Cyber Risks in the Tech Sector: Why General Liability Insurance Isn’t Enough

It happens more often than you think – a small tech firm assumes their commercial liability policy will cover their cyber claims, only to find out too late that it doesn’t. Don’t let that be your company’s story. The smart move is to address the cyber coverage gap now, before an incident occurs. Then, you can serve clients with confidence, knowing you’re properly covered.

Why Isn’t General Liability Insurance Enough?

General liability insurance offers basic liability protection that businesses in most industries (including tech) need. Your standard general liability insurance policy will cover claims involving bodily injury or property damage occurring on your premises or arising from your operations, for example, if a client slips and falls in your office. It can also provide coverage for personal and advertising injuries, such as claims involving copyright infringement, slander or libel. It’s an extremely useful policy that most businesses need.

Nevertheless, it doesn’t cover everything. Certain types of liability are excluded from general liability insurance. For example, a general liability insurance policy won’t typically cover employee lawsuits. For that, you need employment practices liability insurance and workers’ compensation insurance. Likewise, your general liability insurance policy won’t cover vehicle-related claims. That’s what your commercial auto insurance policy is for.

General liability insurance policies also typically exclude many tech-related claims. This can be a problem for any business with tech exposures – and these days, that’s most businesses – but it’s particularly relevant for tech companies. Thankfully, as with the other general liability exclusions, you can fill your coverage gaps with specialized insurance.

The End of Silent Cyber Coverage in General Liability Insurance

Sometimes it takes insurance coverage a little time to catch up to new risks. When cyber claims first emerged, businesses didn’t have dedicated cyber policies, and the policies they did have might not say anything about cyber claims, either to confirm or exclude coverage. This resulted in a trend known as “silent cyber.” General liability policies that failed to exclude cyber claims were interpreted as providing coverage.

This was a win for businesses, but it was a problem for insurance carriers, which had not factored cyber risks into their underwriting. To remedy this problem, carriers began adding cyber exclusions to their policies, including property and general liability insurance.

These days, general liability insurance policies typically won’t provide coverage for many cyber risks, such as:

• Ransomware and other malware attacks
• Data breaches
• Denial-of-service attacks
• Social engineering losses, including from phishing and business email compromise

New AI Exclusions

As new AI technologies emerge, it’s creating new and unknown risks. Some insurers have responded with AI exclusions. These exclusions can bar coverage for claims arising from the use of AI, even if the type of claim would otherwise be covered.

For example, a standard general liability insurance provides coverage for advertising injuries. If you launch a social media marketing campaign for your company and you’re sued for copyright infringement or defaming a competitor, you may have coverage under your general liability insurance policy. However, if your policy has a generative AI exclusion, and if you used generative AI to create the campaign, your insurer may deny the claim.

Data Breach Exposures

IBM says the average cost of a data breach is $4.4 million as of 2025.

Some data breaches stem from cyberattacks like malware, phishing and the exploitation of system vulnerabilities. Other data breaches are the result of company mistakes. For example, if records that should be private are made public or if an employee misplaces a laptop or flash drive, a breach could occur.

The National Conference of State Legislators says all 50 states have enacted data breach notification laws. Companies experiencing data breaches may also be subject to lawsuits and regulatory investigation. Data breaches are costly – and they’re not covered by general liability insurance.

General Liability Also Doesn’t Cover Professional Liability

General liability insurance does not cover professional liability stemming from claims of professional negligence, errors or oversights resulting in financial loss for your clients. Instead, professional liability is covered under an error and omissions (E&O) or professional liability policy.

For example:

• If a client sues you because they were injured on your property, resulting in lost wages and medical bills, your general liability insurance policy would provide coverage.
• If a client sues you because they suffered lost revenue due to your professional negligence, your professional liability insurance policy would provide coverage.

Professional liability insurance is important for many types of professionals, from real estate agents to lawyers. In the tech industry, tech E&O provides valuable professional liability coverage.

What Cyber Risks Do Tech Companies Face?

Cyber risks come in many different forms, such as:

• A ransomware attack holds your data and computer systems hostage, resulting in financial loss for your company as well as your clients.
• A scammer uses a business email compromise attack to trick an employee into authorizing a wire transfer.
• A data breach exposes customer data, triggering data breach notification requirements and regulatory investigation.
• A platform using generative AI produces faulty results that are not noticed immediately, resulting in financial loss for your company.
• A software update that you send out to clients is faulty, resulting in business disruption and triggering lawsuits against your company.

Cyber Insurance for Technology Businesses

To cover your tech company’s cyber risks, you may need several types of cyber insurance:

• Cyber liability insurance with first-party and third-party cyber liability coverage.
  • First-party cyber liability insurance covers your company’s direct financial losses stemming from covered events, for example, if you experience business interruption or costs associated with recovering lost data and restoring your network.
  • Third-party cyber liability insurance covers claims made by other parities stemming from covered cyber events, such as lawsuits from customers who were impacted by a data breach at your company.
• Social engineering coverage. Cyber insurance can provide coverage for social engineering losses. However, some policies have sub-limits or other restrictions, so check your policy and assess whether your coverage is sufficient. As scammers adopt deepfake technology and generative AI, social engineering scams are becoming more sophisticated and harder to detect, so it’s a good idea to check your coverage.
• AI coverage. This is an evolving issue, so it requires close attention. If your company is incorporating generative AI into its operations, check your policies for new AI exclusions. You may find these AI exclusions in many different types of policies, including general liability, management liability and cyber.
• Tech E&O. If a client sues you over a missed deadline, faulty program or other act of professional negligence, a tech E&O policy can provide coverage. Tech companies often need both tech E&O and cyber liability insurance.

Do You Need IT Company Cyber Insurance?

Mavrix provides insurance for technology companies. We can help you secure the cyber liability and tech E&O insurance you need to protect against cyber-related lawsuits, data breaches, ransomware attacks and other cyber claims. We can also help you with your other insurance needs, such as employment practices liability insurance, directors and officers liability insurance, commercial property insurance and general liability insurance.

Request a quote to learn more.