Deciphering Between First and Third Party Cyber Liability

Deciphering Between First and Third Party Cyber LiabilityDeciphering Between First and Third Party Cyber Liability

While it is certainly true that IT companies tend to have greater risk exposures than those that don’t work as closely with customer data, cyber liability risks can affect any industry, just in different ways. As a result of differing needs, insurance companies developed two separate types of cyber risk insurance to meet the needs of those in the IT business and non-IT companies.

First-party cyber liability coverage is the type of cyber risk protection that companies outside of the IT field would most often need. This type of cyber liability happens when a company’s individual information is breached. For example, let’s say that a hack happens that results in the exposure of a company’s trade secrets, that company would experience a first-party liability. A company that attains first-party cyber liability coverage will typically be covered for:

  • Notifying customers that their information was compromised or exposed.
  • Purchasing credit monitoring services for customers affected by the breach or hacking incident.
  • Launching a public relations campaign to restore the reputation of the company after a breach.


These are just a few of the scenarios that a first-party cyber liability policy would provide funds for. What about a third-party cyber liability policy? This type of liability occurs when customer or partner information that your client’s organization has promised to keep safe is breached. For example, let’s say your client’s company is breached, and the hack results in the exposure of their customer’s Social Security numbers; this would be a third-party cyber liability risk.

Third-party cyber liability risks typically affect IT companies, however in recent years we’ve seen many retailers be hit with this type of breach as well. While a first-party cyber liability could certainly threaten a company, third-party cyber liabilities could potentially be devastating to a business. This is especially true if it’s a smaller company or nonprofit organization. Third-party cyber liabilities have been known to ruin brands, open doors to million-dollar lawsuits, and trigger statutory fines.

We offer third-party liability coverage in addition to first-party liability insurance through our Privacy and Network Security product. At PL Risk Advisors, we understand that all industries and companies could face the risk of a privacy or network security breach. Storing personally identifiable information on clients and employees could be open to data breaches, identity theft, and unauthorized use of confidential information. Please contact us to learn more at (855) 403-5982. 

Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.