Common Cyber Liability Insurance Claim Issues

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In today’s digital-centric economy, the threat of disruptive cyberattacks and data breaches has become increasingly dangerous — and common.  On a regular basis, company websites, databases, and networks have been hacked by third parties, and for a wide variety of reasons: to “ransom” the data, to frustrate/punish the company, or even simply for the challenge of it.

These cyberattacks can cause lasting damage to businesses that are unprepared.  Without insurance, the business may not be able to defend itself and cover the losses suffered by its customers.  It may also not have the funds necessary to cover its own business interruption losses, to investigate and correct the “hack,” and to repair its public image.  As such, it’s critical that digital-oriented businesses obtain comprehensive cyber liability coverage.

Unfortunately, simply having cyber liability coverage is not a guarantee that the insurance company will payout or stand in to defend you in the event of a third-party lawsuit.  As with other insurance disputes, the insurer will do whatever it can to redefine the issues so as to avoid liability (i.e., by arguing that an exclusion applies).

If you’ve been subjected to a cyberattack, we encourage you to contact Ver Ploeg & Marino, P.A. for further assistance — we are an experienced Miami insurance law firm, with a deep understanding of how best to navigate such disputes.

For now, let’s briefly explore some common cyber liability insurance claim issues.

First-Party vs. Third-Party Claims

Cyber liability claims can involve first-party claims and/or third-party claims.  Each of these will require a tailored legal strategy for securing the payout you deserve.

A first-party claim is one that centers around your losses as a business.

For example, after a cyberattack, your business may be disrupted for several months.  You may have lost significant amounts of data and may have to spend a great deal of money on investigating and repairing the hacked systems.  The damages associated with these “direct” losses may be recovered through a first-party insurance claim.

By contrast, a third-party claim is one that centers around a third party’s losses (linked to the cyber attack on your business).

For example, you may have a database of customers, which includes sensitive personal and banking information.  If a hacker gets access to that database and discloses that information to the broader public, then those customers will arguably have losses linked to privacy violations, among other issues.  Those customers could ostensibly bring a lawsuit against you.  A third-party claim allows you to request a defense against such lawsuits from the insurance company.

Submitting a Cyber Liability Claim Through a CGL Policy

Many cyber liability claims are handled through commercial general liability (CGL) policies.  If the policy does not include a specific exclusion preventing recovery in a cyberattack scenario, this may be doable.

Increasingly, however, insurance companies are introducing language in CGL policies that specifically exclude cyber attacks from coverage.  In doing so, they hope to guide policyholders towards new cyber insurance policies that are constructed with those claims in mind.

It’s worth noting that if your CGL policy includes an exception for cyberattacks, that is not necessarily a complete bar to an action.  Many such exceptions are written ambiguously, and in Florida, ambiguous insurance contract language is interpreted in favor of the policyholder.

Recognizing a Broad Set of Damages

Damages for a cyber liability claim can be rather broad, as many aspects of a business may be disrupted as a result of a cyberattack.

For example, in the early naughts, Sony and Microsoft suffered a coordinated attack from hacking groups.  These attacks caused untold damage to their online service networks, resulted in leaked customer information, and led to negative public sentiment.

In order to recover from these attacks, these companies had to sort out their losses related to their disrupted business, restore and recreate data that had been lost to the hackers, move forward with expensive cyber investigations, notify the public as to the hack and its consequences, and engage in marketing to repair their public image.

These varied losses are ostensibly recoverable through a cyber liability insurance claim, though a comprehensive documentary record is necessary to support the claim.

Stepping in to Defend the Policyholder

Generally speaking, you have a right to be defended by your insurer against third-party lawsuits in the cyber liability context (assuming that there is coverage).  To avoid having to step in and defend you, however, the insurance company may attempt to paint coverage more narrowly.  They may argue that the third-party claims involve issues that are not covered by the insurance plan, and thus, that they have no obligation to defend you.

This can be challenged with the assistance of a skilled attorney.

Contact our Miami Insurance Law Firm for Assistance

Whether you’re in the process of submitting a cyber liability insurance claim, or have already submitted a cyber liability claim and have had it denied by the insurance company, our team here at Ver Ploeg & Marino, P.A. can provide the assistance necessary to challenge the adverse decision and obtain the benefits you deserve.

VPM Law is a Miami insurance law firm, fielding a deep bench of attorneys who boast decades of experience: investigating, submitting, and litigating insurance claims throughout the state of Florida.  We understand the challenges faced by policyholders, and how best to navigate the complexities of an insurance dispute in securing a favorable result.

We are committed to thorough, relentless advocacy.  Over the years, we have gained deep insight into the strategies utilized by insurance companies to avoid having to pay out legitimate claims — and this includes the cyber liability context.

If you’d like to speak to a qualified attorney at our Miami insurance law firm, we encourage you to get in touch with our team directly.  Contact us to request a consultation.

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