Canada: Cyber-Insurance: What You Need To Know?

A question that I often get from clients is one about cyber-insurance. In light of the recent passing of Bill S-4, better known as the Digital Privacy Act, the Personal Information Protection and Electronic Act ("PIPEDA") has now been amended to include mandatory breach notification provisions. While these mandatory breach notification provisions are not yet in force, it is a good time to review your cyber-insurance coverage.

As data breach incidents continue to rise, and legislative regimes provide more and more stringent regulation of data breaches, including the proliferation of mandatory breach notification provisions, the expense associated with data breaches also rises. Estimated costs of dealing with a data breach, even to resolve a potential attack, or an attempted breach, have been as high as $600 000.1 Costs can be incurred as a result of forensic and investigative activities, assessment and audit services, crisis team management, and the necessary internal and external communications.2 As these incidents increase in number, scope, and impact, organizations are looking to transfer the risk associated with informational security breaches.3

The most common way of transferring risk is by obtaining insurance policies: if the risk is insurable, the risk is transferable. Cyber and privacy insurance has been available on the market for the last decade, covering organizations' liability for a data breach in which the organization's or customers' information is lost or stolen. Marsh Inc., a global insurance broker, said that the number of organizations that purchased cyber insurance in the US increased by 33% from 2011 to 2012, and that cyber insurance is currently the fastest growing area of commercial insurance in the world.4 Policies vary, with cyber insurance offered as an add-on or included in more generally policies, or sold as a distinct product. Marsh Inc. also noted that the lesser growth of cyber insurance in Canada compared to the US is likely due to the higher number of mandatory breach reporting regimes in the US.5


An important preliminary note on cyber insurance is that cyber insurance is often confused with technology errors and omissions insurance (commonly called "Tech E&O" insurance). Tech E&O insurance protects providers of technology services or products, such as software designers and manufacturers, whereas cyber insurance protects consumers of those products and services.6

Generally, cyber insurance is divided into first party coverage protecting the policyholder, and third party coverage protecting from third party claims against the policyholder. First party policies may cover:

  1. The costs associated with determining the scope of the breach and taking steps to stop the breach;
  2. The costs of providing notice to individuals whose identifying information was compromised;
  3. Public relations services to counteract the negative publicity that can be associated with a data investigation;
  4. The costs of responding to government investigations;
  5. The costs of replacing damaged hardware or software;
  6. The costs of responding to parties vandalizing the company's electronic data; and
  7. Business interruption costs.7

Third party policies may cover:

  1. Liability for permitting access to identifying information of customers;
  2. Transmitting a computer virus or malware to a third-party customer or business partner;
  3. Failing to notify a third party of their rights under the relevant regulations in the event of a security breach; and
  4. Potential "advertising injury," i.e., harms through the use of electronic media, such as unauthorized use or infringement of copyrighted material, as well as libel, slander, and defamation claims.8

Cyber insurance can also cover specifically the crisis stage of a data breach. This could include any expenses related to the management of the incident, such as investigation, remedial steps, required notifications, call and public relations management, credit checks for the subjects of the data, and any legal costs including fines or the costs of running a suit.

Limitations of Coverage: Relevant Considerations

It is important to determine the extent to which your organization's cyber insurance policy will protect against liability for breaches. Because all insurance policy coverage is dependent on the particular terms and conditions in the policy at issue, organizations looking to obtain cyber insurance should consider a number of questions, including those detailed below. In general, organizations should ensure that their response plan to a potential or actual breach is consistent with their insurance policy. Organizations should consider:

  1. What security controls can you put into place that will reduce the premium?
  2. Will you have to undertake a security risk review of some sort?
  3. What is expected of you to reduce or limit the risks?
  4. Will you get a reduction for each year you do not claim?
  5. What assistance is provided to improve information governance and information security?
  6. What and how big a difference to your future premiums will a claim make?
  7. What support if any will be provided to assist in making the right security decisions for the industry / business you are in?
  8. The security / protection industry is very fast changing, how can the insurance ensure that your policy is current?
  9. Do all portable media/computing devices need to be encrypted?
  10. What about unencrypted media in the care or control of your third-party processors?
  11. Are malicious acts by employees covered?
  12. Will you have to provide evidence of compliance to existing Data Protection Principles, in relation to your actual processing, to prove you were not acting disproportionately?
  13. Although ignorance of the law is no excuse, we are just not able to keep up with all the compliance issues that may affect all the territories our company works in, would you refuse a claim if you were processing data that may contravene laws in one country but not another – because insurance policies often stipulate that you must not be breaking the law?
  14. What if there is uncertainty around whether the incident took place a day before the cover was in place or on the day?
  15. Are the limits for expenses grouped together in a way that the maximum limit that is covered is likely to be achieved very quickly, unless you increase the cover?
  16. Are all and any court attendances to defend claims from others covered?
  17. Could you claim if you were not able to detect an intrusion until several months or years have elapsed, so you are outside the period of the cover? 9

Every organization faces different challenges with regard to data breaches. The size, industry, type of data, potential exposures, business model, and many other considerations will affect the scope and detail of the ideal cyber insurance policy.10 Organizations should ensure that they have a detailed system tailored to the specific liabilities and risks to which they are exposed in the event of a data breach.


[1] Miriam Smolen, Adrian C Azer and Katrina F Johnson, "Cyber-Insurance: Mitigating the Dreaded Friday Night Phone Call", December 18, 2013, Gilbert LLP, online: (

[2] Matthew Davies, "The Threat from Within: Why Your Clients Need Standalone Coverage", March 27, 2014, Canadian Insurance: Top Broker, online: (; Miriam Smolen, Adrian C Azer and Katrina F Johnson, "Cyber-Insurance: Mitigating the Dreaded Friday Night Phone Call", December 18, 2013, Gilbert LLP, online: (

[3] "Cyber insurance in demand after recent data breaches: banks, hotels, educational institutions buying cyber insurance", July 28, 2013, CBC News, online (

[4] Ibid

[5] Ibid

[6] "Technology Errors & Omissions Insurance", International Risk Management Institute, online: (; "Cyber and Privacy Insurance", International Risk Management Institute, online: (

[7] List taken from Miriam Smolen, Adrian C Azer and Katrina F Johnson, "Cyber-Insurance: Mitigating the Dreaded Friday Night Phone Call", December 18, 2013, Gilbert LLP, online: (

[8] Ibid

[9] Questions taken from "An Introduction to Cyber Liability Insurance Cover",, online: (

[10] "An Introduction to Cyber Liability Insurance Cover",, online: (

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.