An insurance insight for business by
Jeremy Riddle, Roehr Executive Vice President
For more information call 513-985-4208 jriddle@roehrins.com
Operating in the construction industry exposes contractors to a broad range of risks. While the need for General Liability insurance is widely recognized, a more nuanced exposure—Electronic Data Liability—is often overlooked.
Under a standard Commercial General Liability (CGL) policy, “property damage” is defined as physical harm to tangible property. However, electronic data is considered intangible property. As a result, losses involving corrupted, destroyed, or lost data—or financial losses stemming from the inability to access data—generally falls outside the standard CGL coverage.
An electrical contractor is working on an expansion project for a large medical center. While burying electrical wiring, the crew accidentally severs fiber optic cables supplying internet service to the medical center and nearby businesses. Repairs take the fiber optic provider three days to complete, leaving the medical center and surrounding businesses without internet during that time.
The electrical contractor’s CGL insurer covers the costs to repair the damaged fiber optic cables. However, when the medical center and nearby businesses file claims for lost revenue and corrupted data due to the internet outage, the insurer denies those claims. The reason: the standard CGL policy excludes coverage for electronic data losses.
Key Risk Management Strategies Considerations
To mitigate these risks, contractors can adopt the following strategies:
Add Coverage – Electronic Data Liability Endorsement
• The effective way to mitigate this risk is by adding coverage through the commercial General Liability policy by way of an endorsement.
• The ISO CG0437 Electronic Data Liability Endorsement is the standard form used for this purpose. It typically provides a specific sublimit and deductible and responds to third-party claims for “loss of use” resulting from physical injury to tangible property.
• Sublimits generally range from $100,000 to $1,000,000.
Contractual Risk Transfer
• Construction Managers and General Contractors should require subcontractors to carry Electronic Data Liability coverage as a condition of their contracts.
• This is particularly important for subcontractors who may work near or handle property associated with electronic data.
Safe Job Site Practices
• Pre-Digging Protocols: Always identify potential underground cables before digging i.e. by calling 811 (Call Before You Dig).
• Advanced Locating Technologies: After calling 811, use Ground Penetrating Radar or cable locators to further verify the location of underground utilities—a practical application of the adage “measure twice, cut once.”
• Observe Easements: Be aware of utility easements and respect all utility markings.
• Alternative Digging Methods:
• Hand-digging in areas with known cables or utilities
• Hydrovac excavation to safely expose underground infrastructure
• Employee Training: Provide ongoing training and retraining whenever new materials, procedures, or equipment are introduced, or when supervisors observe gaps in workers’ proficiency.
By implementing these strategies, contractors can effectively manage Electronic Data Liability.
