I received the following news in my email this morning from Joel A. Appelbaum, Executive Vice President & Chief Content Officer of International Risk Management Institute, Inc. I thought it was important enough to share.
Insurers have recently invoked the “war exclusion” to deny coverage for a cyber-security incident that caused policyholders significant damage. Specifically, Merck & Co., Inc., one of the largest pharmaceutical companies in the world, said its insurers denied claims related to the NotPetya cyber-security incident under commercial property insurance policies. Some of Merck’s insurers denied coverage principally based on the war exclusion.
Whether insurers will routinely invoke the war exclusion to deny coverage for cyber-security incidents comparable to NotPetya is essential—especially since these cyber attacks will likely become increasingly prevalent. Indeed, NotPetya reportedly affected companies such as conglomerate Maersk, FedEx’s European subsidiary TNT Express, French construction company Saint-Gobain, and British consumer goods company Reckitt Benckiser. Other companies with substantial international operations, such as Roche, Marriott, and Lion Air, also confirmed that they were targeted.
Policyholders should take the steps necessary before being affected by cyber incidents to preempt a denial of coverage based on the war exclusion. To enhance the predictability of how the insurer will attempt to use the exclusion, carefully review the exclusion in proposed policy forms and inquire how the insurer intends to apply the exclusion before buying the policy. This proactive approach will also serve to define the scope the parties understand the exclusion to have.
Joel’s warning is a resounding “caveat emptor” to a business reviewing its coverage or considering a new policy. Consider discussing this with your agent the next time you meet. Before then, however, visit IRMI.com to find more about IRMI and the valuable insurance risk information they provide.
This Blog/Web Site is made available by James H. Bushart, Public Adjuster LLC for educational purposes only as well as to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and/or site manager make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. By using this blog site you understand that there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster LLC. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, nor should it be used as a substitute for competent maintenance or repair advice from a qualified contractor licensed to perform work in your state.