At INf, we just finished recognizing the month of October as Cybersecurity Awareness Month. I hope you enjoyed the few educational videos that we were able to send your way.

Since then, a few of our clients have asked me to talk a little bit about whether a legal malpractice policy would cover a claim that was based on a cyberattack, data breach, or wire transfer fraud. So as a bonus to our October series, we’ll go over a few of these issues.

Cyberattack and Data Breach Claims

Let’s take a look at the cyberattack and data breach issues. My answer is going to be a pretty typical insurance answer in this situation—maybe. It might be covered based on the claim circumstances. My best guess is that if you submit a legal malpractice claim based on a cyberattack or data breach, it will trigger the coverage.

The carrier will review the claim issues and decide which issues are going to be covered and which issues are not going to be covered. I would believe that those issues that are typically considered legal malpractice issues are going to be covered, and those issues that are strictly considered cyber issues will not be covered. Now, your policy may have certain language that will provide a very limited amount and scope of coverage for some cyber events. So you might be able to glean a little bit of coverage out of your legal malpractice policy in that event.

Wire Transfer Fraud Claims

On the other issue of wire transfer fraud, my answer is going to be a little bit different. I don’t believe that most legal malpractice claims or most legal malpractice carriers are going to cover claims for wire transfer fraud. Most of the carriers and carrier personnel that I have spoken to believe that wire transfer fraud is theft. And a legal malpractice policy is not theft protection.

Perhaps a fidelity bond, maybe crime coverage, or a standalone cyber liability policy would be the better policy from which your coverage would come. Some legal malpractice policies even specifically exclude theft, wire transfer fraud, and bank transfer fraud.

Consider a Cyber Liability Policy

If you’re looking for coverage to replace the physical funds that are lost from a wire transfer fraud, my suggestion to you is to not depend on your legal malpractice policy to do so. I think you’ll be very disappointed. Which brings me to my last and final point: you need to seriously consider the purchase of a standalone cyber liability policy. It’s going to protect you against a host of exposures, like cyberattacks, data breaches, ransomware, phishing schemes, and so much more.

So if you really want to protect yourself, the office, and your client, the purchase of a cyber liability policy is the way to go.

These policies help protect you from the threat of hackers, data dumps, stolen passwords, ransomware attacks and more.  

It takes less than 5 minutes to fill out the application for this insurance.  Contact INF to get started at 412.563.2106.

You as lawyers have several choices when it comes to legal malpractice insurance.  My guess is all brokers selling this type of coverage will tell you that their policy or program is a good one.  But what exactly makes up a good program? 

Let me tell you what I think makes up a good program and distinguishes it from other insurance program or policies in the marketplace:

 1. A malpractice helpline or hotline for insureds.  This is important as it provides an outlet for the insureds to discuss the disciplinary or claim issue with one of their colleagues.

2. A library of risk management tools.  For example, sample copies of engagement letters, disengagement letters, samples of conflicts of interest checks and examples of docket control systems.  This can be web site based or hard copies

3. Risk Management classes and or videos that may or may not provide CLE credit

4. Comprehensive policy form that provides: full prior acts coverage, career coverage, broad definition of professional services, unlimited tail coverage endorsement and a free retirement tail when appropriate.  

5. An involved and experienced broker. Does your broker look like me, act like me, talk like me?  If not they should.  A broker is your connection to the carrier.  Likewise the broker is the carrier’s connection to you.  Education, dedication and commitment is a must. LPL is not a one size fits all, not even a one carrier fits all kind of product.

When searching for or reviewing your legal malpractice insurance program, you may not be able to secure everything I just mentioned but a good program will have most of them.

Many carriers trying to be innovative or distinguish themselves in the Legal Malpractice marketplace try to add certain coverages to the policy hoping to get your business.  While any additional coverage is a good thing, sometimes the advertising and marketing of the additional coverages can cause confusion about the type and extent of the additional coverages offered.  

