Ping Service
Feedback Forms

Court Certifies Interlocutory Appeal for the FTC v. Wyndham Matter

TRAUB LIEBERMAN STRAUS & SHREWSBERRY LLP’s Cyber Law Blog previously discussed various aspects of the Federal Trade Commission (“FTC”) action filed against Wyndham Worldwide Corp. (“Wyndham”) under Section 5 of the FTC Act, which prohibits “unfair and deceptive acts or practices.” Recent developments in the FTC action carry implications for cyber liability and how companies handle cyber security and data breaches.

On April 7, 2014, US District Judge Esther Salas denied Wyndham’s motion to dismiss directly challenging the FTC’s authority to regulate cyber security practices. Wyndham’s motion asserted that Congress had not delegated such authority to the FTC under its Section 5 powers, and even if it did, the FTC failed to publish rules or regulations providing companies fair notice of the protections expected and “legal standards” to be enforced by the FTC.

At the time, Judge Salas unequivocally ruled in favor of the FTC’s authority. However, on June 23, 2014, the Court granted Wyndham’s application and certified the matter for an immediate interlocutory appeal to the Third Circuit Court of Appeals.

The appeal involves two questions of law: (1) whether the FTC can bring an unfairness claim involving data security under Section 5 of the FTC Act and (2) whether the FTC must formally promulgate regulations before bringing its unfairness claim under Section 5 of the FTC Act.

Interlocutory appeals are rarely granted, are in the complete discretion of the trial court, and must meet certain requirements under 28 U.S.C. § 1292(b), including whether there is a substantial ground for difference of opinion on the matter. While Judge Salas’s denial of Wyndham’s motion to dismiss was certain as to the FTC’s Section 5 authority and the issue of fair notice, the Order certifying the matter for interlocutory appeal on the other hand, acknowledged Wyndham’s “statutory authority and fair-notice challenges confront this Court with novel, complex statutory interpretation issues that give rise to a substantial ground for difference of opinion.”

The Court further acknowledged that it was dealing with an issue of first impression with “nationwide significance… which indisputably affects consumers and businesses in a climate where we collectively struggle to maintain privacy while enjoying the benefits of the digital age.”
As a result, the Third Circuit will be the first major appellate court to weigh in on the issue of whether the FTC has authority to regulate cyber security practices, and if so whether those regulations require specific legal standards and fair notice to those within the scope of FTC’s enforcement.

- See more at: http://www.traublieberman.com/cyber-law/2014/0710/4801/#sthash.hgIolyzW.dpuf

Fax Online    Send article as PDF   

Cyber Liability Insurance: The Value of an Educated Broker in the Age of E-Commerce

I first published this article in 2010. Surprisingly, its as relevant today – perhaps even more relevant – than it was four years ago.

Rick

Introduction: Insurance Products for Cyber Risks

Media reports of cyber intrusions, data thefts and computer system malfunctions involving large, high-profile companies such as Sony PlayStation, Citigroup and Lockheed’s Security Vendor, RSA, have led a rapidly growing number of companies to consider the necessity of insurance coverage for technology and cyber privacy risks. As these businesses become more reliant on electronic communication and data storage, they are also developing a heightened awareness that an unauthorized intrusion could endanger their tangible and intangible assets (including their intellectual property) and, in many cases, their reputations and abilities to conduct business. Consequently, prospective policyholders are becoming more cognizant of the necessity for insurance covering these exposures.

Read the rest of this entry »

The Insurance Industry and ICANN: The Next Frontier

icann-flagsWe all take the Internet for granted.  Short of a power outage taking down phone lines, cell towers and satellite transmissions, the Internet will always be there. Like death and taxes, you can count on it.

Not that the paradigm will change any time soon, but at some point, it might.

On March 14 and 17, 2014, the Wall Street Journal reported on the decision by the National Telecommunications and Information Administration (“NTIA”), part of the Commerce Department, to cede control of the Internet from the Internet Corporation for Assigned Names and Numbers (“ICANN”) (a U.S. non-profit) to an organization of multinational stakeholders.

As readers of Cyberinquirer, know, ICANN is responsible for managing the core of the Internet by distributing domain names and Web addresses.  It’s been doing so since 1998.

Read the rest of this entry »

New York Court to Sony: No Personal Injury Coverage for You!

As many of us have been saying since the advent of cyber insurance coverage, cyber policies potentially cover privacy risks and exposures, not Commercial General Liability policies, be it under a property damage or a personal/advertising injury insuring agreement.  In other words, policyholders and their brokers would be mistaken if they deluded themselves into thinking that a standard base CGL policy’s personal injury/advertising injury coverage applies to a typical cyber breach where personally identifiable information is extracted.  Sadly, my good friend Scott Godes falls into this category.

On February 21, 2014, , Judge Jeffrey K. Oing, of the New York Supreme Court, Manhattan Commercial Division ratified this maxim by denying personal injury coverage to Sony for the 2011 breach and theft of personal information from its PS3 gaming platform, among other databases.  Zurich American Insurance Company v. Sony Corporation of America, Index No. 651982/2011 (N.Y. Supreme, filed 7/20/2011). See Complaint here.

Read the rest of this entry »

Cyber class-action litigation: Insurers’ next significant spend?

The following article was first published by my friends at Advisen for their new Cyber Risk Network. For those who haven’t already done so, check it out.

Rick

Virtually every reader is well aware of the decision from the US Court of Appeals for the First Circuit finding that claims by class-action plaintiffs for “mitigation damages” arising from a cyber breach were viable. Anderson v. Hannaford Brothers Co., 659 F.3d 151 (1st Cir. 2011).

There, the court held under Maine law that, in the abstract, certain claimants whose financial information was stolen could recover certain costs incurred in a reasonable effort to mitigate.

Hannaford Brothers is an extreme outlier in the world of cyber class-action litigation. And—as it should have in my view—the case effectively ended when the District Court, on remand, declined to certify the putative class in light of the claimants’ failure to establish that common issues of law and fact “predominate” over individual issues, a predicate to class certification.

Read the rest of this entry »

Risk Based Security’s 2013 Data Breach QuickView Report

The following was provided by my friend Jake Kouns of Risk Based Security, a leading-edge security and threat intelligence company. that provides comprehensive vulnerability and data breach intelligence services.   Thanks Jake.

Rick

Risk Based SecurityWe  are pleased to release our Data Breach Quick view report that shows 2013 broke the previous all-time record for the number of exposed records caused by reported data breach incidents.  The 2,164 incidents reported during 2013 exposed over 822 million records, nearly doubling the previous highest year on record (2011).

