Cyber Espionage And Insurance Coverage


In the United States alone, it is estimated that the cost of “[c]yber-espionage and other malicious cyber crimes...[i s] between $24 billion and $120 billion annually.” In 2008, the U.S. Department of Defense’s classified security networks were significantly compromised by foreign cyber-espionage. Indeed, in June 2008, “150 computers in the $1.75 billion computer network at the Department of Homeland Security were quietly penetrated with programs that sent an unknown quantity of information to a Chinese-language Web site.” In 2010, “[t]he reported hacking of Google...targeted not only access to dozens of Gmail user accounts of Chinese human rights activists, but also Google’s Intellectual Property.” In 2012, an average company experienced 1.8 cyber-attacks per year resulting in an average of $8.9 million in damages. So the question arises: “Are the cyber-activities of foreign countries against the United States “cyber-warfare?” If the answer is yes, do the “war” and “terrorism” exclusions of a cyber liability policy apply to bar coverage?

What Does a Cyber Liability Insurance Policy Cover?

A cyber liability policy covers e-business; the Internet; computer networks; the use of a computer; privacy issues; computer virus transmission; and other means by which compromised data is passed to a third party. Broadly speaking, a cyber liability policy affords first-party coverage (property and theft) and third-party coverage (privacy and data security).

Originally Published in Security magazine - February 2014.

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