Insight

Cyber School

Cybersecurity and the Claims and Litigation Management Alliance’s School of Cyber Claims

Cyber School
ES

Elizabeth S. Fitch and Theodore M. Schaer

March 31, 2016 12:00 AM

According to the 2015 McAfee Security Paradox Report, 63 percent of midsize U.S. companies have experienced a data breach.

WHY?

Lack of proper cyber education makes them easy targets for hackers. According to the 2015 NetDiligence Study, the average payout was $1.2 million with average legal costs of $434,000 and crisis services cost of $539,000.

THE TAKEAWAY?

All businesses are targets. When it comes to a cyber breach, it’s not “if;” rather, it’s “when.”

WHAT IS THE GREATEST CYBER THREAT?

Ignorance. When thinking of cyber exposures, what comes to mind are systems failures, and the human element is often overlooked, but according to the Poneman Institute, 35 percent of cyber breaches are due to human failings. Eighty-five percent of office workers, for example, have been duped by social engineering.

Employee ignorance is one risk factor, but ignorance at the executive level is even more disconcerting. Most executives are under the misimpression that cyber risk is an IT problem. Yet, system glitches account for only 29 percent of data breaches, so relegating the responsibility of mitigating cyber risk to the IT department fails to address 70 percent of a company’s vulnerabilities.

“DATA SECURITY IS AT THE FOREFRONT OF FEDERAL ENFORCEMENT ACTIONS."

Executives and insurance brokers alike have assumed that traditional insurance policies, such as comprehensive general liability policies (CGL), provide protection for damages flowing from a cyber breach. This is not necessarily true. For instance, in Zurich American Insurance Company v. Sony Corporation of America, Sony sought coverage under its Zurich’s CGL policy for theft of customer personal information by online hackers. Zurich filed a declaratory relief action requesting a ruling that the data breach did not qualify as bodily injury or property damage. Sony countered that the breach fell within the purview of the personal and advertising injury provision of the policy. The New York Supreme Court rejected Sony’s position and found that coverage was not afforded. Despite court rulings favoring insurance companies, the insurance industry has responded to cyber breach claims with sweeping policy exclusions that limit or eliminate coverage under traditional policies. The lesson learned is that executives and insurance brokers need to better understand the cyber threats, company vulnerabilities, and insurance
coverages available.

Although the insurance industry has developed new cyber products, market confusion over the scope of coverage exists. Standalone cyber insurance policies are a complex hybrid of first- and third-party coverage. Because risk is ever-evolving, there are gaps in coverage. This is further complicated by statutes and regulations, inconsistent case law, and procedural peculiarities throughout the United States. Business executives, insurance brokers, underwriters, and claims professionals need to understand technology and the risks it presents, need to know coverage forms and how to analyze cyber applications, and know how regulatory actions and third-party claims trigger coverages.

WHY IS THE LEARNING CURVE SO STEEP?

Technology is rapidly changing, hackers are becoming more sophisticated, and the laws are constantly evolving. Every day hundreds of new apps hit the market. The pending technology patent applications alone evidence the ongoing technology revolution. Real-time client/customer data compounds the problem. While most executives and risk managers profess to understand technological basics, most acknowledge that they have no understanding of the complex security controls used to protect information security systems.

Conversely, hackers have embraced the technology revolution and continue to develop more sophisticated tactics to prey upon people’s trusting nature. Spoofed emails lead users to visit infected websites designed to appear legitimate. Secretly installed spyware then tricks users into divulging personal information such as credit card numbers, passwords, and social security numbers. Hackers are leveraging social media to learn personal details about targeted individuals and then carefully crafting emails to trick employees to turn over valuable data and give access to bank accounts.

Federal and state governments have enacted privacy laws to protect personal information. Congress has passed privacy legislation that governs virtually every industry, from health care to education to the financial sector, but they are complex and difficult to understand. Similarly, federal agencies that have regulatory authority over particular business sectors have promulgated rules and regulations and have increased their regulatory enforcement, seeking fines and penalties. The Federal Trade Commission has been emboldened by a recent Third Circuit opinion in FTC v. Wyndham World Wide Corporation, in which the FTC sued the hospitality company and three subsidiaries, alleging that data security failures led to three data breaches at Wyndham hotels in less than two years. The Third Circuit held that the FTC has the authority to regulate cybersecurity, opening the floodgates to regulatory actions. For example, on February 3, 2016, an administrative law judge ruled in favor of the Office of Civil Rights and levied $239,800 in sanctions against a health care provider for HIPAA violations, showing that data security is at the forefront of federal enforcement actions.

