Marciano said another common exclusion is, "based upon negligent computer security. If a data breach happens, coverage will be denied for companies that failed to use their best efforts to install software updates or releases, or failed to apply security patches to their computer systems," she said.
Yet another "increasingly common" exclusion, Rafferty said, is expenses for first-party notification, which result from, "disclosure of personally identifiable, confidential corporate, or personal health information."
The reason, she said, is because those costs, especially in the retail sector (illustrated by breaches of major retailers like Target and Home Depot), have skyrocketed.
All of that, experts agree, means that companies need to custom-design their coverage. "No two policies are alike," Kaplan said. "'Significant' and reasonable' depend entirely on the kind of work a business does."
An example, he said, is companies in the medical field. "They may be more likely than others to be targeted by government or regulatory claims because there are more stringent state and federal-level laws that govern medical data than there are for other kinds of data."
Rafferty said it is crucial to have any proposed insurance policy, "thoroughly reviewed by someone with extensive experience investigating cyber breaches," to make sure it meets the specific needs of the organization.
Some damages, of course, cannot be measured exactly. "Damage to reputation cannot be mitigated by insurance policies," said Lucas Zaichkowsky, enterprise defense architect at AccessData. Nor can, "forecasted revenue that drops both short and long term as loyal customers change allegiances."
But there are ways to close coverage gaps. One of the most obvious is to practice good security "hygiene," including end-to-end encryption of data and keeping software up to date with all recent patches.
Kaplan said the obvious way to avoid the "vicarious liability" exclusion is to, "work only with third-party vendors who have insurance; that way, in a worst-case scenario, you have an avenue for seeking compensation."
And he added, as many experts have, that one of the best ways to avoid the headaches and costs of a major data breach is for organizations to make themselves a more difficult target.
"It's incredibly important to train your employees in data security best practices," he said, noting that according to Verizon Enterprise, 25% of data loss incidents in 2013 happened, "not because of hacking, but because of human error. Another 14% were caused because of theft or loss of devices."
The other reason to try to avoid the need for an insurance claim is because, even if most exclusions are eliminated, it will not cover every expense. Marciano offers a list of typical annual premiums for organizations of different sizes in different fields, which range from a mere $649 for $500,000 of coverage for a doctor's office, to $84,000 for $5 million in coverage for a $4 billion pharmacy benefits management company.
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