You may need a subscription to read it, but I greatly enjoyed this Bloomberg Law article today on cyber insurance. The title of the article sort of says it all, although the article delves into the topic in decent depth: “Cyber Insurance Policies Grow Pricey Amid Rising Hacks, Lawsuits.”
For those of you who might not have a way behind the paywall, the article’s primary points are that: (1) prices for cyber insurance are going up, up and away, and have been increasing for some time; (2) this is due at least in part to the increasing cost and frequency of such claims; and (3) coverage litigation over these exposures is increasing. This last point is interesting to me, in terms of its relationship to the prior two. Although I have no data to back it up, thirty years of experience has taught me that, whatever the line of insurance, coverage suits increase as coverage becomes harder and/or more expensive to obtain and claims severity increases. It’s sort of a “how much blood can you get from a stone” dynamic – as coverage becomes harder to access, insureds look to expand what they do have as much as possible. (If you wanted to write a law review article proving the point, you could do it simply by going back to the asbestos coverage suits and the litigation over the meaning of the asbestosis exclusion, tracing the pattern from there to environmental coverage litigation and the meaning of “sudden and accidental,” and then continuing on with the pattern until you run into the explosion of business interruption litigation arising out of the pandemic).
Beyond that, though, there was one practical point that jumped out at me from the article, and it did so because it relates to something I talk about with lawyers and business people all the time (in fact, I just discussed this right before the holiday with one of my partners with regard to the scope of directors and officers coverage for purposes of an upcoming transaction): namely, the need to study the policies in the market proactively, before purchasing and long before a claim is made, to get the right coverage at the right price. As the article points out, too many companies buy such coverage off the rack, when what they really need is a close study of the available coverages and a determination as to what best fits their risk profile. I thought Troutman Pepper partner Kamran Salour summed it up nicely in the article when he pointed out that “finding that ‘sweet spot’ [among premiums, deductible and scope of coverage] is critical for companies as they seek to maximize coverage and minimize expenses.” Couldn’t have said it better myself, even if I have been saying it, in one form or another since at least the time I launched this blog.