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'Act of War' Clause Could Nix Cyber Insurance Payouts
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Richard F.
Richard F.,
User Rank: Strategist
10/29/2020 | 2:01:50 PM
Well Written Article Explaining Insurance Coverage Evasions
This is a very useful and informative article explaining to the intelligent non-specialist one of the many evasions and traps used by some cyber insurance companies to avoid paying legitimate claims.

Unfortunately, many cyber insurance policies contain other layers of obnoxious surprises. Arbitration provisions, my area of expertise, and inclusion of "foreign" law are but a few of the many other devices also used by some insurance companies. 

Large companies can, and should negotiate EVERY component of coverage and EVERY endorsement excluding or limiting coverage.

 Smaller companies must rely on astute policyholder only insurance coverage attorneys.  Insurance brokers are important, but all purchasers have to remember that "their" insurance brokers must always maintain and preserve their relationships with the insurance companies to stay in business. Policyholder only insurance coverage attorneys can not, and do not, have those divided loyalties.  

It all can be summarized as "RFP." Read the Fine Print & Read the Full Policy!!  

Buyers beware!!!!

 

   
mcavanaugh1
mcavanaugh1,
User Rank: Moderator
10/29/2020 | 4:35:07 PM
Re: Well Written Article Explaining Insurance Coverage Evasions
This article is not about a Cyber Insurance policy that did not pay a claim. The focus is on the buyers that believe they can file a Cyber claim under another policy (mostly Property or Business Interruption) and be afforded coverage. It would be like filing a claim under your Homeowner's Insurance policy for damage to your car after a car accident. The insurance company is going to decline.

Many Insurance Agents & Brokers are not educated on why you should not expect coverage for a Cyber event under a Property policy.  They feel that servers & computers are considered property so any damage, regardless of the proximate cause, should be covered under the property policy. This is not going to be the case outside of specialized forms or those endorsed to provide affirmative coverage for Cyber events.

In reality, 90% of Cyber claims filed under standalone Cyber Insurance policies are covered by the carrier.  That is specific to standalone policies providing affirmative coverage as opposed to an endorsement on another policy.  You should absolutely work with an Agent or Broker that understands the coverage or make sure that they are working with a wholesaler or carrier that does.

Understanding the Cyber Insurance policy requires a knowledge of the exposure (not just the application) and the policy language which is not always the case for attorneys so the combination of an educated agent and an attorney is not a bad idea.  Also, if there are any questions and the attorney or agent cannot answer get on the phone with the underwriter who better be able to answer the questions.  If that is not possible you might want to try another carrier, agent, or broker.


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