Your friend clicked on a link in a questionable email. Now her computer is locked with a message saying it will unlock if she makes a bitcoin ransom payment. This is causing two problems for her: (1) Her computer doesn’t work now, and (2) She had 10 years worth of family photo albums stored on the hard drive, with no cloud backup.
Notable Timestamps
[ 00:15 ] – Today’s scenario involves ransomware. The computer wasn’t cheap, and those photos were priceless, so she wants her insurance company to make the ransom payment for her. The adjuster handling the claim is looking to see whether this is covered, and if so, what actually can be done.
[ 01:06 ] – The team discusses what happens when you click on a suspicious link, and what’s supposed to happen when someone says “O-H…”
[ 03:45 ] – The computer falls under Coverage C as personal property, and so do the digital photos.
[ 04:41 ] – Theft is a named peril under Covegage C that likely applies. Vandalism might also apply.
[ 05:35 ] – Being unable to access something qualifies as a loss in this scenario.
[ 07:08 ] – There is a split in courts, but in EMOI Services, LLC v. Owners Ins. Co., 2022-Ohio-4649, 2022 WL 17905839. —- N.E.3d — (Ohio 12/27/2022) (Supreme Court of Ohio, applying Ohio law) [reviewed at PLRB, Prop. Ins. L. Rev. 11510 (2023)], encryption of files, caused by a ransomware attack on the policyholder’s computer system, was not direct physical loss or damage to “media” covered under an Electronic Equipment endorsement to a businessowners policy.
[ 08:30 ] – If data isn’t physical in “O-H…I-O,” the Electronic Data coverage in commercial forms could apply, if it would otherwise have no application.
[ 09:30 ] – Assuming the matter is covered, the insurer could pay ACV… but could they pay the ransom? It’s an open question.
[ 11:04 ] – Calculating ACV for the photos is subjective, but market value would likely be low.
[ 13:00 ] – One of the Special Limits of Liability caps “personal records” at $1,500.00.
[ 13:48 ] – Ransomware is becoming an new insurable niche, with potential new endorsements coming down the road: “cyber-extortion” coverage, etc.
[ 15:33 ] – Tim provides a recap of the scenario and the points above.
Your PLRB Resources
Coverage Question – Loss of Use: Hacked Cell Phone, Ransom Demanded – https://search.plrb.org/?dn=73714 (https://search.plrb.org/?dn=73714)
Coverage Question – Cyber Losses FAQs – https://search.plrb.org/?DN=67890
Webinar – Cyber Loss Case Scenarios – https://www.plrb.org/distlearn/webinars/vplayer.cfm?vid=w0091
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The views and opinions expressed in this resource are those of the individual speaker and not necessarily those of the Property & Liability Resource Bureau (PLRB), its membership, or any organization with which the presenter is employed or affiliated. The information, ideas, and opinions are presented as information only and not as legal advice or offers of representation. Individual policy language and state laws vary, and listeners should rely on guidance from their companies and counsel as appropriate.
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