According to various reports, the insurance industry is set to face up to $1bn in losses following the CrowdStrike incident, due to the triggering of (mainly) cyber and business interruption policies. However, a group of airline passengers who had a flight delayed or cancelled due to the outage are in the process of suing the tech company, and it’s also feeling the heat from some of its investors, who say they have been defrauded.
We asked our in-house expert, Andy Coleman, what he thought the impact might be on D&O insurance;
“It’s hard to see a case for a D&O policy response to this incident and I don’t anticipate claims any time soon. Once the initial cyber and BI fall-out has cleared, there may be some who attempt recovery via a D&O policy, particularly in the American market where it’s much easier to bring an action. However, at the heart of the issue, is the lack of a defined wrongful act. It was an automatic upgrade, and no permission nor authorisation was needed nor sought from any CrowdStrike client director or officer but, again, I expect there will be some on the Plaintiffs Bar who will try to sue after finding some small print in the licensing contract. There may also be an argument over why choose CrowdStrike vs. another provider, but this issue was so widespread, so unexpected, that it would be very difficult to assign any negligence to any board and its directors or officers.”
In Guy Carpenter’s cyber analysis ‘A Closer Look: Unveiling the Global Impact of CrowdStrike Event’ it says that product lines beyond cyber risk may be affected but with regards to D&O it reported that “Historically, securities class actions arising from technology incidents have fared poorly. In addition to securities class actions, companies that are either involved in or impacted by the event may face increased exposure if they struggle to restore operations and may face shareholder derivative suits alleging the board’s breach of fiduciary duty.”
Table 2: Assessment of Coverage Scope for CrowdStrike Outage
It’s clear that the impact of the CrowdStrike outage affected operations around the world, particularly in the travel and healthcare industries but also in the retail and banking sectors and this is set to drive insurance claims. However, it looks unlikely that D&O policies will experience losses in the long-term.
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