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Wake Up and Smell the Threats: Two Recent Examples of Why Municipalities Need Cyber Insurance

Odd as it may seem to those of us who live and breathe cyber, tech and privacy insurance, I have heard anecdotally of municipal authorities who profess that their cities and towns do not need to incur the expense of buying these products. “Why do we need them? We don’t operate on the internet,” they reportedly have said.

Well, my response is “why don’t you think you need them?” Do you maintain a bank account? Do you store personally identifiable information about private citizens, whether in your property records, police files, tax databases or otherwise? Are your employees able to access your municipality’s computer systems remotely? Is it really possible that every single piece of information you maintain is recorded on paper and nothing is stored on a mainframe, whether located on- or off-site? Come on. Its 2010. That’s virtually impossible, isn’t it? Haven’t you read my December 23, 2009 post No One is Immune. Even Government Entities Need Cyber/Tech Insurance?

Since that posting, additional municipalities have suffered cyber attacks and been the subject of cyber lawsuits.

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Loss of Computer Data: Is it Property Damage?

j0236341Let us say, speaking hypothetically, that a grossly negligent individual (who, since we are speaking hypothetically, is named…”Mr. X”) has accidentally uninstalled my favorite computer game, “Sid Meyers Civilization IV” (for which, by the way, I paid good money and patiently waited three whole hypothetical hours to legally download onto my computer).

Let us further hypothesize that I was twelve hours into a very successful game which has now gone the way of the passenger pigeon. Is the loss of my computer software considered “damage to property” for the purpose of a negligence action, or is it just a form of pure economic loss? “Of course it’s property damage!” I thought to myself, “and a most egregious form at that!”

Yet, in law, as in life, few things are certain. I was compelled to learn more, and so I conducted a brief review of the case law from Canada, the United States and Australia to satisfy my curiosity. What I have learned is that, notwithstanding that we live in the age of the internet, it is far from clear whether we can sue for the loss of electronic data in a negligence action.

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