Secure Your Clients – and Your Business: Prevention, Recovery & Legal Risks for MSPs

Explore the overlooked legal risks that MSPs and MSSPs face in cybersecurity. This blog revisits familiar responsibilities and highlights crucial areas often missed in network protection. Dive in for essential insights.

Prevention: The “Before” – You Know the Drill

Pre-breach prevention is likely second nature to you. It includes all the usual suspects: keeping systems patched and updated, enforcing strong authentication, educating users, monitoring networks, and generally doing everything possible to stop bad actors at the gate. Most MSPs already have comprehensive checklists for this. (If you don’t, pause here and call me – seriously!)

You’re probably leveraging a stack of tools and best practices to reduce your clients’ attack surface. This could involve endpoint protection, managed detection and response, secure gateways, RBAC rules (role-based access control), and more. For example, many providers are adopting SASE (Secure Access Service Edge) solutions for secure remote access and network control.

(Full disclosure: I work with Timus Networks and trust their SASE platform, so I’ll use Timus as an example of this approach – but you should choose whatever fits your stack and clients best.)

SASE essentially converges networking and security into one cloud-based service, improving performance and zero trust firewall enforcement for users everywhere. Whether it’s a next-gen firewall or a cloud access broker, the goal is the same: keep threats out before they become incidents.

Let’s be honest, convincing clients to invest in prevention can be half the battle. Often, smaller customers say, “Are we really at risk? We’re too small to be on a hacker’s radar.” You and I know that’s wishful thinking – breaches can (and do) happen to businesses of all sizes. Unfortunately, if a client holds the misguided belief that they won’t be targeted, they might resist your recommendations. You face an uphill battle in those cases, and protecting your own MSP business from the fallout of a client’s poor decisions is getting harder.

For now, I’ll assume you’ve got prevention covered: you apply the patches, configure the firewalls, deploy the anti-malware, and nag clients to turn on multi-factor authentication. If you’ve ever had a client ask “Does 2FA cost money?”, you already know the answer: not having it will cost a lot more when things go wrong. Implementing a secure authentication platform and a clear access control model is foundational to reducing risk. If you need a deeper dive on any of these pre-breach basics, let’s chat one-on-one.

Recovery: The “After” – Cleaning Up the Mess

Even the best preventive measures can’t stop every incident. That’s why post-breach recovery plans are essential. Again, most MSPs and MSSPs are well-versed here. Think of yourself as a digital firefighter when a breach occurs – rushing in to contain damage and save what you can. This includes steps like:

Incident Response: Following a documented incident response plan (you have one, right?) to isolate affected systems, eradicate malware, and stop the bleeding. Every MSP should have an internal plan and also help clients develop their own incident response plans as part of business continuity.

Communication: Notifying stakeholders and possibly regulatory bodies. If a breach is serious, clients will need to engage cyber insurance and maybe law enforcement – and you’ll likely be coordinating with those teams.

Data Recovery: Getting the client operational again. This often means restoring from backups, rebuilding systems, and verifying that backups are clean. (Pro tip: test those backups beforehand – nothing’s worse than discovering your backups were failing when you need them most.)

Post-Incident Analysis: Figuring out what happened. Did an unpatched server provide an entry point? Did an employee fall for a phishing email? Identifying the root cause helps prevent the next incident. It also gives you material to educate the client (“see why I told you we needed that email filter?”).

Most of you live this reality and could perform these steps in your sleep (though preferably not literally asleep). If anyone reading doesn’t have a solid disaster recovery and incident response plan for both your clients and your own MSP operations, that’s a priority to fix – feel free to reach out for guidance. The key point: when a breach happens, you’re the one with the extinguisher. Clients rely on you to respond swiftly and effectively, and you take pride in being their trusted rescuer in those dark moments.

So far, so good. We’ve talked about how you prevent breaches and how you respond after an incident – things you’re already doing as diligent service providers. Now let’s talk about the third piece of the puzzle, which doesn’t get as much attention: protecting yourself from the fallout.

Legal Risks: The “Uh-Oh” – Covering Your… Bases (aka Don’t Get Sued)

Here’s where things get real. Sometimes the gravest danger to your business isn’t the hacker in a hoodie – it’s the attorney in a suit after a breach. While you’re focused on securing systems, you also need to secure your own business against legal and financial fallout. This is the part many MSPs haven’t fully wrapped their heads around, and it’s time we speak openly about it.

Imagine this scenario (based on a true story): A client suffers a data breach. During the post-mortem and legal investigation, it comes out that the client had declined some of your security recommendations in the past – perhaps they said no to that advanced threat protection or skipped on additional employee training. Now the client’s looking for someone to blame, and their lawyers are pointing fingers at you. In one recent case, a small MSP found itself on the hook for a $925,000 payout because a project-based client named them in a class-action lawsuit after a breach. In another, a law firm in California sued its IT provider for over $1 million in damages after a ransomware attack, alleging the MSP failed to prevent the incident. These are nightmare situations – but not impossible ones. Are managed service providers liable for breaches experienced by their clients? Increasingly, courts are being asked to decide that question.

