Brett, the CFO of a small machine shop, was worried about the financial losses the firm might incur from a recent cyber attack. The firm’s systems were infected with a computer virus and IT was trying to address it.

Even worse, the virus had caused several of the firm’s large, specialized machining tools to fail, and it was starting to look like some of the machines were permanently damaged. The machines would have to be replaced and many of these machines were imported from overseas, which meant they could not be replaced quickly. With the fourth quarter approaching – their busiest time of year – Brett was worried about the impact all of this would have on sales and net income.

Perhaps worst of all, Brett had shot down the suggestion that the company purchase cyber insurance coverage. He felt only the “big guys” needed this coverage and he was looking to save the company some money.

Brett called Jim, the CEO, to relay the bad news about the damaged machines.  “This sounds like a business interruption claim,” Jim said. “Will our business interruption form cover this loss since it was caused by a cyber attack? We don’t have cyber insurance coverage, do we?” Brett didn’t know what to say…

A business interruption claim can be really harmful to a business, leading to lost net income and extra expenses. Even worse, a standard business interruption form may not be of much help if the cause of loss is a cyber attack. In fact, a standard business interruption form may only pay a nominal amount (as little as $2,500) if the cause of loss is from interruption of computer operations. Most business interruption forms require “direct physical loss or damage” to trigger business interruption coverage. If a cyber event triggers your business interruption claim and you don’t have cyber insurance coverage, you may be left without coverage.

For these reasons, it’s critical that your business carry cyber insurance coverage that includes business interruption coverage. Without it, your business is vulnerable to business income claims and losses that are triggered by a cyber attack. Just as Brett discovered, cyber insurance coverage isn’t just for the “big guys.” The truth is, small and medium-sized firms are the most common targets for cyber attacks.

Talk to us about your risk of cyber attack and how you can protect your business with cyber insurance with business interruption coverage.


Post authored by Alex Plotkin. Originally published November 5, 2014.