Cybersecurity Insurance – Are you covered? Part 2
In this series, we are looking at the built-in Cybersecurity Insurance traps for your business – no matter the size. Business Insurance Cybersecurity Riders aren’t the same as full Cybersecurity Insurance, but they are a good starting point to up your security game.
One of our partner companies – Ben Yarbrough from Calyptix – has posted an excellent article on ChannelPro Network for MSPs (like daviestrek) to evaluate their security stance and posture with clients to make sure the client AND the MSP are covered in the event of a disaster. “Cyber Insurance Litigation: 3 Pitfalls Every MSP Needs to Understand” is a great article with a number of points worth taking a second look at.
Trap #1: Application Inaccuracies Can Void Coverage Entirely
“Cyber insurance applications are not paperwork exercises. Courts routinely treat them as material representations that go to the heart of risk transfer.
In Travelers v. International Control Services, the insured represented on its application that multi-factor authentication (MFA) was deployed. However, MFA was enabled only at the firewall, not across all systems, as the application required. After a ransomware attack, Travelers denied coverage. The court agreed, rescinding the $1 million policy as if it never existed.
For MSPs, the lesson is clear. Even when MSPs do not complete insurance applications, their work underpins application representations. During claims investigations, insurers routinely examine MSP tickets, configurations, logs, onboarding documents, and assessments to validate underwriting answers.
A denied claim can quickly cascade into client dissatisfaction, negligence allegations, or insurer subrogation. MSPs should assume anything supporting an insurance representation may later become evidence.”
Key Takeaway on Trap #1
When filling out your insurance paperwork a “little fib” is a very big deal. “I don’t know what that is” shouldn’t be skipped, and almost always, that achingly simple thing you’ve done for many years is going to be more complex. Work with your MSP or Computer expert to fix or implement solutions that will satisfy your Insurance Rider. Your Agent is not likely to know the answers either and “don’t worry we will cover it” is the worst possible answer.