Although overshadowed by the number of exposed records, 2013 is also ranked #2 in total reported  data breach incidents, just behind 2012. “When you analyze the data breach activity in 2013 it’s hard to  find any bright-side, said Barry Kouns, CEO of Risk Based Security. “Four of the “Top 10” data breaches all time, were reported in 2013, including the top spot. “

Read the rest of this entry »

The Target Breach: Show Me The Insurance

The following article was first published by the Advisen Cyber Risk Network. If you haven’t checked it out, you should. Its extremely informative. And I’ll be a regular contributor.

Cheers.

Rick

By now, almost everyone has read or heard about – or even been directly impacted by – the theft of financial data relating to over 40 million credit and debit cards used at Target stores in November and December last year.

However, the insurance coverage aspects of the breach have generally flown under the radar.

To a company like Target (or whoever is affected by the next breach), the availability of insurance coverage is an important component of crisis management and remediation, litigation and regulatory investigation strategies, and reputational/brand/lost income protection.

So assuming Target has purchased potentially applicable insurance products, what coverages might apply?  And how might they respond?

At a minimum, it can be expected that Target will investigate the availability of coverage under four separate lines of insurance: Cyber, privacy and technology (CPT); general liability; crime/fidelity and; directors and officers liability policies.

Read the rest of this entry »

Cyber Security and Data Breaches: Why Directors and Officers Should Be Concerned

Following is an excerpt from the leading chapter in Willis London’s Executive Risks: A Boardroom Guide 2012/2013. If you would like to read the entire chapter, please contact me at rbortnick@cpmy.com. A complete copy will be emailed upon request. Cheers. Rick

sec1

Cyber insurance has become a necessity. Every company that maintains, houses or moves sensitive information is at risk of a data breach, primarily due to the growth and increased sophistication of hackers, malicious software and, most recently, ‘hacktavists’. Even mere employee negligence can lead to a data breach. High-profile companies such as Sony can attest that cyber-intrusions can lead to hundreds of millions, if not billions, of dollars in legal exposure.

Equally troublesome, our expanding online society has introduced new financial risks and exposures that may not be covered under general and professional liability insurance products, including standard directors’ and officers’ (D&O) policies. As such, corporate directors and officers, and their risk-management professionals, must ensure that they buy appropriately tailored policies that provide protection against the rapidly expanding risks to which they could be vulnerable, both personally and professionally.

The risks and costs of a data breach

It has become known as the Year of the Breach: in 2011, companies of all sizes experienced malicious intrusions or employee negligence that affected their operations and/or businesses. For example, in April 2011, computer hacktavists unlawfully accessed the Sony PlayStation Network (PSN) and obtained the personal and financial information of roughly 77 million PSN users. Since then, Sony and its insurers likely have spent tens, if not hundreds, of millions of dollars to remedy and mitigate the resulting security and commercial crises — an amount that grows by the day as lawyers prosecute class action lawsuits on behalf of allegedly affected users whose personal and financial information was improperly accessed.

Equally problematic for Sony, it has been sued by its commercial general liability (CGL) insurer, which sought to avoid coverage by arguing that its general liability policies do not and never were intended to cover data breaches.

The TJX Companies also fell victim to a cyber intrusion that security experts predict will have long-term costs of between US$4 billion and US$8 billion in fines, legal fees, notification expenses and brand impairment. In the TJX case, the retail group reported that 45.6 million credit and debit card numbers were stolen from one of its systems during the period July 2005 to January 2007. Of critical import, the January 2007 intrusion occurred after TJX already had knowledge of the initial breaches.

Of course, big corporations are not the only entities that are vulnerable to hackers and hacktavisits; indeed, half of all companies that have experienced data breaches have fewer than 1,000 employees.

 

Create PDF    Send article as PDF   

Cyber, Privacy and Technology Best Practices and Reputational Harm: Why Legal Professionals Need a Lawyer’s Advice, Counsel and Privileges

BabyB_LPlate_improvedIntroduction

Lawyers, like other professionals, often have access to their clients’ personal and financial details. At the same time, they may possess comparable information about their clients’ clients (such as when a lawyer represents a healthcare company). As a result, lawyers are at risk for being sued if and when something happens to that information – such as when a laptop or cell phone is misplaced or stolen or a hacker breaches a law firm or client’s systems and accesses the client’s personally identifiable, health care, and/or confidential information.
The most prudent way to avoid such lawsuits and minimize their impact is to create and implement cyber, privacy and technology (“CPT”) best practices before something goes wrong. In most cases, this would include best practices training and education as well as the purchase of dedicated CPT-specific insurance. This article discusses why lawyers are at risk, how to create and implement best practices, and the advantages of CBT insurance coverage rather than (mistakenly) relying on professional errors and omissions and/or general liability coverage in the event of a CPT incident.

Executive Summary

An attorney’s reputation is his and her lifeblood. Indeed, reputation translates to the bottom line. For better or worse.
And, of course, reputation is, in large part, predicated on the quality, timeliness and cost-effectiveness of the services being provided. So too, it is incumbent that an attorney avoid negative commentary (or embarrassing revelations) through the pervasive and ubiquitous medium of social media. As a corollary, attorneys, like others, must be sensitive to the loss of customer goodwill, whether measured by turnover, client retention or other intangible assets.

Regardless of whether your clients are the Fortune 500, middle-market companies or small entrepreneurs, an attorneys’ clients – and by extension, the attorney himself and herself (to the extent the attorney holds personal, health or commercial information) – are at risk of losing personally identifiable information (“PII”), personal health information (“PHI”) and/or confidential commercial information (“CCI”). It doesn’t matter whether the harm is attributable to malicious activity or simple employee or third-party negligence. It’s the effect that is the focus, not necessarily the cause (although that too factors into the analysis).

In many cases, the effect of a cyber incident could be devastating, if not fatal, to an attorney’s reputation. And, by extension, his or her practice’s economic viability.
It is almost axiomatic to say that “best practices” are among the most important strategies employed by attorneys and other professionals. Just as we counsel clients to use best practices with respect to their operations, so too, we, as professionals, should be well-trained on the scope and extent of best practices in the subject matter presented, including, in particular, CPT risks and exposures, which, to no surprise, are palpable and potentially devastating.

In the CPT context, among others, best practices counseling should be provided by an attorney. Unlike non-lawyers, attorneys bring with them the attorney-client privilege and work product protection. Although vendors and IT specialists can promote themselves as having the appropriate knowledge and training to teach and implement best practices, they do possess the critical protections afforded by the attorney-client relationship. In a relatively new space like CPT, where the law is uncertain and developing, the privileges become even more important, as many attorneys are just at the start of the learning curve.

