Policyholders and Southwest Airlines alike notched an important win when a Fifth Circuit panel undid a ruling barring excess cyber insurance coverage for costs stemming from the airline's 2016 computer network failure, potentially expanding the scope of cyber coverage.
In a decision issued Jan. 16, the three-judge panel reversed a lower court decision siding with Liberty Insurance Underwriters Inc., instead determining that Southwest's compensation packages to customers affected by the network failure were not barred from coverage simply because they were discretionary.
Luma Al-Shibib, co-chair of Anderson Kill's Cyber Insurance Recovery Group, told Law360 that Liberty's interpretation was so narrow as not only to render coverage illusory but also essentially limit coverage to technical costs for repairing Southwest's system — subverting the purpose of the policies and business interruption coverage.
"If Liberty's position had been upheld, that really would have just, I think, eviscerated the coverage and turned the understanding of what business interruption insurance is on its head," Al-Shibib said.
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