Cyber insurance claims are often denied due to policy exclusions, security control lapses, or inaccurate statements made on the insurance application. Insurers often rely on the specific language of the policy when making a determination.
Insurers carefully review how a loss is calculated and whether the company accurately described its security measures when it bought the coverage. These factors can lead to a denial of the claim.
Our team at Barcus Arenas, PLLC, has nearly two decades of combined experience. If you’re facing a denied cyber insurance claim, our first-party insurance claims lawyers in Houston may be able to help. Better Advice, Better Advocates. Call for a free consultation.
How Insurers Deny Cyber Insurance Claims
Cyber insurance policies are often written in specific ways, and insurance companies use this precise language when deciding whether to approve or deny a claim. Insurance adjusters pay close attention to the definitions in the policy as much as they do to the coverage details.
Terms can be defined in ways that may not apply to the specific incident a business faced, leading to potential gaps in coverage.
Barcus Arenas, PLLC, examines denial letters alongside the actual insurance policy to determine if the insurer’s reason for denial aligns with the coverage that was originally purchased.
For a free legal consultation, call (800) 941-1041
Failure to Maintain Required Security Controls
Many cyber insurance policies have ongoing requirements that include things like keeping software updated or using specific methods to protect stored data.
If an insurance company can prove that a necessary security measure was not followed before a cyber incident occurred, they might consider the policy violated, even if the cause of the breach was different.
At Barcus Arenas, PLLC, we can assist you in gathering the necessary documents to show which security measures were actually in place at the time of the incident.
Incorrect Information on the Insurance Application
Insurance companies often ask businesses how they protect their data and systems before they offer coverage. If a business shares incorrect information, even by mistake, it can lead to problems.
If a business claims that it uses MFA throughout the organization but later experiences a security breach through an account that didn’t have that protection, the insurance company might argue that the policy is invalid from the beginning.
Barcus Arenas, PLLC looks closely at your original application and compares it with your company’s actual security measures to determine if there has been any misrepresentation.
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Policy Exclusions That Catch Texas Businesses Off Guard
When businesses buy cyber insurance, they often don’t realize some situations are not covered. For example, insurers might deny claims for issues related to war or cyber attacks from other countries.
Another important area to watch out for is known as prior knowledge exclusions. If any staff member was aware of a potential vulnerability before the insurance policy was bought, the insurer might claim that the loss was predictable and therefore not covered.
Barcus Arenas, PLLC, can help you understand exclusions in your policy and check whether an insurer has applied them correctly to your claim.
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Disputes Over Business Interruption Losses
A claim for business interruption losses must show that the outage was directly linked to a covered cyber event. Insurance companies often focus on the details of how lost income is calculated, rather than questioning whether the incident occurred.
There are also waiting periods before the insurance coverage starts. If a business experiences a brief outage that doesn’t meet this time requirement, they might not receive any compensation, even if the disruption was significant.
At Barcus Arenas, PLLC, we can help you figure out the right amount of lost income you should receive when your insurance provider disputes the claim. We work through the numbers carefully to ensure fairness in the calculations.
How Strong Specific Security Protocols Can Strengthen Your Claim
Insurers look for evidence that a company was actually doing what its policy required, not just what the application claimed. Businesses that can point to specific, documented security measures are in a much stronger position when a claim is disputed.
- Multi-factor authentication should be enforced across every system that touches sensitive data.
- Software and firmware patches should be applied on a regular, documented schedule.
- Sensitive data should be encrypted both at rest and in transit, which limits the scope of a breach.
- A written incident response plan should be in place and followed step by step when an incident occurs.
- Employees should receive regular security awareness training, with attendance and completion records kept on file.
The CISA offers cyber guidance for small businesses. Barcus Arenas, PLLC will review which protocols were in place at the time of a breach when evaluating whether an insurer’s denial was based on an actual gap or an overstated one.
Get the Help You Need When Your Cyber Insurance Claim is Denied
Cyber insurance claims are typically denied because of policy exclusions, lapses in security controls, or incorrect information provided on the insurance application. But insurers sometimes deny legitimate claims for reasons that may not be clear.
A denied cyber insurance claim leaves your business covering breach costs, legal exposure, and lost income out of its own pocket, often at the worst possible time.
Barcus Arenas, PLLC, may be able to help if your cyber insurance claim was denied. Call today for a free consultation to discuss your options.
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