Ransomware Attacks May Not Be Covered By Traditional Insurance Policies


Buying insurance policies to minimize the costs your organization will incur in the event of a ransomware attack is becoming a popular trend in today’s uncertain cybersecurity environment. But not all insurance policies are created equal, as National Ink & Stitch found out the hard way. Ransomware attacks may not be covered by traditional insurance policies.

National Ink & Stitch, a small screen printing and embroidery company, filed a claim with State Auto Property and Casualty Insurance Co. after suffering a ransomware attack in December 2016. However, according to Claims Journal, the insurer denied the claim, arguing the business did not suffer a “direct physical loss of or damage to” the computer system.

National Ink ended up paying the Bitcoin demanded by the cybercriminals who implanted ransomware on its computer system, but the system moved more slowly afterward because of the additional cybersecurity measures put in place. Also, art files that had been stored on the server could not be accessed.

National Ink filed a suit and filed a motion asking the court to issue summary judgment in its favor, and that motion was granted this week. What helped the company’s case was computer experts’ testimony that there were likely dormant remnants of the ransomware virus in the system. National Ink’s only options were to wipe the entire system and reinstall the software and data or purchase a new server and components, according to the court opinion written by U.S. District Judge Stephanie A. Gallagher.

Although no dollar figure had been set for the summary judgment as of Jan. 24, CyberScoop reported National Ink had sought $310,000 in damage from State Auto.

As this case shows, relying on traditional insurance policies could prove difficult for businesses who suffer a cyberattack. Cyber policies are becoming increasingly popular, but with the number of cybercrimes on the rise, premiums will increase, as well.

Your best bet is to protect yourself as much as possible on the front end to stay out of the clutches of cybercriminals and out of court suing an insurance company. 2W Tech is a full-service IT consulting firm that has IT consultants on staff who specialize in security solutions. Give us a call today and let us help keep you protected from ransomware threats.

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