To continue reading, please contact me at rbortnick@cpmy.com. A complete copy will be emailed upon request. Cheers. Rick

PDF Printer    Send article as PDF   

Canada Update: The Tort of “Intrusion upon Seclusion”

The following was written by my friend Patrick Cruikshank, Underwriting Manager, Specialty Risk – Professional Liability at Northbridge Insurance in Toronto. Thanks to Patrick for his contribution. Relevant articles are always welcome for publication.

Rick

canada-flag-stereotypesIn the 2012 case of Jones v. Tsige, the Ontario Court of Appeal established the new tort of invasion of privacy.  For some, this privacy tort has opened a Pandora’s Box.  For others, it’s considered legal progress in the modern technological world.

Sandra Jones and Winnie Tsige were employees of the Bank of Montreal (BMO).  They worked at different branches and did not know each other.  Tsige was in an intimate relationship with Jones’ ex-husband.

Over a period of 4 years, Tsige used her workplace computer to gain access to Jones’ personally identifiable information and personal financial information 174 times.  Tsige did not disseminate this information.

When Jones discovered this unauthorized access, she made a formal complaint to her employer, who upon investigation determined that Tsige had accessed Jones’ information and had no legitimate reason to do so.  Jones subsequently sued Tsige for invasion of privacy and breach of fiduciary duty.  She sought $70,000 in general damages plus $20,000 in punitive damages.

Jones’ claim was dismissed by the Ontario Superior Court because there was no law in Ontario that recognized an invasion of privacy tort.

The Court of Appeal overturned the decision and granted summary judgment in favor of Jones.

Read the rest of this entry »

Asia-Pacific Cyber Law Risks and Developments

We first published the following White Paper extract in October 2011. While the White Paper might be somewhat dated (and therefore will be refreshed shortly), it remains relevant for our friends interested in learning the basics of Asia Pacific cyber/privacy law. Please let me know if you’d like to see the entire paper. Rick

I. Introduction

The Internet facilitates the widespread and instantaneous flow of information across international borders. While the advent of this method of transnational communication has truly created a “global economy,” at the same time, it has engendered problems for companies and their insurers which seek to assess risk and implement information safeguards, particularly in the face of divergent data privacy laws which vary from region to region or may not even exist in certain jurisdictions. The Asia-Pacific region typifies such a lack of uniformity.

At the same time, the emerging economies in this rapidly growing part of the world have generated promising targets for computer hackers. 75% of Asia-Pacific enterprises have experienced cyber attacks in the past 12 months. Perhaps not surprisingly, a 2010 study by Symantec reported that almost half of all Asia-Pacific-based businesses (and 67% in Singapore) ranked cyber risk and information security as their top concern—more so than natural disasters, terrorism, and traditional crime combined. Cyber attacks and data breaches are on the radar of CEOs and risk managers for good reason: the average cost for a large company to remediate a data breach in Australia increased to nearly $2 million in 2010, which is slightly up from 2009. See Ponemon Institute/Symantec 2010 Annual Study: Australian Cost of a Data Breach (May 2011).

Notwithstanding the prevalence of such attacks, it is far more likely that a cyber security program is managed as a part of a company’s traditional business risks, with traditional coverages being contorted to cover various components of cyber risk (i.e. property loss, liability to third-parties, business interruption, etc.), rather than by way of a dedicated cyber-specific insurance program. Still, in light of recent developments, it is virtually certain that companies soon will begin looking to transfer such risk via more efficient and targeted technology insurance forms and policies

Read the rest of this entry »

Protecting Our Children from Internet Predators, Marketers and Information Aggregators: The Need for Aggressive Government Intervention

As everyone knows, the Internet has dramatically altered (read: simplified) the way we communicate, do business and satisfy our intellectual and social curiosities. Indeed, Internet-based sales topped the trillion dollar mark for the first time in 2012 and are projected to increase 18.3% to 1.298 trillion in 2013. I’d take that rate of growth any day, particularly in the current world economy.

Read the rest of this entry »

Canadians More Exposed Than One Would Think

canada-flag-stereotypesOkay. Let’s start with the obvious. No, this has nothing to do with Canadian citizens and immigrants behaving badly, although that may be a topic for a future post.

What we’re talking about is the prevalence of cyber-related incidents and the resulting fallout among Canadian-based companies. And the numbers may surprise you.

Read the rest of this entry »

The Posts have Come Back… To Cyberinquirer


Since last we visited, your humble Publisher has moved on to the Law Offices of Richard J. Bortnick, where I am Managing Director (very European, if I do say so myself). A number of dedicated readers and friends (you know who you are) have asked what had become of me and why my old email address was no longer effective.

The answer my friend (apologies to Peter, Paul and Mary) is the Law Offices of Richard J. Bortnick. At the risk of having this viewed as attorney advertising, I will stop there other than to say I also will be signing as a free agent with a Consulting Firm to be named later (but not much later).

So, please feel free to contact me if you want to catch up, engage in intellectual banter (with the exception of Philadelphia sports, where the banter will all be negative) or have some worthwhile humor you’d like to pass along (although it can’t be as good as the material I get from my good friend Jeff). My new email address is rjbortnick@comcast.net (at least for the short term… stay tuned on that too).

Its good to be back. And thanks for all of your kind wishes.

Rick

PDF Editor    Send article as PDF   

Power to the People: Social Media Technologies Mediating Corporate Social Governance

The measure of effectiveness of a CEO and its executive board has always been the degree to which the business is achieving its purpose. Whether in Canada, the U.S., Europe or Asia, an executive board’s purpose should be to increase shareholder value, a purpose that is best accomplished by serving the needs of various stakeholders. Somewhere in the pyramid of stakeholders is the consumer or client, whose likes, favorites, and preferences must be met with quality personalized products and services that deliver high competitive value. In an interconnected global knowledge economy, this has meant listening to what consumers are saying online through social media platforms like Facebook and Twitter, and engaging in two-way conversations to respond in real-time to consumer demands.

Read the rest of this entry »

The Queen v. Cole: Privacy Protection for Employer-Issued Equipment in Canada

The recent decision The Queen v. Cole by the Supreme Court of Canada touches upon interesting issues regarding information privacy in the digital age.

The facts are simple. An information technologist working at the same high school as Mr. Cole, a teacher, remotely accessed Cole’s history of internet access and one of his drives and found a hidden file which contained nude photographs of a student. The photographs and internet file were copied onto a disc and given to the police, which determined that a search warrant was unnecessary. Cole was subsequently charged with possession of child pornography and fraudulently obtaining data from another computer hard drive. The trial judge excluded the computer material under Sections 8 and 24(2) of the Charter. In overturning the decision, the summary conviction appeal court found no breach of Section 8. This decision was set aside by the Ontario Court of Appeal, which concluded that the evidence of the disc containing the temporary internet files and the laptop computer and its mirror image was excluded. A 6-1 majority ruling by the Supreme Court concluded that the police infringed upon Cole’s rights but upheld the Court of Appeals’ finding that the evidence should not have been excluded from trial.

