With a regular parade of headlines describing disastrous corporate data breaches, there are clear motives for getting a cyberinsurance policy. But William Wagner of Taft Stettinius & Hollister warns that one case in particular demonstrates the potential dangers of some policies. In the case, a network of hospitals in California realized an IT vendor it hired left data unencrypted for two months, exposing 32,500 patient records. The network had a $10 million cyberinsurance policy and quickly turned over the necessary paperwork for coverage of the ensuing lawsuits.
Convenient, right? Not so much. After agreeing to pay the fees, the insurer then sued the hospital in federal district court, alleging it didn’t have a duty to defend or indemnify. In large part, the argument was based on the hospital not continuously following the minimum required security practices as agreed to in the insurance policy.
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