Electronic Data Processing (EDP) Coverage

A Standard property insurance policy leaves something to be desired in addressing special EDP-related exposures. Electronic data processing equipment and its software is particularly susceptible to damage from electrical or magnetic disturbance and changes in temperature or humidity — perils which are excluded in a standard special” perils property policy. Except for prepackaged software programs; which are typically covered on an actual cash value basis; coverage for programs and data in a standard property policy is essentially limited to replacement with blank tapes or diskettes plus transcribing expense. Finally business interruption coverage in connection with damaged EDP Media {not equipment} is limited to 60 days from the date of loss or the time when the other damaged property is repaired; whichever is longer. Therefore; if the building repairs are complete; but normal operations cannot resume because replacement computer programs; data or media are not readily available; an uninsured business interruption loss may result. ??The best way to resolve these coverage inadequacies for EDP exposures is to buy a special EDP policy. Typically; EDP policies provide “special” peril coverage similar to that provided by “special” property forms; PLUS coverage for all electrical and magnetic damage; mechanical breakdown and often temperature and humidity changes as well. Some insurers include these perils in the basic form; while others make them available by endorsement for an additional premium. Usually these broader coverages are subject to a higher deductible as well. Valuation can be on either a replacement cost or actual cash value basis; and coverage may be available on a blanket as well as a scheduled basis. Media coverage includes the cost to reconstruct software developed in-house {subject to the limit of liability selected for the coverage}; if necessary. ??Perhaps most importantly; an EDP policy will respond appropriately to extra expense or income loss from the loss of EDP equipment; programs and data; provided that these coverage options in the policy have been elected and adequate limits of liability have been established.”

« Back to Glossary Index

Comments are closed.