Read the rest of this entry »

It’s Time for Professionals to Practice What They Preach

The following column appeared in the September 2012 issue of the Advisen Cyber Journal. I hope it resonates with our legal eagle subscribers. If not, then your brokers (and I) have more work to do.

Cheers.

Rick

Lawyers typically fancy themselves as the smartest people in the room. Many certainly have the largest egos in the room. But when it comes to keeping their own houses in order? Well, not so much. Its akin the shoemaker whose children go barefoot.

The same flaw appears to apply with equal force and effect with respect to accountants. And consultants. And, perhaps most incredibly, insurance brokers.

Perhaps you’ve figured out where I’m going with this. But in case you haven’t, here’s what I’m getting at. Counter-intuitive as it may seem, anecdotal reporting from a number of underwriters I’ve spoken with suggest that intelligent, thoughtful, (sometimes) rational people who bill others hundreds of dollars an hour or make sizable commissions for dispensing professional advice do not abide by their own wisdom and don’t buy cyber/technology/privacy (“CTP”) insurance.

Read the rest of this entry »

Planet Mars, Curiosity, and Data Security

For those captivated by recent events in astronomy, parallels can be drawn between the recent landing of NASA’s rover Curiosity on planet Mars and the public discourse on data security in Canada. With the distinction that one is effectively equipped with the right budget and tools to achieve its actual objective, both have come a very long way, both have managed to blaze through layers of clouds, both seek to secure ingredients essential to life, and both are now aimlessly wandering about unchartered territories.

A decisive factor in Barrack Obama’s 2008 political campaign was the extensive use of individual, thin sliced consumer data to send highly tailored messages to gain political support. Within 13 years, Google has become the most valuable brand in the world through the aggregation of vast amounts of data including search data, or data held in Gmail accounts. This information is then used to create an advertising cruise missile, which is much more efficient than the old method of pattern bombing.

Read the rest of this entry »

Human Error: The Greatest Risk and Root Cause of Data Security

Whether discussing data encryption, network security, or internal data privacy management practices and policies, the most sophisticated IT security protocols, the most learned team of specialists, and the most compliant of data management practices and policies cannot escape, prevent, or remedy what many businesses and organizations have rightly labeled as the root cause of data security failures: human error. While they tend to possess greater network security than smaller organizations, the risk of human error should be of particular a concern to medium and large size organizations whose internal controls over data and employees are inevitably diluted by their size and numbers.

Read the rest of this entry »

Data Privacy and Unauthorized Non-Hackers: the Rise and Risk of Accountability and Breach Notifications in Canada

Recent unauthorized access to British Columbia Institute of Technology’s computer network, which contained personal medical information of approximately 12,680 individuals, is yet another reminder of risks of exposure to data breaches. That none of the data on BCIT’s computer network was compromised or misused is reflective of a low-profile non-hacker intrusion, and of the ease with which computer networks can be infiltrated. Indeed, a sophisticated hacker would know better than to leave massive amounts of data, rightly labeled by some as the “oil” of the 21st century, uncompromised. More curious than uncompromised data, however, is BCIT’s notification in the absence of an actual data breach, and mandatory breach notification provisions under B.C. privacy law.

Read the rest of this entry »

Past the Point of No Return: Jones v. Tsige and the “New” Tort of Invasion of Privacy in Canada

Jeremy Bentham used to refer to the common law as the “dog law”. As he explains it, “whenever your dog does anything you want to break him of, you wait till he does it, and then beat him for it. This is the way you make laws for your dog: and this is the way the judges make law for you and me.” .

Insofar as the tort of invasion of privacy in Canada is concerned, Jeremy Bentham was arguably right. Aside from the province of Quebec, which is governed by a civil law system, and a few other provinces in Canada which have benefited from a statutorily enacted tort of invasion of privacy, lower Courts have been divided over the existence of a free-standing tort of invasion of privacy at common law. The recent decision Jones v. Tsige (2012) by the Ontario Court of Appeal is the first to confirm that what used to be an embryonic tort of invasion of privacy is now alive and well in Canada

Read the rest of this entry »

Agreement between the US, NATO, and Australia on Cyber Security

The US and Australia have a longstanding agreement to back each other up in case of physical enemy attack, but now have moved that agreement to the arena of cyber-attack as well. With Australia’s history of cyber-attacks well known, such as an attack two years ago that brought down Australia’s Parliament’s website, the country cannot afford to ignore cyber security any longer.

Read the rest of this entry »

Cyber-security in a Hyperconnected World

The cyber-attacks recently launched by six individuals from the group Anonymous, an international hacktivist collective, against 13 Quebec government and police websites are but a fleeting glimpse of a much broader problem associated with the cyber world, most of which remains largely unseen. Succinctly stated, the cyber-attacks were a response to the Quebec Liberal party’s constitutionally questionable Bill 78 that was recently passed as a response to the student crisis sparked three months ago over the government’s planned 75% tuition increase. That six individual were arrested by law enforcement agencies and charged with mischief, conspiracy, and unlawful use of a computer should hardly be reassuring.

Read the rest of this entry »

Insurers: Assert Your Subrogation Rights

The following column was first published in the second issue of Advisen’s Cyber Liability Journal (here). I will republish my future columns in coming months. In the meantime, you can subscribe to the Journal at http://corner.advisen.com/journals.html (here).

Rick

It is axiomatic to say that insurance products evolve. Indeed, like virtually every organic structure, its development, growth and nimbleness are necessary to meet the progress of maturing, service-based economies. Hence, the advent of cyber/tech/privacy liability (CTP) insurance.

At present, there are over 25 markets selling some type of CTP coverage. Many insurers sell standalone products. Others bolt on new coverage parts to their existing products. Still others add endorsements that attempt to extend coverage to address an existing client’s business model.

Read the rest of this entry »

If the Glove Fits, You Must Defend

Trade dress insurance coverage is alive and well. At least in Wisconsin. In Acuity v. Ross Glove Company, 2012 WL 1109035 (Wis. Ct. App. April 4, 2012), the Wisconsin Court of Appeals held that an insurer’s duty to defend was triggered under advertising injury liability coverage where the underlying complaint set forth allegations of trade dress infringement.

In the Acuity case, Ross Glove purchased a commercial general liability policy from Acuity, which included advertising injury liability coverage. The policy at issue defined “advertising injury”, in part, as “infringing upon another‘s copyright, trade dress or slogan in your advertisement.”

