Cyber Coverage Watch: Louisiana Dispute Over Ascent Cyberpro Policy

cyber-liability

NEW ORLEANS, March 30 – Eustis Insurance Company and its insured, New Hotel Monteleone, remain embroiled in litigation over coverage for a 2014 cyberattack, centering on the insurability of exposures Hotel Monteleone faces in the wake of the attack, including fraud recovery and operational reimbursement expenses.  The case, venued in the Eastern District of Louisiana, is a signal example of the non-standard nature of cyber-coverage, and the need for experienced counsel on all sides when policies are formulated, bought, and sold.

This week, the dispute became even more complicated when Eustis  filed a third-party complaint against wholesale insurance broker, R-T Specialty, Inc., alleging that R-T failed to properly explain to the Hotel Monteleone the precise coverage of the policy, issued by Certain Underwriters at Lloyd’s, London (Lloyd’s), subscribing to Ascent Cyberpro (the Ascent) policy.  The hotel previously initiated the suit against Eustis and Lloyds In December 2015 seeking complete coverage for its losses under the Ascent Policy

Eustis engaged R-T after the Hotel Monteleone approached Eustis about cyber coverage following an earlier, 2013 cyber attack on the hotel, for which there was no insurance coverage.  Eustis did not have broad experience with cybercoverage, and brought in R-T based on R-T’s alleged representations that it was conversant in procuring such insurance.

The Ascent Policy issued through Lloyds and R-T had an overall limit of $3 million.  The coverage, however, was restricted substantially relating to costs incurred by an insured which constituted fines or penalties.

The third party complaint against R-T Specialty alleges that the broker failed to  inform Eustis that fraud recovery and operation reimbursement might be considered to be a fine or penalty, or that a $200,000 sub limit appearing in the policy’s Payment Card Industry Fines or Penalties Endorsement may apply to fraud recovery and operational reimbursement expenses arising from the cyberattack.

The case illustrates the murkiness of the current cybercoverage market, the great variability in individual coverage, and the possible exposure of agents and brokers for failing to properly produce or explain the coverage they secure for their customers.

New Hotel Monteleone, LLC v. Certain Underwriters at Lloyd’s of London, Subscribing to Ascent Cyberpro Policy No. ASC14C00944, No. 2:16-CV-00061-ILRL-JCW (Eastern District, Louisiana 2016)

 

 

 

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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