Cyber Insurance Not Paying Out Why Businesses Are Denied

Businesses are often surprised to find that their cyber insurance claims are denied, leaving them to foot the bill for costly data breaches and cyber attacks. This can happen due to the lack of clear communication between the business and their insurance provider.

Many businesses assume that their cyber insurance will cover all types of cyber attacks, but this is not always the case. In fact, some policies may have specific exclusions for certain types of attacks, such as ransomware.

To avoid being denied a claim, businesses must carefully review their policy documents and understand what is covered and what is not. This includes understanding the definition of a cyber attack, the types of attacks that are excluded, and any specific requirements for reporting incidents.

Businesses must also ensure they have the necessary documentation and evidence to support their claim, including proof of the attack, the extent of the damage, and any efforts made to mitigate the situation.

Cyber insurance typically covers the costs of forensic IT investigations to determine what data was affected and accessed. This can help businesses understand the extent of the damage and take steps to prevent future breaches.

In the event of a data breach, cyber insurance can cover the costs of notification efforts to let affected third parties know about the incident. This includes notifying regulators and providing credit monitoring services to affected individuals.

Cyber insurance can also cover the costs of crisis management efforts, including public relations campaigns to protect the business's reputation in the aftermath of an attack. However, it's essential to note that cyber insurance policies typically don't cover all possible costs related to an incident.

Here are some of the main coverages under cyber insurance:

Business interruption coverage helps businesses recover income lost during the downtime cyber incidents cause. This can help businesses avoid long-term financial setbacks.

Cyber insurance typically doesn't cover costs in areas such as potential future lost profits, loss of value through intellectual property theft, and losses incurred during the time deductible.

A carrier may deny a cyber claim if a business failed to take proper precautions, such as installing software updates and patches, implementing strong password policies, using multifactor authentication, and training employees in security best practices.

Negligence can invalidate coverage, leaving businesses with no financial support in the event of a cyber attack.

Businesses should prioritize security practices to avoid claim denials.

If a business makes a claim exceeding coverage limits, the insurance company may deny the claim for the excess amount.

Coverage limits determine the maximum amount a carrier will pay out.

If losses or expenses incurred exceed these limits, the insurance company may deny the claim.

Incurred losses during the waiting period can also lead to claim denials, as cyber insurance generally stipulates a time deductible.

Businesses should have plans for weathering brief periods of business interruption.

Proper documentation and evidence, such as incident reports, forensic analysis, and financial records, is essential to support a cyber claim.

Without sufficient evidence, the carrier may deny the claim.

Delays in reporting complicate the process and may result in a cyber claim denial.

Businesses should establish procedures for reporting incidents promptly.

Here are some common reasons why cyber insurers may deny claims:

Policy exclusions are often buried in the fine print of policy documents, waiting to trip up unsuspecting policyholders.

Policy exclusions can easily be considered one of the biggest reasons for claim denials. Applying for a claim for a security incident that falls in the list of exclusions can prove to be a futile exercise.

Many policy exclusions are designed to exclude claims related to specific types of security incidents, such as those caused by malware or ransomware.

Policy exclusions can be a major headache for policyholders, especially if they're not aware of what's excluded.

Complying with your cyber liability insurance policy is crucial to ensure your claim is approved. You can't assume your insurer will cover all costs without question.

Hidden in the fine print are terms and conditions that must be met to avoid claim denials. These include assessing whether you took "due care" to protect your business from cyberattacks.

To avoid non-compliance, fix any risks that could lead to claim denials immediately. This includes understanding your contract in detail, which can be overwhelming without the right support.

Regular automated compliance assessments can help identify areas that need fixing or updating. This can be done with the help of a compliance process automation platform.

By leveraging such a platform, you can ensure your business produces evidence of "due care" and stays compliant with policy terms.

Compliance with liability is a must, especially when it comes to cyber liability insurance. You can't assume your insurer will cover all costs following a security breach.

Your insurance provider will assess whether you took "due care" to protect your business from cyberattacks. This means you must comply with the terms and conditions set forth in your policy documents.

Non-compliance can lead to claim denials, which can have a significant impact on your business. It's essential to identify and fix risks that could lead to non-compliance immediately.

To ensure compliance, you can leverage a compliance process automation platform. This can help you understand your contract, assess your business's compliance, and provide remediation services.

Regular automated compliance assessments can provide a thorough analysis of your business's compliance with policy terms. This can help you identify areas that need fixing or updating.