Read the rest of this entry »

The Implications of a Cyberattack on Your Securities Portfolio: You May Want to Read Your Holdings’ 10-Ks

falling moneySo, you think that a corporate cyberattack has nothing to do with you? If so, think again. Indeed, to the extent you own stock or securities, the value of your holdings could be at risk in the event of a cyberattack. I’ve said it before and I’ll say it again: Cybersecurity is an economic issue. See here.

Take, for example, Intel (INTC). In the “Risks” section of its 2009 10-K, the company disclosed in a tersely worded statement that its networks had been the victims of “sophisticated” attacks. Kudos to Intel for making this disclosure, which predated the October 2011 publication of the SEC Guidance addressing public companies’ cyber risks and exposures (discussed here and elsewhere, including in the March 2012 edition of the Advisen Cyber Journal. Please feel free to contact me for details on how to obtain this must-read issue and subscribe. Advisen has done a masterful job, as it does with all of its publications). As will be discussed in my next post, a significant number of public companies still have not complied with their cyber risk and cyber exposure reporting “obligations” under the SEC Guidance.

As to Intel, the subject 10-K listed several noteworthy risks. The most intriguing stated that “We may be subject to intellectual property theft or misuse, which could result in third-party claims and harm our business and results of operations.” Intel’s disclosure continued that “[w]e regularly face attempts by others to gain unauthorized access through the Internet to our information technology systems by, for example, masquerading as authorized users or surreptitious introduction of software….These attempts, which might be the result of industrial or other espionage, or actions by hackers seeking to harm the company, its products, or end users, are sometimes successful.”

The adverse economic impact of a cyber-related disclosure is not theoretical, either. Indeed, in the immediate wake of the News Corp./News of the World cell phone hacking scandal in mid-2011, News Corp’s market cap reportedly fell by over 15%, valued at approximately $7 billion, in less than a week. Not surprisingly, News Corp was sued shortly thereafter in a series of securities fraud class actions, which remain pending.

While cyber risks and exposures may or may not have an impact on a stock’s trading price, their potential impact can not be ignored. Google (GOOG) is another example. As previously discussed here, Google has been the subject of cyberattacks which it claims were precipitated by the Chinese government. The import of this development can not be understated, as it created tensions between the U.S. and Chinese governments and even made it into Intel’s SEC filing. For private citizens, however, perhaps the greatest implication of the Google cyberintrusions is the arguable effect that they had on Google’s price per share. On January 12, 2010, when the intrusion was publicly disclosed, Google shares fell 1.7% to $590.48. By April 25, 2010 Google’s shares were trading at $544.99, another roughly 8% price drop. Can these losses be directly linked to the breach of Google’s security systems? Put differently, can a possible link be dismissed? That’s for shareholders and others to decide.

So, what does this all mean? At a minimum, it suggests that the economic implications of a cyber event can be wide ranging, from the simple cost of fixing a security gap to a major hit to a brands’ reputation (remember News of the World? After 168 years of tremendous success globally, it ceased publishing on July 10, 2011 as a direct result of the hacking scandal), all the way to claims arising from the theft of consumer’s personal and financial information. Such an intrusion into the systems of retailer T.J. Maxx (TJX) lead TJX to settle with regulators, states, consumers and others and set a settlement/remediation reserve of over $100 million.

In the end, it is clear that just as consumers need to be vigilant about monitoring their personal and financial information to protect themselves from identity theft and the like, investors too must regularly track their holdings to protect their portfolios and assets. As to the companies whose information and systems are at risk, the need for both D&O and cyber insurance is patently obvious, and is as important as the protection of their intellectual property, consumer information and other non-public data. Risk management, information protection and insurance go hand in hand. And we’re here to make sure everyone recognizes the correlation.

PDF Converter    Send article as PDF   

The Coverage Question

We are grateful to the rapidly-growing number of Cyberinquirer readers who continue to submit substantive content for publication. This truly is an industry blog, and we strive to present alternative points of view from all quarters.

The following article was authored by Gregg A. Rapoport, Esq., and David Lam, CISSP, CPP. Attorney Rapoport has represented policyholders in coverage litigation for over 20 years as part of a broad business litigation practice based in Pasadena, California. Mr. Lam is vice president of the Los Angeles Information Systems Security Association and has over 20 years of experience as an IT and information security professional and author. This article was first published by RIMS, and we appreciate Messrs. Rapoport and Lam offering it for republication here.

Rick Bortnick

As they confront the sobering question of whether their networks and the data they carry are fully secure, today’s “C-level” executives are becoming fluent in once-esoteric information security terms. Many have reached the conclusion that no matter the size of their IT and security budgets, there is no foolproof system for securing the confidentiality, integrity and availability of their data. Company networks remain vulnerable to attacks even if they adhere to industry best practices and run best-of-breed firewalls.

To address these security challenges, companies are relying on their risk managers to evaluate the applicability of existing insurance coverage to data breach incidents, and to assess the value of transferring some of the uncovered financial risk to one of the carriers now offering cyber-risk insurance policies. As the market for these products matures, premiums have come down significantly and policy limits have increased.

Read the rest of this entry »

An Insurer’s View: Examining the Rising Costs of Breaches

The following article, written by reknowned London Market underwriter Rick Welsh, was first published in the November 2011 Data Guidance newsletter. A shout out to Rick for passing it on to us for republication.

Rick Bortnick

Today, no company – even with comprehensive privacy policies and practices – can be safe from data breaches. Can companies effectively transfer the risk (and cost) of data breaches by way of insurance? What costs should the companies consider? Almost every reference to the cost of data breaches or ‘cyber crime’ identifies the actual cost of the breach notification as its common currency. In Part One of this analysis, Rick Welsh, Cyber Underwriting Director at ANV, explores this metric’s limitations and the true exposure and cost of data breaches.

The well-regarded Ponemon Institute is constantly measuring the cost of a data breach and is commonly referenced by many to express the rising cost of data breaches. The second annual ‘Cost of Cyber Crime Study’ issued by the Ponemon Institute in August 2011, found that the median annualised cost of cyber crime for the 50 companies in the study was $5.9 million, with a range being between $1.5 million to $36.5 million. The annualised average was up 56% from the previous year’s study.

Read the rest of this entry »

New Cybersecurity Disclosure Guidance for Public Companies: Focusing Attention, Raising Questions

As regular Cyberinquirer readers know, on October 12, 2011, the SEC’s Division of Corporate Finance published “suggested” Guidance on public companies’ disclosures of their cyber risks and exposures. I published a personal perspective on the implications of the Guidance in an October 29, 2011 post (here). Since then, our friend John Doernberg of William Gallagher Associates in Boston has written an excellent, thoughtful article which adopts a more technical approach. As many of you may know, John is a Vice President at William Gallagher and focuses on privacy, information security and risk management issues. Before becoming an insurance broker in 1995, John practiced law at leading firms in New York and Boston. The following article first appeared at John’s own site, http://blog.wgains.com/?s=Doernberg, and is being republished here with his permission. Thanks John!

Rick Bortnick

Increased corporate reliance on computer networks and electronic data has brought a corresponding increase in risks associated with breaches of their security. Such breaches have become more frequent and severe. With these Guidelines, the Division has indicated that public companies and their advisors should focus greater attention on how disclosure obligations under the federal securities laws may be affected by the potential financial and operational impact of cybersecurity breaches.

The Guidelines note that cybersecurity breaches (generically referred to as cyber incidents) can be malicious (cyber-attacks) or unintentional. The Guidelines provide something of a rogue’s gallery of cyber malice: the gaining of unauthorized access to steal or corrupt sensitive data or to disrupt operations, denial of service attacks, sophisticated electronic circumvention of network security, and social engineering techniques such as phishing to extract passwords or other information that will enable the gaining of access.

Read the rest of this entry »

Cyberinquirer Named As One of LexisNexis’s Top Insurance Blogs of 2011

With the help of our readers, Cyberinquirer has again been named as one of LexisNexis’s Top Insurance blogs 0f 2011. We are obviously flattered, particularly in view of the quality of the other blogs selected to this august list. It shows that people are reading what we have to say. And that, perhaps, they are interested in what we have to say. We sure hope that to be the case. We love thinking, reading and talking about tech, privacy and cyber related issues (yeah, admittedly we’re geeks). And we hope that you, our readers, gain from our insights, even if you don’t always agree with them.

So now that we’ve been recognized by LexisNexis for the second straight period, maybe some of you, our readers, will be more comfortable authoring a piece we can post. Remember, this blog is open to all relevant, responsible submissions, be they articles, commentaries, or just comments on something we have said that strikes a chord. If you’ve got something to say that may be of interest to others in the community, email it to me at rbortnick@cozen.com and I will get back with you promptly. We strive to publish fresh, interesting content on a regular basis, but its not always easy, as we do maintain law practices. And have other commitments. So flip your authored pieces. We’d actually appreciate it.

Needless to say, we couldn’t have done this on our own. So the honor is not just for us, but for you too. Thanks.

Edit PDF    Send article as PDF   

The Hospitality Industry Revisited: Does Your Company Have Proper Coverage?


101387303-a0006-000338.530x298In a prior post (here), we discussed the frequency of cyber thefts in the hospitality industry in 2009. We have a decent idea of how many of you read that article. For those of you who haven’t, here’s my topic sentence: “38% of the credit card hacking events in 2009 involved the hospitality industry.” Yep. 38%.

And guess what? The hospitality industry remained a high-level target in 2010. Alright, if you’re connected to the hospitality industry, you probably knew that already. But what you might not realize is that you’re not out of the clear. And, things may be getting worse as the frequency of cyber criminality grows, and as the perpetrators become more sophisticated and cyber attacks propagate (more on that below).

Read the rest of this entry »

Securities Law and Cyber Disclosures… Perfect Together…Especially for Cyber and Tech Underwriters and Brokers. And Me

Its not often that worlds collide or that interests converge into one amorphous epiphany. But that’s exactly what happened to me recently, when the Division of Corporate Finance (DCF) of the U.S. Securities and Exchange Commission (SEC) issued a Disclosure Guidance identifying the types of information public companies should consider disclosing about cyber risks and events that could impact their financial statements. Now, the DCF has cautioned that the Disclosure Guidance only represents its own views and “is not a rule, regulation, or statement of the Securities and Exchange Commission.” The DCF also emphasizes right up front that “the Commission has neither approved nor disapproved its content.” Yeah, right. YOU be an officer or director or officer of a company that does not “comply” with the DCF’s “recommendations.”

Read the rest of this entry »

INTRODUCTION TO CANADA’S PIPEDA PRIVACY LEGISLATION

I. Overview

Canada’s privacy regime can be described as a web of legislation at both the federal and provincial/territorial level. Some commentators express concern that this web has become tangled, lacks uniformity and actually undermines the predictability and consistency that, in their view, would exist under a single (federal) privacy regime. Canada has two primary privacy statutes: the Privacy Act and the Personal Information Protection and Electronic Documents Act (“PIPEDA”). The Privacy Act, R.S.C. 1985, c. P-21 (Can.), took effect on July 1, 1983, and imposed certain privacy rights obligations on approximately 250 federal government departments and agencies by limiting the use and disclosure of personal information. The Privacy Act also gives individuals the right to access and, if necessary, correct personal information held by governmental organizations subject to the Act.

Read the rest of this entry »

Underwriters and Their Policyholders Agree: Less Is More When It Comes to Crisis Management Expenses

Doug Pollack of IDExperts recently published a blog post on cyber insurance that caught my eye. Insofar as IDExperts is a respected provider of cyber breach response services, I assumed the article would address technical issues. Upon reading the piece, however, I was disappointed to find that the article addressed insurance-related matters, including criteria for the selection of insurance products and programs, a topic typically the province of risk managers, brokers, underwriters and lawyers. Hmmm…

At the outset, the article addresses technical issues, as the author correctly suggests that “privacy, compliance and legal officers should work closely with their risk manager to ensure that the organization is getting a policy that meets its needs.” Having hooked me with that truism, I was looking forward to reading on. But that is where the technical commentary (and our common perspective) ends. From there, the author moves on to express his views (and, in my counter-view, misconceptions) on cyber insurance products and how they should operate.

Read the rest of this entry »

John Keohane Remembered

We at Cyberinquirer will be taking a break this weekend. I am heading to NYC for a memorial in honor of our dear friend John Keohane, who perished that awful day at the age of 41. Many of you may have known John from his days with CIGNA, ACE and Zurich. He is still missed by his colleagues, friends and family and always will be. What a tragedy.

PDF24 Creator    Send article as PDF   

Cyber Security On President Obama’s Agenda

Faced with revitalizing a deteriorated economy, formulating a national budget, and the aftermath of Osama Bin Laden’s death, President Barack Obama has his hands full. Yet, in the midst of all the issues commanding the White House’s attention, the Obama Administration somehow has found time to address the threats to our nation’s cyber security.

According to Business Insurance, on Thursday, May 12, 2011, the Obama Administration proposed cyber security legislation to improve protection for individuals and the federal government’s computer and network systems. The proposed legislation would address national data breach reporting by creating simpler and standardized reporting requirements for the 47 states that contain such requirements. The proposal would also synchronize penalties for computer crimes with other crimes. Additionally, the government, through the Department of Homeland Security, would become directly involved in assisting the industry as well as state and local governments in policing and enforcing cyber security. The proposed legislation encourages the state and local governments to share information with the Department of Homeland Security about cyber threats or related incidents by providing them with immunity for doing so.

