Economy, Fee Income Push Create Perfect Storm For CUSO Lawsuits
CUNA Mutual Group’s Hunt Urges NACUSO Audience To Beware of Cyber, Professional Liability Risks
LAS VEGAS, NV – CUSOs expanding their fee-based services to increase revenues need to be cognizant of the growing risk exposure to professional and cyber liability such expansion creates, a CUNA Mutual Group speaker told a NACUSO Annual Conference breakout session audience Thursday.
“The current economy has people looking for any reason to sue,” said Jim Hunt, CUNA Mutual Group staff underwriting specialist. “Directors and officers of CUSOs must understand the financial and reputational impact a loss will have on their CUSO.”
Professional liability could arise from neglect or an act, omission, error, breach of duty, misstatement or misleading statement made by directors, officers or employees of a CUSO. “Even a seemingly small, inadvertent error or unintentional oversight can result in costly legal action against your credit union or CUSO,” Hunt said.
Likewise, as CUSOs expand e-commerce activities and become responsible for safeguarding larger amounts of confidential data, so does the risk of cyber-attack, data breaches and viruses. Hunt said types of cyber exposures include:
- Privacy rights violations: unauthorized disclosure of other’s confidential information
- Damages to a third party’s data
- Social media errors (Facebook, Twitter, etc.)
- Human errors
- First-party losses, such as public relations and security breach expenses.
According to an October 2012 NetDiligence study of 137 cyber liability and data breach events between 2009-2011, the financial services industry was the top targeted business sector with 37 percent of records exposed occurring in this sector and an average cost per breach of $3.7 million.
“Data security breaches can occur from situations that your chief information officer has absolutely no control over, such as improper disposal of data, lost or stolen electronic assets or rogue employees. One data breach could wipe out your CUSO, if you’re not protected,” Hunt said.
To avoid these exposures and related losses, CUSOs should first ask themselves a series of questions about their fee-based services, the potential risks they pose, and what steps can be taken to minimize them. These include examining processes and arrangements with third-party vendors.
In addition, Hunt strongly advised CUSOs to protect themselves against errors and omissions and cyber liability losses by obtaining professional liability and cyber liability insurance coverage as part of their overall protection strategy. “As independent legal entities, most CUSOs need their own insurance. These coverages afford full entity coverage, including coverage for present and former directors, officers and employees of the CUSO, and any subsidiary of the named insured of which the named insured has more than 50 percent ownership.”
Hunt said there are no standard policies in the industry, and each company has a different profile for professions and businesses they want to write for professional liability and cyber liability policies. Advantages of these coverages are they cover high-severity, low-frequency events and:
- Provide claims-handling ability, including defense expenses
- Reduce the impact of a loss
- Assist meeting business goals with acceptable risk
- Help protect your assets and your employees
- Avoid surprises and large losses by identifying existing and emerging risks
Hunt advised looking at the total package offered by the insurance provider and selecting the one that offers the best overall solution.
To learn more, follow @CUNAMutualGroup on Twitter, circle +CUNA Mutual Group on Google+, or visit http://www.cunamutual.com/pressroom.
CUNA Mutual Group insurance, retirement and investment products provide financial security and protection to credit unions and their members worldwide. With more than 75 years of true market commitment, CUNA Mutual Group’s vision is unwavering: To be a trusted business partner who delivers service excellence through customer-focused products and market-driven insight. More information on the company is available on the company’s website at www.cunamutual.com.
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company. Property and casualty insurance products are issued by CUMIS Insurance Society, Inc. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wisconsin.