Internet Banking Liability

Internet Banking Liability is available only in AK, DC, ND, NY, VA, VT. All other states, please refer to Cyber Cover.


Internet Banking Liability provides broad electronic banking coverage for Losses arising from Wrongful Internet/Electronic Banking Acts, which may involve:

  • Invasion of privacy
  • Libel, slander and defamation or other actionable oral or written disparagement
  • Loss or damage to electronic data of a customer
  • Denial, impairment or interruption of service to a customer
  • Loss of business opportunity by a customer
  • Unauthorized access to a customer account
  • Infringement of copyright, misappropriation of ideas or plagiarism
  • Infringement of trademark, trade name or service mark, or
  • Other causes of action arising directly out of the provision of Internet banking services by the financial institution
Features
  • Wrongful Internet/Electronic Banking Acts are any actual or alleged omission, error, misstatement, misleading statement, neglect or breach of duty committed in connection with the provision of Internet banking services.
  • Covered Losses include judgments, settlements and defense costs which the financial institution and/or its directors, officers or employees are legally obligated to pay as a result of an Internet Banking Liability claim made against them.

Sample Policy
Coverage Summary

Applications
All States except NY  
NY version  
Claims Examples

Invasion of Privacy

A hacker accesses savings account information through a bank’s Web site and sells the information to a third party. An affected customer sues the bank, alleging negligence in safeguarding account information, and seeking consequential economic loss damages as a result.

Loss or damage to a customer's electronic data

A consumer applies for a loan through a bank’s Web site, and a loan officer replies via email to the consumer concerning the application’s status. The consumer later sues, alleging that the loan officer’s email contained a virus which deleted all of his financial records from his computer. He demands that the bank compensate him for the cost of reconstructing the data and for losses he allegedly suffered when he could not access data to file his tax returns on time.

Denial, impairment or interruption of service

A hacker shuts down a bank’s Web site for over 24 hours. During that time, a customer attempts to access his accounts to transfer funds for a stock purchase. While the Web site is down, the stock increases in value before the customer could transfer his funds. The customer demands compensation, alleging that the delay created by the denial of service caused a lost financial opportunity for which he claims the bank is responsible. For a claim of this type, defense costs will be paid.

Loss of business opportunity

A customer attempts to transfer funds online from her personal account to her business account at another bank. The funds do not transfer due to a systems malfunction. When a vendor seeking to contract with the customer’s company cannot verify that her company has sufficient funds on deposit to complete the contract, it terminates negotiations with the customer’s company. The customer sues the bank, alleging that her business has lost substantial profit as a result.

Unauthorized access to a customer account

A hacker accesses a customer’s savings account through a bank’s Web site and uses personal information in the account records to obtain credit cards in the customer’s name. When the credit card issuers attempt to hold the customer liable for unpaid charges, the customer sues the bank for failing to safeguard the confidential information.

Infringement of copyright, misappropriation of ideas or plagiarism

A bank obtains a report from a consultant concerning issues facing small businesses in the state. In preparing the report, the consultant copies extensively from another report, written by the consultant’s former partner. The bank places the report on its Web site for informational purposes, along with other information the bank provides in connection with its commercial lending activities. The consultant’s former partner sues the bank, alleging that the bank plagiarized his work.

Infringement of trademark, trade name or service mark

A bank’s marketing department develops several slogans to emphasize the quality of the bank’s Internet Banking Service and includes these slogans on its Web site home page. However, they neglect to seek the advice of an intellectual property attorney as to whether any of the slogans are already in use by other companies. A national corporation, which has registered two of the slogans as service marks, sues the bank.

Other causes of action arising directly out of the provision of Internet banking services by the bank

Competing Bank A sues Bank B, alleging that Bank B’s Web site contains embedded code which results in Internet search engines diverting potential customers to Bank B’s Web site. Unknown to Bank B’s management, a designer, who had been denied a loan by Bank A, embedded the code during the site’s development phase.

Social Networking Coverage

  • Regulatory Agency: The bank tweets on its Twitter page “Certificates of Deposit at 2% for $1,000+.” However, the correct minimum amount is $10,000 and the link to the Web page with the correct information doesn't work. The bank does not post a correction nor does it update the link within the Tweet. The FTC fines the bank for advertising misleading information.
  • Customer Complaint: Someone posts on the bank’s Facebook page that the bank is the best because it never charges ATM fees. However, in reality, the bank does charge fees but reimburses those customer accounts which meet certain criteria. The bank does not respond by posting correct information nor does it remove the message. Relying on the false information posted, a customer files a lawsuit for reimbursement for all the ATM fees she has paid on her account to date as well as for punitive damages.

Cyber/Network Extortion

  • A bank employee is terminated and feels he has been unjustly treated. In retaliation, he threatens to disseminate, via the Internet, confidential information accessed from the bank’s files prior to his departure unless a year’s salary is wired to a specified account.
  • A bank decides to terminate the contract with its Internet service provider due to concerns about the current provider’s financial stability. In dire straits, the provider announces that he has access to the bank’s systems and will wire out money unless the full contract is paid.

Business Interruption

A hacker enters a bank’s Web site to obtain information about account balances and, in order to cover his tracks, maliciously enters code that shuts down the Internet banking programs. The Web site is inoperable for 32 hours while the bank’s programmers attempt to rewrite, test and elevate new code. In the interim, the bank extends hours at its branches to accommodate those who typically bank online in the evenings and adds an extra teller at each location to handle additional traffic.

Liability Mitigation Expense

  • A bank has online trading capability on its Web site. On a particularly heavy trading day, the Web site “crashed” and was not accessible for two hours. News reports about the significant stock market rise referenced the inaccessibility of the bank’s Web site. A public relations consultant is hired to address the negative publicity.
  • In response to a security breach, a bank notified its customers, reissued debit cards to all cardholders who may be directly affected, and offered one year of credit monitoring services to enable customers to quickly identify possible fraud on their accounts.

Notwithstanding any language to the contrary, nothing contained herein constitutes nor is intended to constitute an offer, inducement, promise, or contract of any kind. All coverage descriptions and claims examples are provided for informational and educational purposes only and are not a representation as to coverage for any particular claim and are not represented to be error free. Coverage for any claim is determined upon the specific facts of the claim, the terms and conditions of the policy and applicable law. For details on the coverage provided by your specific contract of insurance, please refer to your policy. Coverage is subject to underwriting guidelines and may not be available in all states. Limits may be capped for underwriting reasons. Any links to any sites which are not originated by ABA Insurance Services Inc. (ABAIS) are provided only as a courtesy and are not intended to nor do they constitute an endorsement by ABAIS of the linked materials.