Background
Pacific Builders Group, a construction firm based in the Western U.S., specializes in general construction services and generates approximately $8 million in annual revenue. Organized as an LLC with three managing partners, the company employs a dedicated team of 25 individuals. Recognizing the growing threats posed by cybercrime and data security vulnerabilities, the company implemented an 831(b) Plan to proactively mitigate risks associated with fraudulent transactions and cyber breaches.
- INDUSTRY- Construction
- SPECIFIC- General Construction
- ANNUAL GROSS REVENUE- Approx. $8 Million
- EMPLOYEES- 25
- OWNER STRUCTURE- LLC with 3 Managing Partners
Risk Description
Pacific Builders Group faced substantial financial risk due to the increasing sophistication of cybercriminal tactics, particularly phishing and fraudulent electronic transactions. The risk involved unauthorized transfers of funds resulting from compromised email accounts belonging to subcontractors, a scenario becoming increasingly prevalent in industries reliant on digital communication for financial transactions. These types of incidents are typically not covered under standalone cyber coverage from traditional insurers, as they often exclude losses stemming from employee errors or failures to follow proper verification procedures.
Incident
In a recent breach, Pacific Builders Group mistakenly transferred funds totaling just under $250,000 to an unauthorized third-party account after receiving fraudulent instructions from a compromised subcontractor email. Upon discovering the breach, an immediate internal review was initiated. Despite rapid response measures and partial recovery efforts, the net financial loss remained nearly $250,000, presenting a significant financial impact to the firm.
Resolution
Pacific Builders Group promptly filed a claim under the Data Breach coverage of their 831(b) Plan, specifically designed to address losses due to fraudulent and cyber-related incidents. The plan’s direct writer quickly assessed the situation, confirmed the validity of the coverage, and efficiently processed the claim. With a policy limit set at $150,000, the claim fully utilized the available funds, substantially offsetting the financial impact of the breach.
Following the incident and claims process, Pacific Builders Group took additional steps to enhance internal cybersecurity protocols and staff training. The company significantly strengthened its internal control measures to proactively detect and mitigate similar fraudulent activities in the future.
Key Takeaways
By utilizing an 831(b) Plan, Pacific Builders Group effectively minimized the financial repercussions of a data breach event. The incident reinforced the importance of robust cybersecurity measures and comprehensive risk management strategies tailored to contemporary business threats.
Get Started