UNLIMITED LIABILITY MAKES ITS WAY BACK INTO CYBER CONTRACTS

Several government contractors are reporting that unlimited liability clauses – popular about 10 years ago at both the state and federal government levels – are making a comeback.  Unlimited liability clauses mean that if the system you manage, install, or maintain has a breach, your company could be on the hook for all damages to the government.  The risk becomes potentially larger when the fact that most “routine” maintenance on systems either owned or operated on the government’s behalf is done by sub-contractors.  When was the last time you reviewed their work?  Millions of dollars in potential liability are in play.  Contractors were largely successful in rolling back unlimited liability contract clauses several years ago by pointing out that no one could properly indemnify a system or client under such terms and still  stay in business.  The impact was particularly acute on small firms, many of whom could not obtain insurance under a decidedly non-commercial term.  The return, however, should not be too much of a surprise as government agencies look to strengthen cyber security.  Still, you need to be prepared and push back where necessary.   This is yet another reason to read your contract, BPA, or other agreement carefully.  Make sure you know what you’re signing your company up for and what you can’t live with.