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Policyholder PulsePublished on:
As Investment in ESports Grows, Insurance Coverage Must Keep Up
Packed stadiums? Check.
Players and teams with huge followings? Check.
Massive social media appeal? Check.
But here, the events that spectators are so eager to attend aren’t live basketball or football games. Instead, fans are lining up to watch others competitively play video games, more commonly known as eSports. In 2018, eSports garnered 258 million unique viewers globally, compared to 204 million for the National Football League’s 2016 regular season. In 2019, eSports are predicted to draw 299 million viewers and hit $2 billion in revenue, up from $1.5 billion in 2018. The International Olympic Committee is even considering adding eSports to the 2024 Olympic Games.
A data breach may cost a company millions in recovery and liability damages, but rarely does a breach force a company into bankruptcy. However, a months-long data breach at American Medical Collection Agency (AMCA) in 2018-2019 did just that, forcing its parent company, Retrieval-Master Creditors Bureau Inc., into Chapter 11 bankruptcy. AMCA has not stated whether it had cyber insurance, but the situation presented by this breach and bankruptcy filing serves as a cautionary tale for those without adequate cyber insurance coverage—or any at all.
Experts are full of advice about the importance of designing and implementing a robust cyber breach response plan. They opine frequently on its key components, such as identifying the roles and responsibilities of the response team, steps for investigating and containing the breach, internal and external communications regarding the breach and the response, and applicable legal requirements. For the most part, however, their advice focuses on the information-technology aspects of the plan, with some attention given to the roles of senior management and the legal department. But few commentators offer tips on one of the most consequential components of a cyber response plan: insurance.
Have $57 million (or more) to spare? You’re going to need it if you run afoul of the EU’s General Data Protection Regulation (GDPR) without cyber insurance.
Even when you’ve done your utmost to secure your organization’s cybersecurity—you’ve followed the advice of all the experts, you’ve checked all the boxes—you still may have an Achilles’ heel. Your cybersecurity is only as strong as its weakest point, which is often a vendor or supplier. In this context, a vendor could be anything from a cloud service provider, data processor, or IT engineer to an HR consultant, accounting firm, or health care benefits manager, while a supplier could be a key provider of manufacturing components or raw materials.
On insurance coverage issues, sometimes the boat seems to be listing in the wrong direction. For example, insurers have long tilted the decks to avoid coverage for “spoofing” attacks and similar kinds of email fraud by throwing their weight behind arguments that such transactions do not involve a “direct loss” from the use of company computers to implement a fraudulent scheme, which they claim their policies require. But in the first half of July, not one, but two federal appellate decisions—
and the internet to carry out much more complex schemes. The insurance industry has attempted to keep up with the technological evolution in the coverage it provides, but insurers have also used unclear policy language and the complexity and individualized nature of today’s fraudulent schemes to avoid covering the resulting losses. A slew of courts over the past few years have decided whether crime policies—particularly those with a computer fraud coverage component—cover complex, technology-related fraudulent schemes. The Eleventh Circuit recently joined the fray and ruled that computer fraud coverage did not apply to a policyholder’s $11 million loss.
Artificial Intelligence (AI) is a hot topic in industries from manufacturing to the medical profession. Developments in the last 
Uncertainty and speculation abound; no one knows exactly how the law will be enforced, particularly with respect to companies domiciled outside the EU, with no EU footprint, who process and hold the personal data of EU residents. But while publications are awash with advice regarding compliance, few tackle the question whether your business is protected against loss in the event of a data breach or other unintentional failure to comply. We strongly suggest that your due diligence include a review of your insurance coverage for GDPR non-compliance, especially for fines, penalties and lawsuits (individual or class action). Qualified coverage counsel should assist in the review, but key areas of focus include: