Currently, about 60 different insurance companies participate in the cyber insurance marketplace. No standard forms exist—it is like the Wild West. Cyber policies typically are tightly written, often with over 50 definitions and 50 exclusions, and are designed to cover specifically defined risks. While thus far there have been relatively few coverage disputes, the combination of lack of uniformity and tight drafting creates many coverage pitfalls. The experience of the restaurant chain P.F. Chang’s, in its pursuit of cyber coverage after a data breach, illustrates how a seemingly straightforward claim can run afoul of one of dozens of exclusions the policy is likely to contain.
P.F. Chang’s
In P.F. Chang’s v. Federal Insurance Co., 2016 U.S.Dist. LEXIS 70749 (D. Ar. May 31, 2016), the court commenced its decision by citing the wide breadth of the federal cyber-policy as marketed by Federal on its website: A flexible insurance solution designed by cyber risk experts to address the full breadth of risks associated with doing business in today’s technology-dependent world that “coversdirect loss, legal liability, and consequential loss resulting from cyber security breaches.”
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