Some of the additional or ancillary coverages that carriers in the Legal Malpractice marketplace are marketing/providing are: Cyber Coverage, D&O Coverage, Fidelity Coverage and even some BOP coverage or business owners.  Again, the additional coverages are not bad to have but they should not be thought of as complete coverage for that type of exposure.  All of these ancillary coverages are just that – ancillary. Don’t be fooled in thinking that the ancillary coverage is all you need for those exposures.  The ancillary coverage will provide minimal coverage in terms of depth and limits.  

For a more comprehensive coverage with broad depth and adequate limits, you should consider a standalone or separate policy for each of the exposures that exist in your firm.  Although buying separate policies for cyber, business owners, and crime coverage will add to your outlay of cash it should provide adequate protection for you and the firm in the event of a claim or loss.  Notice I did not mention D&O coverage, if you sit on a non profit or for profit board you definitely need to check with that entity and confirm that they do have an inforce policy that protects you in your position as board member.  

Don’t depend on your Legal Malpractice policy to act as a cover all policy.  It’s not!  It’s great to have supplemental and ancillary coverages in the legal malpractice policy but it is a mistake to believe these types of coverage will provide the coverage needed in a claim situation.  Investigate standalone policies. 

“Amateurs hack systems, professionals hack people.” – Bruce Schneier

What is social engineering? 

Social engineering occurs when somebody acts like something that they’re not to get information from you so they can better themselves. We’ve heard a lot of stories that involve law firms and wire transfer fraud.

Common Social Engineering Schemes Aimed At Attorneys

There was a firm in North Carolina and they received a phone call, supposedly, from the bank saying, “We noticed some interesting activity on your account. I just want to verify we’re talking to the right person, what’s your username and password?” That firm gave the person on the phone their bank username and password. The bank said, “We’re gonna send you a code. We just want to make sure that you are who you are – let us know what the code is and then we’re going to talk about the issues with your account.” So instead, unbeknownst to the law firm, the people on the phone actually signed into their bank, initiated a wire transfer, and sent them the code needed for the wire transfer. So the law firm received the code and provided it to the people on the phone, they put it in, and then they went on to just have a fake conversation about what was wrong with their account. At the end, they said it just turned out to be an internal error and everything was fine. And 30 minutes later, the firm finds out that there was a wire transfer that they didn’t know about that they didn’t authorize. And in fact, it ended up being the person on the phone that allowed it all to happen.

This is a very common thing that we’ve been hearing more and more lately and it is a very common social engineering scheme aimed at attorneys.

Another one is, they’ll call you and appear like they are from a nonprofit, and they’ll try to, again, get some sort of wire transfer normally.

And then the final one that’s really, really common is they’ll send emails to you as your client. So it’s actually quite easy to appear to send an email as somebody else. It’s called email spoofing. An eight year old could do it, it’s so easy. They’ll send emails to you as your client, and they’ll say, “Hey, are you at the office? Can we send a wire out today? I’m busy, just go ahead and do it and email me when it’s done.” Anytime you get anything like that from your clients, you will need to put something in place where there’s some sort of two factor authentication. Something as simple as if they email you, you have to talk to them on the phone before proceeding. Having processes in place to combat social engineering is, again, part of that knowledge that needs to happen.

Social engineering is definitely an issue, and attorneys are one of the main people that they’ll go after because you have access to such important information.

Is This Really Happening?

I can tell you that, obviously, there have been claims, and whether they’re funds, transfer funds, transfers, or just hacks into the system to try to get information such as social security numbers, ein numbers, birth date health records of clients, it’s happening all the time, and it happens everywhere. The smaller law firms that don’t have a ton of money to spend on high priced security systems out there, they’re considered low hanging fruit or as I said, the easy targets for cyber criminals so be careful.

In the past five years, banks have spent about $90 billion on guarding against social engineering. They’re making it a lot harder to get into their information.