The importance of early communication on cyber business interruption claims

Cyber-based communication and transactions are the lifeblood of any business. Yet this necessary flow of information can also make businesses more vulnerable. When a business is victimized by a cyberattack, its operations can come to a crashing halt.

Ransomware is often the culprit. In this crime, which has proliferated since the pandemic, hackers infiltrate a business network and shut it down to extort payment. Because negative consequences can rapidly escalate until the network is restored, any affected business should take immediate action. David Standish, Liberty’s global cyber claims leader, discusses steps insureds can take to help protect themselves when a problem arises.

As soon as an insured business believes it may have a business interruption (BI) loss, policyholders should partner with their claims team. As for what may qualify as a potential business interruption loss, ask this basic question:

Was there a network interruption? (If so, there’s a high likelihood there will be a BI loss.)

When in doubt, consider: is your business losing time or money in response to a specific event? Or, are you spending extra money to keep the business operational during the network interruption? (If yes, there could be a BI loss.)

So, in the event of a BI loss, what can you expect when you contact your insurance company?

At Liberty, we offer our insureds coverage for a potential BI loss as well as access to a panel of forensic accountants through our cyber network interruption coverage. Working in conjunction with a claims team that specializes in handling complex cyber incident response and claim adjusting issues, we have the capability to help manage all cyber claims, regardless of whether we are the primary carrier responsible for the initial incident response and loss adjusting, or if we sit higher in the excess tower on larger, more complex losses.  

Most important, our dedicated cyber claims expertise helps to ensure that your claims will be addressed by a specialist, not a generalist. If you don’t have this coverage, or if you otherwise choose, you can use your own accountant or prepare the BI claim in-house. But first, consider if that accountant or in-house resource has the necessary skillset and BI claim submission experience needed for your situation.

As an outside expert, our preferred forensic accountant partners with you to establish, up front, a methodology for calculating the potential loss. This approach includes, among other things:

Following this process can put you in better position for a swift and equitable resolution.

In cases where the insurer isn’t contacted up front, the insured often submits a disorganized BI claim submission — much like an electronic stack of papers and an estimate of what they believe the insurer should pay. This can serve to create additional time-consuming steps:

If the insured hasn’t worked with the insurer up front, this new forensic accountant would have to start the process of investigating the insured’s methodology of loss calculation later in the process than if there had been early communication. Working with the insured or the insured’s accountant from the outset can help to eliminate the need for backtracking and extra work.

Holding off initial contact can generate more questions and potentially extra work for the insured, carrier, and the forensic accountant, and ultimately slow down the time to get the insured back to the financial position they were in before the interruption.

Due to their significant impact on the livelihood of an enterprise, BI claims can be complicated, requiring the services of forensic accountants and specialized claims handling. All of this takes time.

To save both time and money, insureds should engage the insurer early in the process and work together to implement a loss calculation methodology. Doing so at the soonest opportunity can ultimately set up the claim to have a much more efficient adjustment.