Compliance-specific documentation is also crucial to ensure you can produce evidence of "due care". This documentation should be free of human error and policy-specific.

By taking these steps, you can ensure your cyber liability insurance claim isn't denied due to non-compliance.

Third-party liability is a crucial aspect of liability and compliance. A security lapse in a third-party vendor's network could result in the claim being denied by the insurer.

Your network's security isn't just your responsibility, it's also the responsibility of your third-party stakeholders. This means you need to ensure that your vendors and partners are taking necessary security measures to protect your network.

A security lapse in a third-party vendor's network could result in the claim being denied by the insurer. Even if the claim isn't denied, the insurer will likely scrutinize the matter in depth, making the process tedious and drawn-out.

A claim denial can have serious consequences for a business. It can derail a business' strategy to recover the costs incurred following a security incident.

Businesses that fail to take proper precautions, such as installing software updates and patches, implementing strong password policies, and training employees in security best practices, risk having their claims denied on grounds of negligence.

Incurred losses during the waiting period can also lead to claim denials. Many cyber insurance policies stipulate a time deductible, and businesses that don't have plans for weathering brief periods of business interruption may find themselves in this situation.

To minimize the chances of rejected cyber claims, businesses should maintain good cybersecurity hygiene and protect themselves from reputational damage in case of an attack.

Here are some common reasons why cyber insurance claims are denied:

By understanding these reasons, businesses can take steps to prevent claim denials and ensure they are prepared in case of a security incident.

Complying with your cyber liability insurance policy is crucial to avoid claim denials. You must assess whether you are compliant with the terms and conditions set forth by the insurer, as hidden in the fine print of your policy documents.

Cyber insurers might deny claims due to non-compliance, which can have a significant impact on your business. Non-compliance can lead to financial losses and damage to your reputation.

To ensure compliance, you need to understand your contract in detail, including what your policy covers and what it doesn't cover. Regular automated compliance assessments can help identify areas that need fixing or updating.

Remediation services can ensure that all compliance risks are corrected on time. Compliance-specific documentation, free of human error, is essential to prove "due care" and avoid claim denials.

As a small business owner, it's essential to be aware of the hidden risks that could compromise your business in the digital age. Cyber attacks can happen to anyone, and having a cyber liability insurance policy is non-negotiable today.

Cottage Health System failed to comply with the terms of their cyber policy, which led to a denied claim.

Columbia Casualty Company sought a declaratory judgment against Cottage Health, claiming they weren't obligated to defend or compensate them.

BitPay's $1.8 million insurance claim was denied by Massachusetts Bay Insurance Company due to a phishing scam involving a business partner.

Massachusetts Bay Insurance stated that BitPay's loss was not direct and thus not covered by the policy.

International Control Services had a ransomware attack claim denied by Travelers Property Casualty Company, citing the company's failure to properly use multifactor authentication.

Travelers Property Casualty Company claimed International Control Services falsely stated on its policy application materials that multifactor authentication was required for employees and third parties to access email and other systems.

Learning from the past is crucial in preventing similar cyber insurance claim denials from happening to your organization.

The Cottage Health vs. Columbia Casualty case highlights the importance of reading and understanding the terms of your cyber policy.

Columbia Casualty sought a declaratory judgment against Cottage Health, claiming they failed to comply with the policy's minimum risk controls.

This case shows that insurers are scrutinizing companies' cybersecurity practices when underwriting policies.

BitPay's $1.8 million insurance claim was denied by Massachusetts Bay Insurance Company, citing that the loss was not direct and thus not covered by the policy.

Massachusetts Bay Insurance stated that having a business partner phished does not count as per the policy.

This incident emphasizes the need for employee security awareness training and regular IT security checks.

Travelers Property Casualty Company requested a district court to reject International Control Services' ransomware attack claim, citing that the company failed to properly use multifactor authentication.

International Control Services falsely stated on its policy application materials that MFA was required for employees and third parties to access email and log into the network remotely.

The NotPetya Attacks were a major cybersecurity incident that caused significant losses for several companies. It accounted for 20% of losses in the 100 largest cybersecurity incidents over the last five years, totaling $18 billion in losses.

Merck and Mondelez International are still in the process of claiming $1.3 billion and $100 million respectively through high-profile lawsuits. The insurers denied the claims citing the "war and terrorism" exclusion.

The U.S. government indicted six Russian military personnel for the attacks in October 2020. This move likely influenced the insurers' decision to deny the claims.