Was the 2017 “NotPetya” Ransomware Attack an Act of War?

This is the question being litigated in a high-stakes cyber insurance coverage dispute between global snack food giant, Mondelez International, and its insurer, Zurich American Insurance Company, in Illinois state court. “NotPetya” was a 2017 ransomware attack in which infectious code impacted a number of global corporations, including Mondelez, encrypting computer hard drives and demanding payment for access to the data. Mondelez claims that it suffered damage to its hardware and operation software systems valued in excess of $100 million as a result of the attack. In early 2018, the U.S. and its allies publicly attributed the cyberattack to the Russian government. Russia denied the allegations. Modelez submitted an insurance claim to Zurich under an all-risk property insurance policy. Mondelez alleges that Zurich denied the claim based on a policy exclusion that excluded coverage for “loss or damage directly or indirectly caused by or resulting from … [a] hostile or warlike action … by any government or sovereign power … or agent or authority [thereof].” In October 2018, Mondelez filed suit against Zurich in Cook County, Illinois to determine whether the exclusion applies. According to the docket the case is currently pending, and working its way through the discovery process.

This case is being closely watched by corporations and insurers alike as it may have broad implications on cyberattack coverage for both traditional and specialized cyber insurance policies that contain the same or similar exclusions. What evidence will the insurer present to seek to prove that this war exclusion applies?

Pieces by Brian Corcoran on Lawfare (here) and Jeff Sistrunk on Law360 (here) each contain in-depth discussions of the case and its potential implications on the cyber insurance market. The docket for the case can be found here (select the Law Division and enter Case Number 2018-L-011008).

Posted by R. Brandon McCullough attorney at Houston Harbaugh, P.C. 401 Liberty Avenue, Pittsburgh, PA 15222. Brandon concentrates his practice primarily in the areas of insurance coverage and bad faith litigation, complex commercial and business litigation and appellate litigation. Please contact Mr. McCullough at 412-288-4008 or mcculloughb@hh-law.com with any questions pertaining to this article or any other legal matters.

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