Currently, 47 states have enacted breach notification laws and all 47 mandate notification to individuals whose personal information may be compromised—but key differences do exist. Fifteen states require notification to governmental agencies and 27 states require notification to national credit reporting agencies. Couple this with complex third party litigation, and executives, risk managers, and claims professionals are experiencing information overload.

RIGOROUS TRAINING AND EDUCATION IS MISSION CRITICAL TO MITIGATING THE COST OF CYBER BREACHES.

Cyber risk mitigation poses unique challenges, from adopting best practices in proactive defense against breaches to maintaining appropriate cyber insurance and the management of cyber breach claims. Cyber risk education has typically been segmented and general. What is missing in the cyber education arena is an integrated program.

The Claims and Litigation Management Alliance’s School of Cyber Claims is the first of its kind in that the three-year program has a rigorous curriculum integrating technical, legal, and insurance courses with real world scenarios. The school was specifically designed to provide participants with technical and practical knowledge to proactively and effectively manage cyber claims arising under traditional insurance policies and stand-alone cyber insurance policies. The program will cover the unique security risks associated with mobile computing, teleworking, and cloud and website technologies. Students will learn about authentication, intrusion, detection, and prevention techniques such as biometric encoding, security socket layers, firewalls, virus protection, and cryptography. With this solid technical foundation, the program provides an in-depth analysis of costs and damages arising out of first-party claims and third-party claims, coverage litigation of insurance policies, and the practical implications for cyber claims handling and coverage analysis.

The school’s faculty comprises cyber insurance and risk management industry leaders, whose experience and innovative curriculum arm the students with the tools necessary to evaluate, interpret, and apply traditional insurance policies, cyber insurance policies to claim scenarios, along with the skills to proactively and cost-effectively manage those claims.

Related Articles

A Startup Accelerator Program Sets Cuatrecasas Apart


by Best Lawyers

Miguel de Almada and Frederico Bettencourt Ferreira from the Portuguese firm discuss their 2019 "Law Firm of the Year" award for Litigation and Arbitration.

Cuatrecasas "Law Firm of the Year"

Opening Pandora's Box in Portuguese Tax Law


by Best Lawyers

Diogo Ortigão Ramos discusses Cuatrecasas' 2019 "Law Firm of the Year" award for tax law in Portugal.

Cuatrecasas Law Firm of the Year Interview

Protecting Small Business Owners: Trial Experts Connick Law LLC Notoriously Successful with Fire Litigation


by Justin Smulison

When small business owners become the target of insurance companies in fire-related lawsuits, hiring a firm with a reputation for understanding the science of fire suppression trials can save their livelihoods.

Gold Indoor Sprinkler Heads on Red Background

Will Recent Boeing Settlements Create Tailwinds In Corporate Law?


by Justin Smulison

Prominent litigation against Boeing is setting a precedent of accountability, professionalism and commitment among company boards as well as ushering ESG further into the courtroom to help monitor and prevent safety issues.

Recent Boeing Settlements and Corporate Law

Colorado's Best Lawyers 2022


by Best Lawyers

Our 2022 Colorado's Best Lawyers publication features top-ranked legal talent in Boulder, Denver and Western Colorado.

Colorado's Best Lawyers 2022

Newly Launched COVID-19 Litigation Project Offers Open Access To Pandemic-Related Court Judgments From Over 70 Countries


by Sara Collin

A worldwide database of COVID-19 cases is uniting more than 70 countries as judges, lawmakers and lawyers continue to navigate pandemic related litigation and the ways in which it’s evolving amid year three.

COVID-19 Worldwide Litigation Project

Road to Somewhere


by Mark LeHocky

How can attorneys take steps to improve settlement efforts and avoid unpleasant surprises as they map out a dispute resolution? One litigator-turned-general counsel-turned mediator (with some help from a distinguished rock star) points the way forward.

Improved Dispute Resolution Settlement

Look for the Zoom Label


by Anne R. Yuengert and Matthew C. Lonergan

Will the virtual platforms that got such a boost during the pandemic replace how you interact with your employees, unions, and lawyers?

