Problematic Cyber Exclusions Prevent Recovery from Non-Monetary ‘Loss’

Media/Cyber policies offer a valuable element to manage risks that arise from attacks via technology and computers and cyber operations. Under Cyber/Media policies, business that experience cybercrime attacks can receive appropriate references to cyber experts, legal counsel, and computer forensic scientists. Cyber coverage is often sold in conjunction with Media coverage which provides valuable coverage beyond that in the shrinking Commercial General Liability (“CGL”) coverage respecting to Media claims. The lack of predictability as to what risks distinct cyber policy forms will address makes evaluating policyholder protections challenging and calls for the expertise of experienced coverage counsel in procuring appropriate cyber coverage.  

Cyber/Media policies define “Loss” to include “defense costs, damages and settlements… prejudgment and post-judgement interests, and statutory damages and regulatory fines.” Loss that is non-monetary or costs of complying with an injunction are not covered under Cyber/Media policies. Problematic exclusions bar coverage for payment card industry fines or self-regulatory fines and/or contractual liability.  

In P.F. Chang’s China Bistro, Inc. v. Fed. Ins. Co., 2016 U.S. Dist. LEXIS 70749 (D. Ariz. May 31, 2016), “Loss” from a credit card hack causing customers’ credit card data being posted online was not covered because “both exclusions as well as the definition of ‘Loss’ … hold that such contractual liability apply to ‘the assumption of another’s liability, such as an agreement to indemnify or hold another harmless.” Id. at 22. Case law for Media/Cyber policies is developing. The court in P.F. Chang “turned to cases analyzing Commercial General Liability policies for guidance, because cybersecurity insurance policies are relatively new to the market, but the fundamental principles are the same.” Id. at 24.  

Consulting an insurance attorney is the best way to analyze the coverage provided by your Cyber policy, but digital tools are also available to easily review your policy. For example, Alternis IT offers a downloadable toolkit here: https://lnkd.in/eStfUGsu. While we strongly advocate consulting an attorney for ultimate evaluations, these digital methods provide more immediate results and can often help narrow the scope of what you need to discuss with the coverage attorney.