Does Cyber Insurance Cover Employee Mistakes or Negligence?

Does Cyber Insurance Cover Employee Mistakes or Negligence?

When it comes to cyber risks, many business owners ask a critical question: Does cyber insurance cover employee mistakes or negligence? The short answer is yes—but with some important nuances. In this article, we’ll walk through real-world examples, what’s typically covered, where coverage can fall short, and what other types of insurance you might also need.

How Cyber Liability Insurance Can Help

Cyber liability insurance is designed to help businesses recover from data breaches, cyberattacks, and other digital threats. And in many cases, that includes losses caused by employee errors. Here are some common scenarios:

• Phishing Attacks: If an employee falls for a phishing email and unintentionally hands over sensitive company credentials or financial information, cyber liability insurance can help cover the resulting damages, including business interruption costs, legal fees, and notification expenses.
• Data Mishandling: If a staff member mishandles personal customer data or accidentally sends private information to the wrong recipient, the breach could lead to lawsuits or regulatory penalties. Cyber coverage often includes protection for these types of errors.
• Accidental Deletion of Data: Mistakes happen. If an employee accidentally deletes important files or systems and the loss causes a disruption or financial loss, your cyber insurance may help with recovery and associated costs.

Limits and Exclusions to Be Aware Of

While cyber insurance can cover a broad range of employee-driven incidents, not everything is included. It’s important to:

• Review your policy carefully to understand what’s covered and what’s not.
• Understand common exclusions, which may include acts of gross negligence, insider threats, or unapproved software usage.
• Work with an insurance professional to ensure your policy matches the specific risks of your business.

When Other Policies May Be a Better Fit

Not all employee mistakes fall under cyber liability insurance. In some cases, other types of policies may be more appropriate:

• Technology Errors & Omissions (Tech E&O) Insurance: If you’re a tech company and your employee’s coding mistake causes a client’s system to crash or results in lost revenue, this would typically fall under a Tech E&O policy rather than cyber insurance.
• Professional Liability (E&O) Insurance: For businesses that provide professional advice or services, such as consultants, marketing agencies, or financial firms, an employee’s error that leads to a client’s financial loss would likely be covered under a professional liability policy.

Why Employee Training Still Matters

Cyber insurance is a critical safety net—but it’s not a substitute for proactive risk management. Regular employee training, strong internal protocols, and robust cybersecurity tools can significantly reduce the likelihood of mistakes happening in the first place.

Final Thoughts

Yes, cyber liability insurance often covers employee mistakes, especially those that result in data breaches, phishing losses, or cybersecurity incidents. But the specific coverage details can vary greatly depending on your insurer and your policy.

To fully protect your business, it’s important to consider other types of insurance—like tech E&O or professional liability—depending on the nature of your work.

If you’re unsure whether your business has the right protection in place, now is a great time to review your policies and make sure you’re covered for both the known and the unexpected.