Virtual Platforms Replacing Work Interactions

Discovery in the Time of COVID-19


by H. Barber Boone

The pandemic has affected the vital process of legal discovery in ways both good and bad. Which changes are likely to become widely accepted in the years ahead?

The Impact of COVID-19 on E-Discovery

Busting a Trust


by Joseph Marrs

The rules governing trusts and asset distribution are often much more flexible than many might assume. Here’s a primer.

Rules Governing Trusts and Asset Distribution

The Next Chapter


by Patrick M. Shelby

Among its uncountable other disruptions, the pandemic upended U.S. bankruptcy procedures. Congressional relief, legislative changes, amended legal provisions: What lies ahead for those looking to file?

COVID-19's Impacts on Bankruptcy Procedures

Phoning It In


by Alyson M. St. Pierre, Ashley C. Pack and Crystal S. Wildeman

It’s not easy for employers to weigh requests from employees to work from afar, even in the wake of the pandemic. Considerations include COVID-19, vaccinations, the Americans with Disabilities Act and the nature of the job itself.

Employer Considerations for Teleworking

Compelled to Compete


by Ashish Mahendru

Courts and legislatures—and now the White House—are taking an increasingly dim view of noncompete employment agreements, a development the pandemic has quickened. What can employers do to protect their confidential information?

Protection for Employers Beyond Noncompetes

Meeting Halfway


by Julia B. Meister

To resolve family and business disputes including wills, trusts, estates and more, mediation is often a more effective, gentler and cheaper option than litigation.

Mediation to Resolve Wills, Trusts, Estates

Look Out Below


by Mary Jo Larson

Employee 401(k) and other pension plans that include company stock can be a financial minefield. What’s a responsible fiduciary to do to lessen the risk of a plummeting share price—and the risk of a subsequent “stock-drop” lawsuit from aggrieved workers?

Navigating Employee 401(k) and Pension Plans

Family Law – Sometimes All in the Family


by Justin Smulison

Led by a father-and-son team of Family Law lawyers and trial advocates, with the support and assistance of family members, Blevans & Blevans, LLP continues its tradition of excellence serving the Northern California Bay Area in 2020 and beyond.

Blevans & Blevans

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

Best Lawyers: Ones to Watch in Canada 2023


by Best Lawyers

The year 2023 marks the second edition of Best Lawyers: Ones to Watch in Canada, highlighting professionals earlier in their legal careers all across Canada.

Blue background with white stairs formed out of lines

Announcing the 2022 Best Lawyers in Canada™


by Best Lawyers

The results include an elite field of top lawyers listed in the 16th Edition of The Best Lawyers in Canada™ and 1st Edition of Best Lawyers: Ones to Watch in Canada.

Announcing the 2022 Best Lawyers in Canada™

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

All Eyes to the Ones on the Rise


by Rebecca Blackwell

Our 2023 honorees recognized in Best Lawyers: Ones to Watch™ in America tell us more about how their path to law formed, what lead them to their practice areas and how they keep steadfast in their passion to serve others.

Person walking between glass walls towards window

The Real Camille: An Interview with Johnny Depp’s Lawyer Camille Vasquez


by Rebecca Blackwell

Camille Vasquez, a young lawyer at Brown Rudnick, sat down with Best Lawyers CEO Phillip Greer to talk about her distinguished career, recently being named partner and what comes next for her.

Camille Vasquez in office

Caffeine Overload and DUI Tests


by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

Announcing the 2022 "Best Law Firms" Rankings


by Best Lawyers

The 2022 “Best Law Firms” publication includes all “Law Firm of the Year” recipients, national and metro Tier 1 ranked firms and editorial from thought leaders in the legal industry.

The 2022 Best Law Firms Awards

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Press and Publicity: How Television and Social Media Impact Legal Careers


by Justin Smulison

In recent years, with social media giving minute by minute reporting, many lawyers are finding themselves thrust into a spotlight they never planned for. How are lawyers grappling with unexpected stardom, media coverage and merciless influencers?

Close up of camera at news station

Best Lawyers: Ones to Watch – The Future of Legal Talent Looks Bright


by Justin Smulison

Best Lawyers: Ones to Watch is launching its second edition in the United States, and after talking with both a company leader and esteemed lawyers on the list, the importance of this prestigious list is evident.

Best Lawyers: Ones to Watch in America 2022