The reality is, even if you did your job and the client ignored your advice, you could still find yourself in legal crosshairs. It might be a breach of contract claim or a negligence claim alleging you didn’t meet some “standard of care” in protecting the client. Perhaps the contract wasn’t crystal clear on what’s your responsibility vs. the client’s. Maybe there was only a verbal agreement, or an outdated one, leaving gray areas. Generally, courts will expect you to perform as a “reasonably prudent” IT provider would under the circumstances – and if you haven’t explicitly defined that in writing, you really don’t want a court deciding after the fact what should have been done. It can get sticky fast.

What can you do about it? Let’s break down a few risk management steps to legally protect your MSP/MSSP business (in addition to protecting your clients):

Document Everything – Especially Declined Services: You need evidence of the recommendations you’ve made and the decisions clients have taken. In court, excuses won’t save you, evidence will. If a client refuses a security upgrade or extra safeguard, have it in writing. Many MSPs use a Risk Acceptance Form or liability waiver for this purpose. Essentially, it says: “We offered you X security measure, you declined, thus you (client) accept any risks that result.” This isn’t just bureaucracy – it’s your legal lifeline. If you don’t have proof, a dispute becomes your word against the clients’, which is a bad place to be. So, institute a policy: whenever a client says “No” to a critical security recommendation, have them sign off acknowledging they’re assuming the risk.

Use Liability Waivers (Smartly): A formal liability waiver or contract clause can reinforce the above. Historically, MSPs have used waivers to protect themselves when clients insisted on risky setups (like using old, unsupported gear or no firewall). The waiver, basically has the client agree that the MSP won’t be held responsible if an incident occurs that would have been prevented by the recommended solution. Two things happen when you do this: (1) It forces the client to confront the seriousness of their decision – sometimes a stern conversation about “signing off on risk” makes them rethink skimping on security. (2) If they still decline, you have their acknowledgment in writing that they take responsibility for the consequences. That said, a waiver is not a get-out-of-jail-free card. With the evolution of cyber threats and regulations, the old one-page waiver may no longer be enough. Today’s legal landscape is more complicated, and simply having a signed paper might not fully shield you if gross negligence is alleged or if laws have shifted. Still, it’s far better than nothing – just involve a knowledgeable attorney to craft it properly for your situation. (No cutting corners with random templates!)

Tight Contracts and Clear Scope: Your service agreements should clearly define what is and isn’t included in your services. Spell out the security measures you will deploy and any client responsibilities. For example, if the client refuses to implement certain controls or to maintain a minimum standard of cybersecurity hygiene, the contract should state that the MSP isn’t liable for incidents that arise from those refusals. Also include language about limitation of liability if possible. Many MSP contracts cap liability to the amount of fees paid or exclude consequential damages, etc. – these clauses can save your bacon if a lawsuit does happen (though enforceability can vary, and they won’t cover willful negligence). The key is to avoid ambiguity. Don’t rely on handshake deals or assumptions; get it in writing, in plain language the client can understand.

Insurance – for You and Your Clients: Think of cyber liability insurance as the safety net under your tightrope. It’s often seen as a necessary expense these days. Your MSP should carry errors & omissions (E&O) or cyber insurance that covers you if a client incident leads to claims against you. Some MSPs view insurance as overkill – until that one nightmare scenario occurs. Even if you’re confident in your processes, that policy can be a lifesaver for legal fees and damages. Equally important, encourage your clients to have their own cyber insurance. If a client has a good cyber insurance policy, they might be less inclined to pin blame on you and more likely to have their insurer cover the losses (which can prevent or mitigate lawsuits). It doesn’t directly limit your liability, but it can certainly make a difference in how an incident aftermath plays out. Be prepared to work with your clients’ insurers during incident response; having documentation of your recommendations and actions will make that process smoother too.

Final Word

Let’s address the uncomfortable truth: Even if you do everything right, a determined client (or their lawyers) might still drag you into court. Perhaps you’ll ultimately be found not responsible – great – but the legal defense alone can cost a fortune and countless hours. As one industry article put it, you may know you’re not liable for, say, a client’s failure to patch their own systems, but that won’t stop some clients from suing and forcing you to prove it. The lawsuit process itself is punishment – time-consuming, expensive, stressful. That’s why all the preventive steps we discussed for legal risk are so critical. It’s about not giving a would-be plaintiff any ammunition and having a strong shield if they take a shot at you.

In summary, the landscape is shifting: MSPs and MSSPs must not only guard their clients against cyberthreats, but also guard themselves against legal and business threats. You already excel at the first part – you prevent breaches and recover from them like the security heroes you are. Now make sure you’re addressing that third part with equal vigor. Use those contracts and risk acceptance forms, educate your clients about the consequences of refusing security, and get your insurance and documentation in order. The next time a client balks at a security upgrade, you can say with a smile (and maybe a hint of jest), “No problem – just sign here acknowledging you’re cool with accepting all the risk.” It might change their tune, but if it doesn’t, you’ve protected yourself.

Bottom line: Don’t just secure your clients – secure your business too. In the MSP world, an ounce of legal prevention is worth a pound of cure. Stay safe out there, on all fronts!