Neiman Marcus case a reminder to check your cyber coverage

In a decision that should send major corporations to double-check their cyberinsurance, a federal appeals court ruled Monday that retail customers could go ahead and file a class-action lawsuit against Neiman Marcus in the wake of last year's data breach.

Previously, such cases were dismissed because the customers hadn't suffered any actual damages.

In the decision, the judges ruled that breach posed a substantial risk of harm to the customers.

"Why else would hackers break into a store's database and steal consumers' private information?" they said.

They also pointed to the fact that Neiman Marcus offered the victims a year of credit monitoring. "It is unlikely they did so because the risk is so ephemeral that it can safely be disregarded," the judges said in the ruling.

"If similar decisions follow suit, the likelihood is that the cost of a cyber breach for retailers will increase," said Tim Francis, enterprise cyber lead at Hartford, Conn.-based Travelers. "With this in mind, it is more important than ever that businesses ensure that they have cyber liability coverage, and, if they do, that they have adequate limits in place."

Cyberinsurance costs are also rising because of the price of business disruption, revenue loss, equipment damages, legal fees, public relations expenses and forensic analysis, as well as notification costs that are legally mandated in 47 states, he added.

"With this recent decision, defense costs can add up quickly and can exhaust the policy aggregate limit," said Christine Marciano, president at Cyber Data-Risk Managers.

That could leave a company without enough funds to pay out to plaintiffs.

"A company should consider purchasing a cyber insurance policy that offers defense costs outside of the policy limit in order to ensure the company can sustain the aftermath in such instances as Neiman's lawsuit reversal," she said.

However, the Neiman Marcus case is just one decision, cautioned attorney Scott Vernick, head of the data protection and privacy practice at Philadelphia-based Fox Rothschild LLP. Other courts may or may not follow, he said.

There also have been other cases that went in favor of the victims of a data breach, he said, though in most instances they were dismissed because the plaintiffs had not suffered actual damages, so had no standing to file suit.

This could be an opportunity for companies to double-check their policies and make sure they're covered for litigation, in addition to sending out notices to the victims and paying for credit protection.

In addition, he said, companies should check that their cyberinsurance is tailored to the needs of their particular business, since the level of potential risk is different for different industries.

"And depending on what kind of business you have, you certainly want to make sure that it will cover any response to any investigations by law enforcement and regulatory agencies and any fines that might be imposed," he added. "That's something a lot of companies overlook."

In addition to checking what the policies will cover, companies should also check the other fine print -- what they have to do in order not to void the coverage, said Eric Cole, fellow at SANS Institute.

"For example, many policies state that organizations must apply all patches to all systems within a set period," he said. "Many organizations fall short on a few servers which will allow the insurance company to not have to pay on the policy."

Cyberinsurance is a rapidly-evolving field, experts say, very different from auto insurance or fire insurance. Instead of a hundred years of data, the number of breaches is tiny by comparison, and records only go back a few years. Plus, with technology changing as rapidly as it is, data points from a couple of years ago will be out of date tomorrow.

"Companies should always be re-evaluating cyberinsurance," said Dan Weedin, president at Toro Consulting. "In order to be protecting what they want to protect, it's important to be reviewing this coverage on a minimum of an annual basis, if not more often."

Every business is different in how it uses technology and how much sensitive data is collected and stored, and the situations change quickly if, say, a company decides to start offering its customers a new payment channel.

"This causes an increased exposure that can be missed," he said. "Insurers are getting much better at identifying areas of concern."

The situation is certainly better than it was 10 years ago, he added, with insurance agents becoming more knowledgeable about these policies.

"They are better now, yet not what I would consider cutting edge," Weedin said.

Join the CSO newsletter!

Error: Please check your email address.

Tags cyber attacksespionagelegalNeiman Marcuscybercrime

More about SANS Institute

Show Comments

Featured Whitepapers

Editor's Recommendations

Solution Centres

Stories by Maria Korolov

Latest Videos

  • 150x50

    CSO Webinar: Will your data protection strategy be enough when disaster strikes?

    Speakers: - Paul O’Connor, Engagement leader - Performance Audit Group, Victorian Auditor-General’s Office (VAGO) - Nigel Phair, Managing Director, Centre for Internet Safety - Joshua Stenhouse, Technical Evangelist, Zerto - Anthony Caruana, CSO MC & Moderator

    Play Video

  • 150x50

    CSO Webinar: The Human Factor - Your people are your biggest security weakness

    ​Speakers: David Lacey, Researcher and former CISO Royal Mail David Turner - Global Risk Management Expert Mark Guntrip - Group Manager, Email Protection, Proofpoint

    Play Video

  • 150x50

    CSO Webinar: Current ransomware defences are failing – but machine learning can drive a more proactive solution

    Speakers • Ty Miller, Director, Threat Intelligence • Mark Gregory, Leader, Network Engineering Research Group, RMIT • Jeff Lanza, Retired FBI Agent (USA) • Andy Solterbeck, VP Asia Pacific, Cylance • David Braue, CSO MC/Moderator What to expect: ​Hear from industry experts on the local and global ransomware threat landscape. Explore a new approach to dealing with ransomware using machine-learning techniques and by thinking about the problem in a fundamentally different way. Apply techniques for gathering insight into ransomware behaviour and find out what elements must go into a truly effective ransomware defence. Get a first-hand look at how ransomware actually works in practice, and how machine-learning techniques can pick up on its activities long before your employees do.

    Play Video

  • 150x50

    CSO Webinar: Get real about metadata to avoid a false sense of security

    Speakers: • Anthony Caruana – CSO MC and moderator • Ian Farquhar, Worldwide Virtual Security Team Lead, Gigamon • John Lindsay, Former CTO, iiNet • Skeeve Stevens, Futurist, Future Sumo • David Vaile - Vice chair of APF, Co-Convenor of the Cyberspace Law And Policy Community, UNSW Law Faculty This webinar covers: - A 101 on metadata - what it is and how to use it - Insight into a typical attack, what happens and what we would find when looking into the metadata - How to collect metadata, use this to detect attacks and get greater insight into how you can use this to protect your organisation - Learn how much raw data and metadata to retain and how long for - Get a reality check on how you're using your metadata and if this is enough to secure your organisation

    Play Video

  • 150x50

    CSO Webinar: How banking trojans work and how you can stop them

    CSO Webinar: How banking trojans work and how you can stop them Featuring: • John Baird, Director of Global Technology Production, Deutsche Bank • Samantha Macleod, GM Cyber Security, ME Bank • Sherrod DeGrippo, Director of Emerging Threats, Proofpoint (USA)

    Play Video

More videos

Blog Posts

Market Place