Damage to Electronic Data
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An electrician, while doing work in an office building, causes a power surge that damages the computers of several businesses.  Fortunately, the electrician has a General Liability Policy which covers this claim.  Coverage applies when the policyholder is legally liable for damage done to tangible property.  Unfortunately, though, the power surge also wiped out all of the businesses’ electronic data.  This is where the electrician’s problem begins.

General Liability coverage applies only to “tangible” property, and the policy definition specifically states that electronic data isn’t tangible property.  Furthermore, standard General Liability Policy forms have an exclusion for damage to electronic data.

The solution for the electrician is to add an endorsement called Electronic Data Liability to his General Liability Policy.  This endorsement provides a sublimit of coverage for damage done to electronic data.  There must still be some damage to tangible property to trigger the coverage, but in this case, the damage to the computers themselves satisfies that requirement.

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Electronic Data Liability coverage is important for any contractor doing work that could affect the electronic data of others.  This includes any contractor working in a building as well those with the potential to damage above or below ground power or utility lines.

There is also a possibility that one will destroy another’s data without damage to tangible property.  An example is a virus transmitted via email to a customer’s computer system.  The Electronic Data Liability endorsement won’t help here since there is no damage to tangible property.  Some insurance carriers offer broader Electronic Data Liability Coverage forms.  In addition, Cyber Liability Policies often include coverage for this type of claim.

It’s important to consider what type of damage your operations could cause to the data of another.  Discuss the exposures with your insurance advisor to come up with a solution to make sure you’re protected should this type of claim occur.