Hermes Marangos

1. Cyber Related Covers and Recent Disputes on the Application of War and Terrorism ExclusionsCyber Products from the London market and legal disputes of relevance to insureds worldwide Hermes Marangos

2. The Phenomenon of Cyber and Insurance Coverage Kessler: The financial loss a cyber attack may cause is potentially greater than natural catastrophes: WannaCry (May 2017): USD 1.5 – 3 billion; NotPetya(June 2017): USD 2.5 – 3 billion.  “Rampant” Technology and issues for companies: Reliance upon new cyber technology and collection of ‘Big Data’ (for example, InsurTech and FinTech): Irreversible development of modern life, creating exposure to cyber attack Companies are slow to secure their data infrastructure: Creating vulnerability to cyber attack; warnings by Institute of Directors et al New and experimental insurance products have been developed to deal with such new technologies, increased prevalence of cyber attacks, and greater regulation.

3. Cyber Products and Traditional Insurance Policies • New experimental cyber products (such as InsurTech) are being developed which raise the following legal concerns: • Intellectual property and ownership of products; • AI making decisions that are illegal and discriminatory; • Breaches of or failure to implement Data Protection law; and • Increases in incidences of negligence. • Silent Cyber: Traditional or Specialist Cover? • Affirmative cyber: Exposures that are calculable and ascertainable • Silent Cyber: Exposures that are unintended, unknown, or unquantified caused by cyber attacks but trigger traditional insurance policies (see: WannaCry ransomware covered by K&R policies). • Should exposures be covered by or excluded from all-risk/traditional covers? • Market movement towards specialist covers • Issues of Insurability for breaches: Compare UK FCA fines against GDPR fines.

4. Regulation and Legal Framework Greater Data Protection regulation in national and international law and larger fines for breach (see GDPR which may have extra-territorial effects) British Airways and Marriott Hotels fines WM Morrisons Supermarket – innocent employers and breaches by employees and court “direction” for insurance and risk management solutions

5. Extensive risks to be managed Cyber attacks also raise the following (non-exhaustive), including “silent” losses: Reputational damage; D&O exposure; Claims against business partners; Costs of liabilities to third parties; Regulatory investigations and fines (see: British Airways and Marriott Hotels); Incident response costs; Compensation for Breach of Privacy; and Physical equipment destruction and Business Interruption ("BI")

6. Mondelez v Zurich: Overview • Facts • Cyber hacks and cyber “terrorism”: The NotPetya virus impacted the business of Mondelez in Illinois in the USA. Mondelez argue that the attack in 2017 rendered permanently dysfunctional 1700 of its servers and 24000 laptops. It claims USD 200 million. • The claim is under an all-risk policy, which covered "physical loss or damage to electronic data, programs of software, including physical loss or damage caused by malicious introduction of a machine code of instruction". • Zurich relies upon the policy exclusion of "hostile and warlike action”. • Operation of cyber-related policies: Market capacity and “catastrophic” losses • State-sponsored attacks • Applicable law and standards

7. Application of English legal interpretations of Specialist Wordings to Cyber-attack cases involving War-risk exceptions • Accepted meanings of "terrorism", "hostilities", "war" and "war like action" have consistently been upheld by courts and tribunals (e.g. Universal v Atlantic Specialty case): • London Market meaning of war and warlike action: Hot war/military hostilities (see The Spinneys case/Holiday Inn); • Origin and operation of the clause/relationship to The Laws of War/Geneva Conventions and associate war rules; • Meaning of ‘war’ and ‘terrorism’ from the IRA attacks and the setting up of Pool Re.: • ‘War’ (act of a Sovereign) vs. acts of a terrorist: Atlantic Specialist Insurance v Universal Cable Productions • Terrorism act vs. the act of a terrorist • A State cannot be the subject of the terrorist exclusion

8. Benefits of English law and the London Market • English interpretations of War risk and terrorism • Various jurisdictions looking to English expertise for judicial support. • "Insider" knowledge gained from working in the "Square Mile“ • Role of brokers • Industry meanings and standards developed by the English Courts • Parole Evidence Rule/Purposive Interpretation • Developed Law of Agency

9. Questions?

10. Hermes Marangos- profile Partner 020 3818 3500 hermes.marangos@signaturelitigation.com Mr Marangos has over 30 years of experience representing major entities on complex matters, including international (re)insurance and underlying commercial litigation, particularly in the Americas, Mediterranean basin, MENA, West Africa and Asia. He is considered in the leading guides as a Leading Individual and as one in the Super Lawyer group. He is regularly instructed as defense counsel on third party liability accounts for major corporates with insurance stemming from Lloyds of London. Hermes is acknowledged as a leading expert on issues of political violence and cyber risks, having been involved in the development of relevant laws and regulations (from NMA464 onwards), litigating and arbitrating these risks internationally. He is qualified both as a barrister and solicitor of England and Wales and has litigated, arbitrated or mediated in more than 65 countries. Hermes has led teams handling major litigation relating to financial institutions, liability, construction, engineering and energy. He also advises clients on regulatory and corporate matters.