Does Your Cyber Insurance Policy Cover Your Intellectual Property?

Posted on: Sep 23, 2022 | 3 mins | Written by: HDFC ERGO Team

Does Your Cyber Insurance Policy Cover Your Intellectual Property?

Does Cyber Insurance Policy Cover Intellectual Property

A company’s management usually has a disconnect as far as IP risks and other kinds of risks are concerned. It is uncommon for risk managers to get involved in assessing and managing risks that are related to the IP of a company. Thus, questions related to whether IP risks should be transferred, insured or retained are usually not accounted for. If you want to bridge this gap, a cyber insurance policy might be your best bet.

What is IP?

Various creations of the mind are normally tagged as IP or Intellectual Property. These could include inventions of different kinds, designs, symbols, images, names, and artistic or literary works. Your Intellectual Property is normally protected by law with the help of patents, trademarks, and copyrights. This enables the users to earn recognition for their IP and even earn financial benefits due to the IP. These IP systems will enable people to innovate and create without any hassles.

Risks Associated with IP

Though the risk management options for IP are far less, compared to other assets, they are still available for everyone. One of the major reasons behind this arrangement is that it is quite difficult for underwriters to transfer the risks that are associated with the ownership of a company and their usage of IP. This is especially true in the case of insurance.

It is for these reasons that IP insurance has never really caught the attention of mainstream users. Primarily because the insurance premiums were too high, not making them a viable option for anyone to consider. Combined with the higher premiums was the lengthy process of underwriting the IP and even at times, the non-availability of adequate coverage.

There is another reason why companies aren’t very keen on buying IP insurance policies. A lot of people still believe that general liability insurance offers coverage for the risks associated with IP. And this belief comes from the fact that general liability insurance covers property damages and bodily injuries, apart from certain times where it includes copyright infringement, copying of slogans or trades.

But for this coverage to work, the infringement should be present in the advertisement of the company. And there have been several court rulings that state that advertising-related injuries and personal injuries do not directly relate to patent infringement.

The simple outcome is that companies that believe that their general liability policy or some of their other standard insurance policies will cover their IP risks, might end up finding a significant gap in the coverage. The following are a few insurance policies that are not directly related to IP but might offer coverage in a limited capacity for different exposure levels and gaps.

Commercial General Liability Insurance

Commercial general liability insurance policies usually offer cover for personal injury and advertisement injury for the following instances.

● Any form of oral or written publication or any material that slanders a person or an organisation or vilifies the products or services of an organisation.

● If another entity uses your advertisement idea in their own advertisements.

● Infringement clause if there is the usage of another entity’s copyright, slogan, or dress in your advertisement. It is important to note that the actual infringement should be due to solely the advertisement. Given that patent infringement is usually when someone makes unauthorized usage or sells patented products, it is highly unlikely for such a case to happen from an advertisement. Thus, the coverage for IP is very limited in commercial general liability insurance.

The scope of coverage of commercial general liability insurance is another potential gap. As per a normal commercial general liability insurance policy, a policyholder pays the premium in exchange for coverage for damage due to personal injury and advertising injury. And this is where things can get a bit tricky. Certain things such as fees of the attorney, disgorgement, and punitive damages might not necessarily account for damages. Also, the workaround expenses might not be considered damages as well.

Cyber Insurance

In general, cyber insurance provides cover for risks that are related to the storing of information or data of an organisation or for conducting business over the internet. They might offer a limited cover for IP-related risks if the insured incurs damages due to cyber attacks or other cyber-related instances.

A good example of the coverage on offer, is when the insured fails to safeguard the intellectual property of a third party that was in the possession of the insured. The total expenses that the insured incurs in trying to find out the source of the theft or its extent and the damages that arise out of the theft of intellectual property are usually covered as a part of the cyber security insurance.

On the other hand, a cyber insurance policy does not offer coverage for any allegation of the insured’s patents being infringed upon by a third party. And the aforementioned coverage mostly comes into the picture of multimedia context. And this coverage of cyber insurance is in some ways like a media liability policy.

Media Liability Insurance

This is a special type of insurance that offers coverage for errors and omissions that is applicable to companies that are involved in the field of media and entertainment. Companies in the field of broadcasting, publishing, or considerable marketing-related activities will find the policy to be beneficial.

The policy normally covers liability that arises from alleged defamation, copyright infringement, disparagement, plagiarism and unlawful usage of trademarks, materials, brand names, etc. A media liability policy normally uses manuscript policy forms. Thereby allowing for coverage that can be tailor-made. However, one must keep in mind that the policy will only offer specific claims related to intellectual property and does not offer exhaustive coverage for IP.

Conclusion

Irrespective of which type of policy that you opt for, there is a decent amount of gap as far as coverage is concerned. This is one of the reasons that insurance providers are now coming up with commercial policies for intellectual property. These commercial IP policies aim to bridge the gaps that are present with the above policies such as cyber insurance or media liability insurance.

Insurance providers offer these IP insurance plans that cover different gaps such as the gap due to environmental and cyber security insurance. As an organisation, it is essential that your work with someone who has knowledge about the different IP products in the market, to help you find the right product. You can even involve the risk managers to take a better look at the coverage and scope of the policy on offer.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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