Read the rest of this entry »

Cyber Crime and Securities Fraud Litigation: The Next Wave?

Following the publication of our original post on the implications of a cyber attack on investors’ securities portfolios (see here), we have been asked by scores of readers whether securities fraud litigation arising from cyber crime has ensued. Not surprisingly, the answer is “yes.”

Indeed, we have located at least two such cases, one a putative securities fraud class action against a payment processing company and the second an SEC initiated action against a private investor. The results may (or may not) surprise you, depending on your perspective of trial courts’ levels of judicial activism and willingness to render substantive decisions at early stages of litigation.

In re: Heartland Payment Systems, No. 09-1043 (D.N.J. Dec. 07, 2009) remains the paradigm for such litigation. To facilitate its payment processing services, Heartland Payment Systems (“Heartland”) stored millions of credit and debit card numbers on its internal computer network. In December 2007, hackers launched a Structured Query Language Attack (“SQL attack”) on Heartland’s payroll management system. To its credit, Heartland was able to successfully avert the attack before any personally identifiable information was stolen. At the same time, however, the company failed to detect malicious software (“malware”) which had been placed on the network by the SQL attack. The malware infected Heartland’s payment processing system, ultimately enabling the hackers to steal 130 million consumer credit and debit card numbers. Heartland did not discover the breach until January 2009, at which time it notified government authorities and publicly disclosed the event. Over the course of the following month, Heartland’s stock price dropped over $15 per share. Perhaps not surprisingly, shareholder class actions ensued.

In their complaint, plaintiffs alleged that Heartland and its officers and directors had made material misrepresentations and omissions about the December 2007 SQL attack. Specifically, plaintiffs claimed that the defendants concealed the SQL attack and misrepresented the general state of Heartland’s data security. Plaintiffs further alleged that the defendants’ conduct was fraudulent because they were aware that Heartland’s network had been breached, yet they had not fully remedied the problem Read the rest of this entry »

Identity Theft: Our Children At Risk

Interviewing for your first job as a teenager is as exciting as it is intimidating. Thoughts of what to do with your first paycheck consume your mind as you rehearse your best “do-you-want-fries-with-that” smile. The interview proceeds flawlessly and you start to count the dollar signs as you await the job offer. But imagine your surprise when you are informed that you did not get the job because your background check revealed that you are over $75,000 in debt and five years behind in your child support payments for your eleven year old child…a terrifying thought considering you are only 16 years old.

Adults aren’t the only victims of identity theft. Child identity theft is an increasing and understated crime. A child’s Social Security Number (“SSN”) is the perfect target, as the theft typically goes undetected until years after the crime has taken place. Indeed, the crime might not be discovered until the rightful owner/victim uses his or her SSN for the first time years later. This revelation often occurs when the victim applies for his or her first job or financial aid before college.

The scheme works as follows: businesses are using various techniques to search the Internet for dormant SSNs. These numbers often belong to long-term inmates, dead people or children. Obtaining them is not as difficult as one may think, as SSNs are distributed systematically depending on age, geographical location and when the number is issued. Once it has been determined that no one is actively using the number to obtain credit, the numbers are offered for sale.

Read the rest of this entry »

The White House’s “Progress” Report on Cybersecurity: There’s A Long Road Ahead

Lest one question the severity of the evolving challenges in our rapidly growing cyber world, President Obama has crystallized it succinctly: (1) “cyber threat is one of the most serious economic and national security challenges we face as a nation;” and (2) “America’s economic prosperity in the 21st century will depend on cybersecurity.” In other words, President Obama has declared cybersecurity to be a national security priority.

While that’s obviously good news, the follow-up question is “how are we doing in meeting the associated demands?” Regrettably, not so well, it seems.

Speaking before cybersecurity and privacy experts from government, law enforcement, the private sector, academia and privacy and civil liberties groups, President Obama, Homeland Security Secretary Janet Napolitano, Commerce Secretary Gary Locke, Cyber Coordinator Howard Schmidt and other Administration officials uniformly acknowledged that far more work needs to be done to protect digital communications and information infrastructure and make it more difficult and costly for cybercrimimals.

Read the rest of this entry »

Immigration Enforcement’s New Target: Counterfeit Movies and Shows

Apparently feeling that they’ve resolved the longstanding issue of illegal immigration and can move on to the next crisis, Immigration and Customs Enforcement (“ICE”) and the U.S. Justice Department have identified a new enemy in their ongoing stuggle to protect truth, justice and the American way: Internet sites that sell counterfeit goods and pirated movies.

Indeed, just this month, government officials announced that they have shut down nine websites as part of their newly announced initiative, “Operation In Our Sites,” which is intended to protect Hollywood’s intellectual property. Officials estimated that nearly 7 million pirated movies and shows per month were downloaded from the offending websites.

The announcement was held on a soundstage at The Walt Disney Studios in Burbank, CA. Neither Johnny Depp nor Captain Hook reportedly was present.

Read the rest of this entry »

Credit Card Hackers’ Favorite Target…Hotels.

We’ve all heard the story of the clerk at the local gas station who was double-swiping credit cards in order to make fraudulent copies. Online banking, restaurants, clothing retailers…every industry is potentially a target. Yet the industry that was the subject of more credit card thefts than any other sector in 2009? Hotels.

To the point, SpiderLabs (an affiliate of Trustwave, a data-security consulting firm) has published a study which reports that 38% of the credit card hacking events in 2009 involved the hospitality industry. Over one-third of all thefts of credit card numbers occurred at hotels. Much to my surprise, given the wealth of reporting on the subject, the financial services industry lagged well behind at a comparatively minor 19%. Retail followed at 14.2% while restaurants and bars were fourth at 13%.

I guess I shouldn’t have been surprised, though, as my own credit card number was stolen several years back while i was staying at a business travelers’ hotel in New York City. I had gone to the City for a Cinco de Mayo event sponsored by a major international insurer. Several days later, I received a call from my credit card company asking if I had bought gasoline on Long Island or a $5000 television at a big box retailer. While I do buy gasoline, I hadn’t been on Long Island. And while I certainly would have loved a $5000 television (or, for economy’s sake, something less pricey), I hadn’t bought that either. The conclusion was simple: my credit card number had been stolen when I used it at the New York hotel.

So, why hotels? According to security analysts, they’re generally easy targets. The large chain hotels may employ sophisticated security technology or other protections. Or they may not. In either case, how about smaller or private owned, non-chain hotels? The next time you check into a hotel, ask what security methods they use to protect credit card information. You probably won’t like the answer. The credit card number that you provide at check-in may sit in a folder or a file maintained right at the front desk. Who would prevent someone from simply lifting the file? Especially in the middle of the night. The single desk clerk on overnight duty?

