April 2012 The Fiduciary Shield, "Cyber Liability Insurance: Protecting Multiemployer Plans against Inappropriate Participant Information Disclosures"


Technological advances, especially those involving electronic data storage, inevitably introduce new risks that trustees of employee benefit plans must address. Examples of data-storage media that can make participants’ personal information more vulnerable than ever before include discs, flash drives and, most recently, the “cloud.” Stories about improper disclosure of individuals’ private information, also referred to as data “breaches,” are commonplace. There are three general types of data breach:

  • Breaches due to computer system failures,
  • Breaches due to employee mistakes or negligence, and
  • Breaches due to malicious acts by employees or third parties (“hacking”).

Typically, insurance purchased by employee benefit plans does not adequately cover improper disclosure of participant private information. Cyber liability insurance is designed specifically to help protect against these exposures.

This issue of The Fiduciary Shield presents an overview of cyber liability insurance. It addresses the potential consequences of a breach and discusses the protection that can be provided by cyber liability insurance.

With the rising incidence of cyber breaches, increased regulatory enforcement and the costs associated with both, plan sponsors may wish to learn more about this insurance and consider whether adding this protection to their insurance portfolio makes sense. A sidebar in this issue of The Fiduciary Shield lists questions for plan sponsors to address before seeking a quote for cyber liability insurance.

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