Buyer associations vent frustration over ‘unacceptable’ cyber disputes

European insurance buyer associations are frustrated that several insurers have denied cyber claims for the 2017 NotPetya cyberattack, telling CRE that such actions are “unacceptable” and leave a “bad taste in the mouth”. This week, media reports said law firm DLA Piper is in dispute with Hiscox over NotPetya losses. An initial report in The Timesnewspaper said the insurer has used a war clause to deny a claim under an unspecified insurance policy for losses related to the global malware attack. Hiscox has since told Commercial Risk Europethat the dispute is not related to a war exclusion or a standalone cyber policy. But a spokesperson said the case is ongoing and so could not comment further. CRE recently revealed that US pharmaceutical company Merck is in dispute with insurers over losses it sustained during the 2017 NotPetya attack. The company has instigated legal proceedings in the US against its property insurers, which have denied the claim after citing a war clause. The dispute is similar to that involving food manufacturer Mondelez. It is suing Zurich Insurance for $100m in property damage and business interruption losses arising from the NotPetya attack. The disputes highlight the problem of potential state-sponsored cyberattacks, such as NotPetya. They also draw attention to differences in coverage and willingness to pay cyber claims between insurers and lines of business. This all leaves buyers unsure whether their insurance will respond. War risk exclusions are common practice, but the way insurers are interpreting cyberattacks and their attribution is “unacceptable”, Ferma board member with responsibility for cyber risks, Philippe Cotelle, told CRE. “In a cyberattack, the issue is to identify its origin, which is always complicated. Businesses should not be at the mercy of interpretation by insurers. That would make the application of the insurance contract entirely subjective, which is unacceptable,” he said. A number of high-profile claims disputes currently “challenge the value” of cyber insurance at a “critical stage” in the cover’s maturity, according to Julia Graham, deputy CEO and technical director at Airmic. “High-profile disputes undermine the years of investment in developing this class of cover,” said Ms Graham. “The burden of proof in denial of a claim falls to the insurer, but this type of dispute leaves a bad taste in the mouth of many insureds,” she said. According to Ms Graham, corporate insurance buyers are concerned about the use of war clauses to deny cyber claims. They also have concerns over coverage certainty for cyber losses and lack confidence that claims will be paid, she said. Buyers see inconsistencies in the approaches of insurers when it comes to cyber. “Not all insurers are taking the same stance for similar losses. This demonstrates concerns expressed about differences in the way underwriting data is collected and used by underwriters,” said Ms Graham. Coverage certainty is essential for the cyber insurance market’s development, according to Mr Cotelle. Ferma has been working with the insurance industry, through Insurance Europe and BIPAR, to ensure the market understands the needs of its customers. “Clarity is an essential part of this process,” said Mr Cotelle. Meanwhile, Mactavish has called on the insurance industry to guarantee that eight “flaws” it argues are commonly found in off-the-shelf cyber policies will no longer be used to deny claims.

Buyer associations vent frustration over ‘unacceptable’ cyber disputes

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