Read the rest of this entry »

Two New Online Resources For IP Information: “WIPO GOLD” And USPTO

Within the last week, two separate intellectual property search engines were launched, each of which has the potential to significantly palliate searches for patents, trademarks and other IP. http://www.wipo.int/wipogold/en/

Specifically, on June 1, 2010, the World Intellectual Property Organization (“WIPO”) introduced a free online public resource, “WIPO GOLD” which aims to facilitate universal access to IP information. It promises “quick and easy access to a broad collection of searchable IP data and tools relating to, for example, technology, brands, domain names, designs, statistics, WIPO standards, IP classification systems and IP laws and treaties..” The site also includes a helpful translation option, should users wish to search results in a language other than the default, English. The news report can be viewed here: http://www.wipo.int/pressroom/en/articles/2010/article_0018.html

Meanwhile, the United States Patent and Trademark Office (USPTO) separately announced on June 2, 2010 that it has entered into a “no-cost, two-year agreement with Google to make bulk electronic patent and trademark public data available to the public in bulk form.” Under the agreement, USPTO will provide Google with “existing bulk, electronic files, which Google will host without modification for the public free of charge.” Examples of searchable items include: patent grants and applications; trademark applications and Trial and Appeal Board (TTAB) proceedings; and patent classification information. The USPTO and Google also will work together to make additional data available in the future, such as patent and trademark file histories and related data, the office said. The bulk data can be accessed at http://www.google.com/googlebooks/uspto.html.

In other words, as technology moves forward, so too does the ability to research and guard intellectual property ownership and interests… at least in the Western Hemisphere and other WIPO member countries. Now, if only the remainder of the world could come together to unify owners’ capabilities to globally protect their IP rights.

www.pdf24.org    Send article as PDF   

Does The World Need A U.N. Sponsored Cyber Peace Treaty? One Diplomat Emphatically Says Yes… As the U.S. Gears Up For A Cyberwar

As the cyber war of words heats up between the U.S. and China, the rest of the world is taking notice….and proposing action.

Most recently, the head of the United Nations’ communication and technology agency, Secretary General Hamadoun Toure of the International Telecommunications Union, proposed a treaty whereby member countries agree not to precipitate a cyber attack against other member countries. “The framework would look like a peace treaty before a war,” he is reported to have said.

Secretary Toure’s proposal follows a series of concerns expressed at last month’s World Economic Forum in Davos-Klosters, Switzerland, including a harsh warning that cyber attacks could amount to a declaration of war. According to Secretary Toure, “[a] cyber war would be worse than a tsunami – a catastrophe.” Because of the potential devastating consequences of a cyber war, the Secretary strongly recommended that countries agree not to harbor cyber criminals and “commit themselves not to attack another.” Of course, nothing is quite as simple as that. For example, John Negroponte, the former director of U.S. intelligence, cautioned that intelligence agencies would “express reservations” about such a treaty. Given the breadth and scope of China’s, Russia’s and other countries’ intelligence operations and their reported limits on information disclosures, Mr. Negroponte’s remarks likely would be echoed by other nations.

Read the rest of this entry »

Cyber/Tech Underwriters Build Their Portfolios…As Corporate Executives Fret

j0283561The risk of cyberattacks is real and growing. While many of us theorize and speak in hypotheticals about the possibility of a major and potentially devastating cyberattack (or twenty), those considered most “in the know” are taking these risks seriously. And for good reason.

A January 29, 2010 study commissioned by McAfee, Inc and authored by the Center for Strategic and International Studies (CSIS) reports that over one-third (37%) of the IT security executives surveyed believe that critical infrastructure such as electrical grids, oil and gas production, water supply, telecommunications and transportation networks has become increasingly vulnerable to a cyberattack. Moreover, 40% of the 600 executives from 14 countries who responded predict a major security incident in their sector within the next year. Only 20% believe their sector is secure and will successfully avoid a serious cyberattack over the next five years.

The respondents work in critical infrastructure enterprises across seven sectors in 14 countries (including the US, UK, Japan, China, Germany, France, Italy, Russia, Spain, Brazil, Mexico, Australia and Saudi Arabia). Most problematic, over half of the respondents admitted that their concerns are not without foundation. Indeed, 54% acknowledged that their companies already have experienced infiltrations or large-scale cyberattacks from terrorists, organized crime gangs, and/or nation-states. The average cost of resultant downtime is estimated to be $6.3 million per day. Not chump-change by any means.

The recent cyberattack on Google is just one example. According to CSIS’s report, however, there have been scores more. With additional attacks to come. Of most concern, perhaps, over half of those surveyed believe that the U.S., China and Russia as the three most vulnerable countries.

The report, entitled “In the Crossfire: Critical Infrastructure in the Age of Cyberwar,” goes on to state that more than one-third of the executives who responded feel their respective sectors are unprepared for a major attack and that two-thirds believe the ongoing recession has caused companies to reduce resources devoted to cyber protection.

This situation harkens back to the adage “one man’s suffering is another man’s gain.” The opportunities for cyber/tech underwriters are there. Go get ‘em, ladies and gentlemen.

PDF Creator    Send article as PDF   

The Globalization of Cyber/Tech Risks and the Implications for Worldwide Insurance Coverage

j0254490As recognized below in Pamela’s post discussing whether the loss of computer data is “property damage” in the eye of tort law, the issues surrounding cyber/tech/privacy liability and the attendant insurance coverages are not the exclusive province of the United States or U.S. courts.

To the contrary, virtually every country worldwide is increasingly faced with the problem of having to deal with the hard social and legal issues presented by a rapidly evolving cyber world. So too, policyholders and the insurers who typically grant worldwide coverage under their policies must recognize that the risks faced are not exclusive to the U.S. or our Canadian cousins. The risks are global in nature and policyholders and insurers alike need to stay current with what’s happening outside our cocoon of the Western Hemisphere.

I am certain every reader is aware of the socio-political dispute whereby Google has threatened to withdraw from China amid claims that the Chinese government has hacked into Google’s and other third-parties’ databases, spied on Google email accounts, and tightened blocks on tens of thousands of internet sites, including Facebook, Twitter and YouTube. U.S. Secretary of State Hillary Clinton has spoken on the subject, advocating that companies such as Google refuse to support “politically motivated censorship.” Secretary Clinton also accused China, Tunisia and Uzbekistan of boosting censorship and called on Beijing to investigate the recent cyber attacks on Google and others. (On a side note, just last week, Europe’s principal security and human rights watchdog accused Turkey of blocking 3700 internet sites for “arbitrary and political reasons.”).

Read the rest of this entry »