Cyber insurance decision could signal litigation tsunami

A federal court in Phoenix ruled last Thursday that under its cyber policy, Chubb Ltd. will not have to reimburse restaurant chain P.F. Chang's for expenses charged the chain by its credit card processor after a 2014 data breach, according to Business Insurance.

One attorney stated this was the first decision on a cyber insurance policy case and could open the floodgates to litigation between cyber insurers and policyholders.

A cybersecurity policy was sold by Federal Insurance Co., a unit of Chubb, to the parent company of P.F. Chang. The policy was said to cover “direct loss, legal liability, and consequential loss resulting from cyber security breaches,” according to Judge Stephen M. McNamee's ruling.

After paying out more than $1.7 million under the cyber policy for breach costs, owing to clauses ruled inapplicable, Federal is not obligated to reimburse the charges, the judge said.

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