Lynda Bennett, Partner and Chair, Insurance Recovery Group, and Member of the Executive Board at Lowenstein Sandler, and Robert Crocitto, Principal Broker at ARC Excess & Surplus, examined cyber liability insurance and how CFOs should approach this coverage during a Fireside Chat at the 2017 Chief Financial Officer Leadership Forum in New York on November 14. During the chat, "CFO Liability Protection Through Cyber Insurance," Bennett and Crocitto explored several insurance topics, including:
1. Why CFOs Buy Cyber Liability Insurance
Cyber liability insurance does not deliver one-size-fits-all coverage. CFOs must allocate time and resources to understand exactly what coverage they need to ensure optimal protection against risk.
"The insurance market today is growing more and more complex," Bennett said. "All of you should have [the right insurance] coverage and think about not just how you are protected, but also how your board is protected."
In many instances, CFOs take a cost-centric approach to cyber liability insurance. Yet failure to consider other factors may prove to be costly, particularly if finance leaders fail to properly safeguard their respective organizations.
If a CFO looks beyond the costs associated with cyber liability insurance, this finance leader can discover the best protections for his or her company. Then, a CFO can evaluate a wide range of insurance policies and select the ideal one for his or her business.
"CFOs typically tend to be focused on the cost of [cyber liability] insurance and the level of coverage," Crocitto stated. "But at the end of the day, the CFO needs to understand when his or her department is going to have to contribute with respect to an insurance settlement."
Generally, it is a good idea for CFOs to meet with a risk management team or legal counsel to review a cyber liability insurance policy.
"You need to make sure a policy is tailored to your company's particular risk factors."
A finance leader is better able to gain insights into a cyber liability policy if he or she works in conjunction with a risk management team or legal counsel. As a result, he or she will be better equipped to make an informed purchase decision.
"It is really important to understand the terms and conditions of cyber liability insurance and coordinate with your risk manager to understand what it is that you're buying," Bennett indicated. "You need to make sure a policy is tailored to your company's particular risk factors."
2. Factors That CFOs Need to Consider When They Renew a Cyber Liability Insurance Policy
Much in the same way that no two organizations are exactly alike, the cyber liability insurance policy that works well for one company may not work well for another. Fortunately, insurance brokers are available to provide expert support to CFOs.
An insurance broker can respond to a CFO's cyber liability insurance concerns and questions. Plus, this broker can work with a CFO and a company's risk management team to ensure a business is fully covered against a variety of dangers.
"CFOs should be working hand-in-hand with their insurance broker," Crocitto noted. "An insurance broker needs to make the CFO and the risk management department their partners in negotiating the right coverage."
In addition, a CFO who understands all aspects of a cyber liability insurance policy can help a company in a number of ways. This finance leader can teach colleagues and superiors about cyber liability insurance. Perhaps most important, a CFO who knows the ins and outs of a cyber liability insurance policy can help a company get the right coverages at all times.
"It is very important for you to understand where insurance is going to come up in your organization and how you can add value with it," Bennett stated. "And after you do an excellent job of writing up your insurance provision, you need to have systems in place to ensure you're exploring ways to minimize risk."
3. D&O Insurance and Its Potential Impact on CFOs
Directors and officers (D&O) liability insurance is becoming increasingly important to CFOs around the world. This coverage ensures an organization's executives are protected against legal claims made against them.
"At the end of the day, the CFO needs to understand when his or her department is going to have to contribute with respect to an insurance settlement."
Furthermore, D&O coverage is expanding to provide additional protection to organizations of all sizes.
"D&O has traditionally been a policy to address civil liability," Crocitto said. "Now, D&O coverage has broadened … to pick up insured people for their defense for an investigation associated with them."
It may be beneficial for an organization to purchase D&O coverage with entity protection. That way, an organization can optimize its protection in the event that case proceedings are brought against a company rather than individual executives.
"If you are going to broaden your existing D&O coverage to include entity protection, I recommend looking into higher limits over and above what you're buying now," Crocitto stated. "By buying investigative coverage and adding more on the top, you're not going to have to spend a lot."
Corporate policyholders rely on Lynda to aggressively litigate, negotiate, and resolve complicated disputes with insurers. To date, she has secured hundreds of millions of dollars in insurance recoveries for her clients.
Lynda has more than 20 years of commercial litigation experience and has obtained significant recoveries for clients in environmental, asbestos, construction defect, mass tort, product liability, D&O, and professional liability cases. She also counsels clients with respect to contractual insurance requirements, new insurance products (such as cyber insurance), innovative risk management tools, and insurance program assessment. Working with the firm’s transactional lawyers, Lynda regularly advises strategic acquirers and private equity funds regarding insurance coverage issues that arise in acquisition and investment transactions. Lynda has chaired the Insurance Recovery group since 2011 and is a member of the firm’s Executive Board and Compensation Committee. She previously served on the firm’s Operating Committee and Recruiting Committee, and is currently actively engaged in growing the firm’s Washington, DC, office through the expansion of the Insurance Recovery group in Washington.
Lynda is strongly committed to advancing the role of women in the legal profession. She is a founder of the firm’s Women’s Initiative, is active in legal industry women’s groups, and serves as a board member and past president of the New Jersey Women Lawyers Association. She is also an active participant in a firmwide initiative to help junior attorneys develop their networking, business development, and branding skills.
Rob has close to three decades of experience designing and placing all types of Management and Professional Liability Programs throughout the world. Rob specializesin placing Directors & Officers, Employment Practices Liability, Fiduciary Liability, and all forms of Professional Liability Coverage, including but not limited to Cyber, Privacy and Security Liability. Rob has placed some of the most complex Global Management and Professional Liability Programs for many of the Fortune 500. Prior to joining ARC as a Partner in 2001, Rob spent twelve years at Frenkel & Co., Inc., a large International Insurance Brokerage firm headquartered in NYC, where he oversaw the Management and Professional Liability Practice.
Rob has a very strong following of Corporate CEOs, CFOs, Risk Managers, Insurance Attorneys, and Retail Insurance Brokers; many of whom he has worked with for decades and have relied on his technical expertise, market clout and reputation as an aggressive client advocate. Throughout his career, Rob has been a trusted partner with his clients having designed and placed the Management & Professional Liability Insurance Programs for some of the largest global firms in the world.
Rob frequently speaks at various Risk Management Forums on topics relating to Management & Professional Liability Insurance. Rob also serves on the Board of Directors for the Professional Liability Underwriters Society Foundation, and is an active board member for three other Non-Profit Organizations on Staten Island, NY.
Rob is also an active fund raiser for The NYU Children Cancer Fund, The NYU Child/Life Center, The Eden II School for Autistic Children, The Stephen Siller Tunnel to Tower Fund, Mary’s Place by the Sea, Wish to Fish USA, and the Staten Island Chapter of the American Cancer Society.
Rob received his B.S. from St. John’s University, NY with Cum Laude honors in 1990. Rob also holds a 100 GRT Masters Captains License with the United States Coast Guard.