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Cyberinsurance for Data Security Risks

By Ed Poll
November 26, 2007

The harms that can result from computer security breaches are largely uncovered by the types of insurance policies most law firms maintain, and that makes those firms subject to unnecessary risk for theft of client data.

Combined with the inadequate security most law firms provide for client data anyway, the resulting exposure risk may well violate legal professional ethics. A firm's failure to adequately protect the following is a violation of Bar Association requirements to preserve client files and, more generally, a failure of the firm's overall duty to act competently in the best interests of its clients:

  • Computer-based master files;
  • Time-and-billing records;
  • Court filings;
  • Wills;
  • Powers of attorney;
  • Corporate records; and
  • Other client-related materials

Types of Exposure

Computer security breaches can have a first-party impact (on the firm itself) and a third-party impact (on clients). For example, an unauthorized system access that damages data or online services may render the firm itself inoperable. (Even this scenario may also lead to a third-party loss to clients if they rely on the firm's extranet for aspects of their own business operations.)

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