Inside: Do you have coverage to protect against cyber attack risks?

Cyber attacks are on the rise, and new forms of insurance are stepping up in response

Exposure to losses from data breaches and loss of personal information continues to rank high on the list of worries for general counsel around the country. GCs have good reason to worry.

Marsh, one of the largest insurance brokers in the world, reports that over 600 million confidential personal records have been breached in the last five years. Verizon’s 2013 Data Breach Investigations Report is even more telling with its opening line that in 2012 “[p]erhaps more so than any other year, the large scale and diverse nature of data breaches and other network attacks took center stage.” The Verizon Report’s statistics are even more alarming.

It is always easier to be convinced by way of example, and the United States Court of Appeals for the 6th Circuit’s latest opinion does just that for insureds. For those not very familiar with these two parties to the litigation, Retail Ventures is DSW Shoe Warehouse and National Union is owned by Chartis (now known again as AIG).

In 2005, hackers breached DSW’s main computer system and downloaded more than 1.4 million customers’ credit cards and checking information profiles. DSW filed a notice of claim with National Union for the losses of approximately $5.3 million related in various forms to the theft. In response to the insurance claim under DSW’s Blanket Crime Policy, which contained an endorsement for Computer & Funds Transfer Fraud Coverage, National Union denied it. This forced DSW to sue its insurer for coverage of the data theft and related costs.

Contributing Author

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Collin J. Hite

Collin Hite is the practice leader of the Insurance Recovery Group at Hirschler Fleischer, P.C (Richmond, Va.). He handles insurance recovery and coverage litigation nationally...

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