You may have seen my friend Brian Krebs’ post regarding the lawsuit filed last month in the Western District of Virginia after $2.4 million was stolen from The National Bank of Blacksburg from two separate breaches over an eight-month period. Though the breaches are concerning, the real story is that the financial institution suing its insurance provider for refusing to fully cover the losses.

From the article:

In its lawsuit (PDF), National Bank says it had an insurance policy with Everest National Insurance Company for two types of coverage or “riders” to protect it against cybercrime losses. The first was a “computer and electronic crime” (C&E) rider that had a single loss limit liability of $8 million, with a $125,000 deductible.

The second was a “debit card rider” which provided coverage for losses which result directly from the use of lost, stolen or altered debit cards or counterfeit cards. That policy has a single loss limit of liability of $50,000, with a $25,000 deductible and an aggregate limit of $250,000.

According to the lawsuit, in June 2018 Everest determined both the 2016 and 2017 breaches were covered exclusively by the debit card rider, and not the $8 million C&E rider. The insurance company said the bank could not recover lost funds under the C&E rider because of two “exclusions” in that rider which spell out circumstances under which the insurer will not provide reimbursement.

Cyber security insurance is still in its infancy and issues with claims that could potentially span multiple policies and riders will continue to happen – think of the stories of health insurance claims being denied for pre-existing conditions and other loopholes. This, unfortunately, is the nature of insurance. Legal precedent, litigation, and insurance claim issues aside, your organization needs to understand that cyber security insurance is but one tool to reduce the financial impact on your organization when faced with a breach.

Cyber security insurance cannot and should not, however, be viewed as your primary means of defending against an attack.

The best way to maintain a defensible security posture is to have an information security program that is current, robust, and measurable. An effective information security program will provide far more protection for the operational state of your organization than cyber security insurance alone. To put it another way, insurance is a reactive measure whereas an effective security program is a proactive measure.

If you were in a fight, would you want to wait and see what happens after a punch is thrown to the bridge of your nose? Perhaps you would like to train to dodge or block that punch instead? Something to think about.