Cyber security: Is your company protected?

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By Samantha Schacht
and Eric Meier

In the past decade, technological innovation has occurred faster than ever before, creating opportunities that construction industry professionals never could have imagined.

Complex structural building components materialize with the push of a button using 3D printing technology, and smartphone apps make sharing important paperwork and communicating between job sites nearly effortless. While not all companies have access to these expensive technologies, more affordable innovations are quite useful, too.

Documents can now be stored in company databases and accessed remotely. This enables collaboration among team members and eliminates the need to sift through thousands of documents for information.

New technology also creates new risks for construction companies of all sizes. Clever hackers can disable even the most advanced security systems and gain access to confidential information — whether information of critical importance to your company (such as trade secrets or sensitive employee information) or critical customer information (such as the specifications for the security features of a new building). When a data breach happens, not only do you worry about the impact on your business, your customers and your reputation, but also the financial cost to put the broken or stolen pieces back together again. Accordingly, it is important to take steps now that will reduce your company’s liability if a data breach occurs.

One way to help protect against this problem is to implement measures that decrease the likelihood of hackers viewing your business as an easy mark. Some examples of ways in which you can make your business less likely to have the “welcome” sign out for hackers include encrypting and backing up your data, using strong, complex passwords and securing wireless internet networks that employees typically use. Additionally, it is important to make employees aware of the role they play in maintaining your company’s data security. Incorporating a written data policy into your employee handbook and conducting training sessions on smart technology practices are great ways to accomplish this. Regular security audits are also recommended so that your company can identify its vulnerabilities and correct them before it is too late.

Even the most cautious and well-protected companies can still fall victim to a data breach, however, as seen by recent attacks on Target and Anthem Health Insurance. As such, it is also important to have tools in place to minimize the harm in the event of a data breach.

Construction companies are very familiar with insurance as a risk-planning tool. Unfortunately, typical construction insurance policies do not cover cyber security issues. In fact, many general liability policies now have data and technology exceptions to coverage. Even where specific exceptions do not exist in your company’s policy, most general liability policies do not cover purely economic loss. Rather, they are focused on property damage or personal injury losses. Professional liability policies also will not typically cover cyber security. While those policies protect against professional negligence claims, most security breaches are due to system glitches or other non-covered events.

Recently, cyber security insurance policies and endorsements have begun to emerge. Keep in mind, however, that since these types of policies are new, there is no industry standard yet. Each insurance company’s policy will likely have small variations, and these small variations can have big consequences in terms of the coverage your company is afforded. It is important to have a knowledgeable party (such as a lawyer or insurance broker) carefully review your company’s insurance policy to determine whether your company is receiving the protection it requires and otherwise evaluate whether your investment matches the coverage you desire.

While the number of companies seeking cyber security insurance has dramatically increased over the past year, few small companies have coverage. This is largely due to the fact that standalone cyber security policies can be expensive. The government has taken notice of this though, and has commissioned the Federal Advisory Committee on Insurance to determine ways in which the insurance industry can reduce the cost of cyber security insurance.

New technology provides construction companies with many new opportunities, but there are also new risks. Take some time to review the safeguards your company has in place to protect its information and minimize the potential fallout of a security breach.

Samantha Schacht is a third-year law student at the University of Wisconsin-Madison and current legal extern at Tri-North Builders.

Eric Meier is a shareholder at Whyte Hirschboeck Dudek SC. He is not only one of the firm’s litigation practice group leaders, but also a co-leader of the Construction Services Team.