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Deritivative Cyber Litigation

By James D. Gassenheimer and Lara O'Donnell
May 02, 2015

Potential liability for data breaches has emerged as a major concern for businesses in the past few years as massive cyber-attacks are increasing, with companies that use or store private customer data electronically or use social media as part of their marketing strategy being the prime targets. These data breaches have contributed to an increase in director and officer (D&O) litigation in connection with cyber incidents, and will continue to do so, with plaintiffs seeking to capitalize on D&O policies that do not contain cyber or data breach exclusions.

The market for D&O cyber coverage is evolving in response to these issues. However, existing policies and those covering prior policy periods do not reflect current market trends. Many D&O policies connected to the current influx of D&O litigation lack cyber liability exclusions. Thus, although both businesses and insurance companies are responding to changes in cyber liability exposure and litigation, plaintiffs continue to capitalize on the possibility of payouts for cyber liability under D&O policies.

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