Is damage to computer hardware covered?

  • Damage to the hardware itself is not covered but the related consequential loss such as the cost of restoring data or legal liability might be covered.
  • In other words, following some loss, damage or theft of hardware, the Insured might be liable to a third party (if negligence on the part of the Insured can be shown) because of what happened to the data of that hardware.
    • Note: The cost of replacing the hardware itself is not covered.
  • Example scenarios where liability could be covered include:
    • The Insured’s laptop is stolen and the thief uses the customer data on it to steal money from those customers.
      • Explanation: The definition of a security breach includes a loss arising from the “physical theft of … hardware …”.
    • A fire at the Insured’s offices destroys the only copy of a customer’s important data.

Explanation: Exclusion N removes cover for loss incurred in the replacement of physical assets arising from fire, but provides cover if the claim is part of the Insured's own financial loss on account of the lost data (termed a first party insured event in this policy). A first party insured event includes the loss of data stored on a machine due to “accidental destruction or loss of hardware, so that the data stored on the machine is not readable.”

Cyber Risk