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Information Security Protection Policy (ISO)

Limits, Deductible and Defense

EC 00 10

Policy Language

Explanation

SECTION II – LIMITS OF INSURANCE

 1. Policy Aggregate Limit Of Insurance

The most we will pay for all "loss", and "defense expenses" if covered, under this Policy is the Policy Aggregate Limit Of Insurance shown in the Declarations. The Policy Aggregate Limit of Insurance shall be reduced by the amount of any payment made under the terms of this Policy. Upon exhaustion of the Policy Aggregate Limit of Insurance by such payments, we will have no further obligations or liability of any kind under this Policy.

 2. Insuring Agreement Aggregate Limit Of Insurance 

a. Subject to the Policy Aggregate Limit of Insurance, the most we will pay for all "loss", and "defense expenses" if covered, under each Insuring Agreement, is the Insuring Agreement Aggregate Limit Of Insurance shown in the Declarations:

(1) The Insuring Agreement Aggregate Limit of Insurance shall be reduced by the amount of any payment for "loss", and "defense expenses" if covered, under that Insuring Agreement; and

(2) Upon exhaustion of the Insuring Agreement Aggregate Limit of Insurance by such payments, we will have no further obligations or liability of any kind under that Insuring Agreement.

b. If coverage for "regulatory proceedings" is being provided under Paragraph b. of Insuring Agreement 2. Security Breach Liability, the Limit of Insurance shall be part of, not in addition to, the Aggregate Limit of Insurance for the Insuring Agreement.

Section II – Limits of Insurance

Each insuring agreement is subject to a separate limit shown in the Declarations, and all loss during the policy period is subject to an annual aggregate limit.

There is no premium consideration for the Policy Aggregate Limit of Insurance, so it should be set as high as the insurance company rules permit. 

Defense expenses incurred by the insurance company to defend any of the three third-party liability insuring agreements are paid within the limit of liability for the insuring agreement and the annual policy aggregate, thus reducing the amount available to pay settlements or judgments. 

Insuring Agreement 2.b. (Regulatory Proceedings) is subject to a sublimit, which is part of the aggregate limit for Insuring Agreement 2 (Security Breach Liability). 

Variations to watch for:
  • Some policies provide that the policy premium is fully earned if the policy aggregate limit is exhausted.

  • Some policies contain a separate aggregate limit for the first-party insuring agreements involved in a single first-party incident.

SECTION III – DEDUCTIBLE

1. Subject to Section II – Limits Of Insurance:

a. Under Insuring Agreements 1. Web Site Publishing Liability, 2. Security Breach Liability and 3. Programming Errors And Omissions Liability:

We will pay only the amount of "loss" and "defense expenses" which are in excess of the applicable Deductible Amount shown in the Declarations resulting from the same "wrongful act" or "interrelated wrongful acts". Such Deductible Amount will be borne by you, self-insured, and at your own risk. 

b. Under Insuring Agreements 4. Replacement Or Restoration Of Electronic Data, 5. Extortion Threats, 7. Public Relations Expense and 8. Security Breach Expense:

We will pay only the amount of "loss" which is in excess of the applicable Deductible Amount shown in the Declarations. 

c. Under Insuring Agreement 6. Business Income And Extra Expense:

We will pay only the amount of "loss" which exceeds the greater of:

(1) The Deductible Amount shown in the Declarations; or

(2) The amount of "loss" incurred during the Waiting Period shown in the Declarations.

 2. In the event a "loss" is covered under more than one Insuring Agreement, only the highest Deductible Amount applicable to the "loss" shall be applied.

Section III – Deductible

Each insuring agreement is subject to a separate deductible shown in the Declarations, but only the highest deductible for one affected insuring agreement is applied when a loss involves more than one insuring agreement.

The deductible applies to defense costs incurred by the insurance company to defend the three third-party liability insuring agreements.

For Insuring Agreement 6 (Business Income and Extra Expense) the deductible is the higher of the dollar amount shown in the Declarations or the amount of loss incurred during the waiting period shown in the Declarations (expressed in hours). 

SECTION IV – DEFENSE AND SETTLEMENT

The provisions contained within this section apply only to Insuring Agreements 1. Web Site Publishing Liability, 2. Security Breach Liability and 3. Programming Errors And Omissions Liability:

1. We shall have the right and duty to select counsel and defend the "insured" against any "claim" covered under Insuring Agreements 1. Web Site Publishing Liability, 2. Security Breach Liability and 3. Programming Errors And Omissions Liability, even if the allegations of such "claim" are groundless, false or fraudulent. However, we shall have the right but not the duty to defend the "insured" against a "claim" covered under Paragraph b. of Insuring Agreement 2. Security Breach Liability, and we shall have no duty to defend the "insured" against any "claim" which is not covered under any of these Insuring Agreements.

2. We may, upon the written consent of the "insured", make any settlement of a "claim" which we deem reasonable. If the "insured" withholds consent to such settlement, our liability for all "loss" resulting from such "claim" will not exceed the amount for which we could have settled such "claim", plus "defense expenses" incurred, as of the date we proposed such settlement in writing to the "insured". Upon refusing to consent to a settlement we deem reasonable, the "insured" shall, at its sole expense, assume all further responsibility for its defense, including all additional costs associated with the investigation, defense and/or settlement of such "claim".

Section IV – Defense and Settlement

This section applies only to the three third-party liability insuring agreements. 

Except with respect to the coverage for regulatory proceedings under paragraph "b" of Insuring Agreement 2 (Security Breach Liability), the insurance company has the right and duty to defend the insured, including the right to select counsel.

For the regulatory proceedings coverage, the insurance company has a right to defend the insured but is not required to do so.

Paragraph "2" is commonly known as a "hammer clause." The insured must consent to any reasonable settlement proposed by the insurance company. However, if the insured withholds consent, the insured assumes responsibility for the defense, additional expenses for defense, and any final settlement or judgment in excess of the company's original settlement offer. Endorsement EC 20 09 (Amend Defense and Settlement Provision) modifies this provision to allow the insured to recover a specified percentage of the loss plus defense expenses in excess of the proposed settlement amount.

Endorsement EC 01 20 (Texas Changes) adds a provision that requires the insurance company to notify the named insured about offers to settle claims and actual settlements, in compliance with Texas law. 

Variations to watch for:
  • Some policies do not contain a "hammer clause" allowing the insured to reject a settlement offer with conditions.