War Risk Exclusions Threaten Cyber Coverage.

• Author: Gold, Joshua
• Position: FOREFRONT

It has become common knowledge that some cybercriminals are affiliated with nation states, and may have state backing for the mayhem they have wrought--money stolen from international banking funds transfer systems, email caches hacked and exposed, reams of personal data published.

The suspected role of nation-state actors has raised the possibility that insurance companies may attempt to invoke war risk exclusions to escape paying cyber-related insurance claims. But even if a given war risk exclusion does have some technical applicability to a cyber claim where state involvement is suspected, would an insurance company actually attempt to invoke it to deny coverage?

Until recently, disputes over the application of a war exclusion have generally remained private and been resolved through negotiation. Last fall, however, a property insurance company invoked the war risk exclusion over a cyber loss claim, compelling the policyholder to sue for coverage.

In October 2018, snack company Mondelez International, owner of Nabisco and Cadbury, filed suit in Cook County, Illinois, against its insurer, Zurich American...