Utilizing D&O Insurance Coverage for Cyber Claims

Risk Management Magazine (RMM)

PUBLISHED ON: October 21, 2021

As the frequency of regulatory action and large shareholder class action securities and derivative litigation targeting senior management in the wake of cyber incidents increases, many policyholders are turning to their D&O insurance policies for coverage. D&O insurance is particularly important when cyber insurance is unavailable, was not purchased, or contains an exclusion for “securities claims.” For a host of reasons, this coverage needs to be available when directors and officers are targeted in shareholder suits or when the company comes under regulatory scrutiny in the wake of cyberattacks.

There are also circumstances in which allegations in non-securities suits of negligence or wrongdoing on the part of company officers or directors that enable cybercrime potentially trigger D&O coverage. D&O insurance companies often resist claims of this sort, on various grounds. However, two recent decisions by the U.S. Fifth Circuit affirmed coverage for cyber claims in which a policyholder’s clients or business partners sought redress for alleged company errors.

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