 when hackers broke into Target Brands, Inc.’s (Target) systems by using network credentials stolen from Fazio Mechanical Services (For details see
http://krebsonsecurity.com/2014/02/
target-hackers-broke-in-via-hvac-compa- ny/). Using these stolen credentials, the
hackers were able to obtain more than 40 million credit and debit card records from Target customers. The initial suspicion was that the contractor was doing monitoring work on the systems in respects to optimal energy usage. After further investigation, it turns out all they were doing was elec- tronic billing, contract submission, and project management – typical tasks for any contractor, but the hackers seized control of Target’s credit system. Contractors have a unique role and ex-
posure in possible data breaches and cyber attacks as they are often on the ground level of all new construction and development of design specifications, building informa- tion and networking systems, security sys- tems, and HVAC systems. Contractors and clients are becoming more and more in- terconnected via technology. From online payment systems to sharing of specifica- tions and bid documents, contractors have increased exposure to risk and losses that are not covered by traditional insurance. Cyber Liability Insurance protects
companies from suits alleging breaches of private information. This includes em- ployee records, credit card information, bid data, contracts, financial records, and other sensitive corporate data stored on your server. The insurance provides third party coverage for damage to customers
Highlights of key cyber coverages: 3rd
Failure to prevent unauthorized access
Error or omission in IT security practices and procedures
Misappropriation of digital assets or personal information
Failure to prevent a Distributed Denial of Service Attack
Failure to prevent transmission of malicious code/ malware/viruses
Copyright, trademark, domain name, trade name, and trade dress infringement
and first party coverage for the costs to restore data and systems following a cyber attack. Cyber liability risks are not covered by traditional insurance such as electronic data processing (EDP), crime, owner li- ability, and professional policies. You are a good candidate for Cyber Li-
ability Insurance if: Your employees can access your cus- tomers’ systems or networks.
You accept credit card payments. You store confidential employee re- cords online or in unlocked file cabi- nets.
You allow remote access to your portal or systems.
You have not upgraded your email and systems with the latest encryption software.
Cyber attacks are not currently on the
minds of most contractors, so they should be aware that they have an exposure to these types of cyber losses. Contractors should discuss options to insure these risks with their insurance brokers and take pro- active steps with their IT team to prevent breaches.
Jim Untiedt is President and Phil Varni is Vice President of Sales at PentaRisk Insur- ance Service, LLC, San Jose. Visit the com- pany online at www.PentaRisk.com.
Party Liability (Claims Alleging…)
1st
Party Liability and Expenses
Costs to notify affected parties via letter, and to reissue credit/debit cards
Credit remediation expenses (credit freeze, hold and watch)
Crisis management expenses and public relations expenses
Lost revenues, including Business Interruption Costs to improve or upgrade IT security systems Reputational damage, including lost customers
Associated General Contractors of California 19