The Superior Court of New Jersey Appellate Division recently upheld a lower court’s finding that the war exclusion in a property insurance policy did not preclude coverage for Merck’s claim stemming from a 2017 cyberattack. The decision is appropriately being heralded as a huge win for policyholders and an affirmance of New Jersey’s longstanding history of protecting policyholders’ reasonable expectations. We previously blogged about developments relating to the war exclusion and the Merck case when it was initially heard by the Appellate Division.
Continue Reading Merck Wins Again in Cyber Coverage Battle
Boots on the Ground or Hands on a Keyboard: Merck and Insurers Battle Out the War Exclusion
Update: On May 1, 2023, the New Jersey appeals court affirmed the trial court’s decision that a war exclusion did not bar $1.4 billion in coverage for Merck’s losses stemming from the NotPetya attack.
On June 27, 2017, the skies over New Jersey were clear and the ground steady. But Merck & Co., a New Jersey-based pharmaceutical company, was under attack. Malware ripped through its computers, damaging 40,000 of them and causing over $1.4 billion in losses.
Merck was not the sole target.[1] Dubbed “NotPetya,” the virus tore through the US economy,[2] and did an estimated $10 billion in damage. The US Department of Justice charged six Russian nationals, alleged officers of Russia’s Intelligence Directorate (the GRU), for their roles in the NotPetya attack, among others. The attackers’ goal, according to the DOJ, was:
Continue Reading Boots on the Ground or Hands on a Keyboard: Merck and Insurers Battle Out the War ExclusionThe War Exclusion Will Be a Leading Issue in the Months and Years Ahead
With the circumstances in Ukraine intensifying and companies either shutting down or suspending operations in the region, the question arises about whether the sparingly used war exclusion will become more relevant as policyholders seek to recover losses. Economic effects of the conflict are spreading. Some companies may have to close operations entirely, some partially, and others may have their supply chains severely disrupted. The US government has warned companies to protect themselves against cyberattacks. The impact on policyholders, however, may take different forms, potentially implicating their business interruption, contingent business interruption, cyber, shipping and cargo, and political risk insurance coverages. Other coverages could be implicated as well.
Continue Reading The War Exclusion Will Be a Leading Issue in the Months and Years Ahead
Will Insurers Declare “War”? The War Exclusion, the Ransomware Attack on Baltimore, and the NSA Cyber-Tool?
The City of Baltimore is the latest victim of increasingly common ransomware attacks. On May 7, 2019, unidentified hackers infiltrated Baltimore’s computer system using a cyber-tool named EternalBlue, developed originally by the United States National Security Agency to identify vulnerabilities in computer systems. However, the NSA lost control of EternalBlue, and since 2017, cybercriminals have used it to infiltrate computer systems and demand payment in exchange for relinquishing control. For instance, in Baltimore, the hackers have frozen the City’s e-mail system and disrupted real estate transactions and utility billing systems, among many other things. The hackers reportedly demanded roughly $100,000 in Bitcoin to restore Baltimore’s system. The city has refused to pay.