Understanding "Fines And Penalties Coverage" Under Cyber Insurance

This post is the second in a series that will discuss discrete issues that arise in cyber insurance. For the first installment, click here: http://www.insurancepolicyholderadvocate.com/?p=818

A wide variety of regulatory authorities, both public and private, assert jurisdiction over some aspect of data privacy, data security, and network vulnerability. Here, we address some of the common issues that arise in the context of fines and penalties imposed by governmental authorities as a consequence of a data breach. (In a separate post, we will address "fines" imposed on member banks and/or merchants with respect to violations of Payment Card Industry Council security standards.)

This post is confined to a situation in which the policyholder is, itself, assessed with a fine or penalty, or is forced to undergo a governmental investigation. A policyholder also could cause another entity to be assessed with a fine or penalty. For example, if a network design firm