Pollution Liability Coverage for Cyberattacks

Competitive environmental Intelligence (CeI) for insurance professionals that sell or consult on cyber insurance.

Background:  Businesses that utilize computers can be vulnerable to a cyberattack.  In one situation a wastewater treatment plant was the target in which a hacker caused 300,000 gallons of raw sewage to spill into a river and flood the grounds of nearby businesses.

Cyberattacks (use of Malware) generally refers to a crime in which a computer is targeted.  Hackers can reprogram equipment to run at unsafe speeds, higher temperatures, open valves, change pressures…, that can create pollution liabilities and can threaten human health and the environment.

Hackers can impact the operation, control, performance, navigation, warning systems…, of watercraft, trains, aircraft, road vehicles, dam operations, HVAC, plumbing, electric, security systems, basically anything that depends upon computers can be the target of hackers.

Cyber policies I have reviewed, exclude pollution liabilities caused by a cyberattack.

Solution:  Businesses susceptible to hackers need to have an environmental financial assurance plan to address pollution liabilities caused by hackers?  Financial assurance can be in the form of a letter of credit, bond, monies in escrow, captive, or pollution insurance.

Pollution insurance policies are designed to fill in coverage gaps created by standard property and casualty policies such as pollution exclusions on cyber policies.  Compared to the cost of other financial assurance mechanisms, pollution insurance costs the insured fractions of a cent on the dollar.  Pollution policies can cover first party cleanup, onsite and offsite third-party bodily injury, property damage and business income, transportation pollution liability, legal fees, investigation costs, first party business income and much more.

As an example, one environmental insurance carriers’ definition of a pollution incident includes the following wording:  the discharge, dispersal, release, seepage or escape of any pollutant into or upon land, or any structure on land, the atmosphere or any watercourse or body of water, including groundwater, that results directly from a cyberattack;

If you sell cyber insurance, make sure you are covering pollution losses due to a cyberattack.  If you fail to, when an insured experiences a pollution liability from a cyberattack, your E&O insurance may be the only coverage they have.

The following link will take you to a press release regarding the new Certified environmental Strategist (CeS), online CE approved training offered through The National Alliance:  https://www.insurancejournal.com/services/newswire/2022/04/28/664841.htm

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