By | August 10, 2015

Professional sports organizations are facing a new off-field risk: potential exposure of their proprietary data. In this new age of data in professional sports, teams are spending millions of dollars on sabermetrics and other data science techniques to obtain a competitive edge. But as the recent alleged breach of the Houston Astros’ computer database by individuals working for the St. Louis Cardinals demonstrated, teams’ management of the security and legal risks related to their proprietary data and statistical tools (“Analytic Property” or “AP”) may be falling short.

As with the Astros/Cardinals incident, threats to data security can arise from teams’ on-the-field competitors. But rogue employees, malicious third parties, and human error also pose serious threats to teams’ AP. The fallout can be significant, with a breach of AP potentially resulting in the loss of competitive advantage and organizational goodwill, as well as third-party lawsuits and substantial costs incurred while investigating the breach and notifying effected individuals.

As further discussed by the authors in a recent article in the Sports Business Journal, teams can take important steps to protect against exposing their AP. Chief among them: purchasing appropriate cyber insurance. An organization’s general liability, property, and other common insurance policies may exclude data breaches and their resulting losses from coverage. Cyber insurance can fill the gap. This insurance commonly covers (or helps defray) the cost of investigating a breach, responding to regulators, defending against lawsuits, notifying affected persons and restoring or recreating any lost data, among other expenses.

In light of the increasing importance to professional teams of their ever-growing stockpiles of proprietary data, it Is vital that organizations procure robust cyber coverage before an incident occurs, and also negotiate appropriate defense, indemnification, and additional insured coverage in contracts with their vendors and other third parties who could be implicated In a data breach.

Insurance coverage counsel can assist in negotiating appropriate cyber insurance and contractual risk transfer provisions, and in advising on coverage issues in the unfortunate (but all too common) event of a data breach.

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