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Third Party Risk Exposures Are No Party.

  

  

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When it comes to insurance, most people think of risk from two perspectives; loss of your property or finances (1st party) and loss suffered by others caused by you (third party).  Examples of 1st party losses are a building that is damaged by fire, or a computer virus that destroys your network.  Examples of third party losses are your product causing bodily injury to a customer, or property damage caused by your company vehicle.

But there is more than meets the eye with third party risk exposures.  For instance, when you purchase employment practices liability insurance, you are covering your company against such employee allegations as wrongful termination, sexual harrassment, and discrimination.  Overlooked is the fact that when you have employees in the field working with your customers, you have a third party exposure for sexual harassment.  The big surprise here is that third party EPLI is not automatically included and must be endorsed to the policy.

How about employee dishonesty, aka crime insurance?  This coverage protects a company from theft by employees, as well as for ERISA compliance.  Do your employees have access to your customer's finances and/or accounts?  Again, the third party issue here is that crime coverage is not automatically included and must be endorsed.

Discussions on the new Massachusetts data security laws are still warm - does your company control sensitive customer data?  What would happen if that data got into the wrong hands?  Third party issue?  Big time.  Massachusetts state penalties and fines will be the least of your worries if a data breach occurs and results in financial losses.  Third party Cyber Liability is an insurance coverage specifically designed to cover such a loss.

So when you hear the words third party, it's not another place to go on Christmas Eve; it's a potentially serious risk exposure to your business.