Is Insurance Coverage Available Under Traditional Crime Policies For Computer Hacking?

Every day another corporation suffers a major data breach. Class action privacy breach lawsuits often follow, and companies often incur substantial nonlegal expenses in responding to data breaches. It is important for every business to understand cyber risks and how to insure against losses arising from data breaches and theft of electronically stored information. In a ruling that may enable companies to obtain insurance coverage for data breaches under traditional first party insurance policies, the United States Court of Appeals for the Sixth Circuit held in Retail Ventures, Inc. v. Nat'l Union Fire Ins. Co., 691 F.3d 821 (6th Cir. 2012) that losses resulting from the theft of customers' banking information from a retailer's computer system are covered under a commercial crime policy.

The Retail Ventures Decision

In February 2005, a computer hacker accessed the computer system of Designer Shoe Warehouse (DSW) and downloaded credit card and checking account information from 1.4 million DSW customers. Following the...