Standard General Liability policies for businesses don’t adequately cover the liability risk of “property damage” to “electronic data”.
Most service or contracting businesses could cause property damage that results in loss of or damage to a third party’s electonic data that is housed on their computer system. This exposure is not limited to IT firms.
Standard General Liability forms provide coverage for liability arising out of “property damage”. “Property Damage” is defined as a) physical injury to tangible property including loss of use thereof and b) loss of use of tangible property that is not injured…. As used in this definition, “electronic data” is not tangible property.
“Electronic data” is defined as information, facts, or programs: a) stored as or on, b) created or used on: or c) transmitted to or from: computer software…..hard or floppy discs, CD-ROMS, tapes, drives, cells, data processing devices, or any other media which are used with electronically controlled equipment.
This problem can be solved by the addition of various endorsements to add back coverage for property damage to electronic data. The cost is usually minimal.
However, some General Liability carriers that cater to IT firms will not add back this coverage. As a result, IT firms may need to verify that their Professional Liability (Errors & Omissions Liability) policy picks up this exposure. The key is to locate the definition of “tangible property” and find out if electronic data is included.
