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The Insurance Implications of the Merck Cyberhack Settlement

Written by Jennifer Neal on

The Story

Pharmaceutical giant Merck & Co. Inc. reached a settlement last month that put an end to its extensive cyberattack insurance dispute. The settlement comes just before a New Jersey Supreme Court review that could have set a precedent for the growing cyber insurance market. Three of Merck's insurers filed stipulations, canceling the oral argument, and avoiding potential national implications.

The dispute stemmed from a 2017 Russia-linked cyberattack, known as "NotPetya," which affected approximately 40,000 Merck computers. A state appellate court had previously ruled in favor of Merck, stating that the insurers were liable for around $700 million in claims under "all risks" property insurance policies. The court found that a "Hostile/Warlike Action" policy exclusion applied only to "traditional forms of warfare," allowing Merck's claims to proceed. 

The settlement terms remain confidential, but Merck had initially alleged losses of $1.4 billion from the cyberattack. Prior to the canceled oral argument, various national associations and corporate insurance litigators had urged the court to uphold the ruling, emphasizing its significance for insured businesses. 

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Jennifer Neal of B. F. Saul Insurance Responds

In the world of insurance, we've always emphasized that exclusions are just as important as coverages, and the recent settlement involving Merck serves as a powerful reminder. Because the outcome favored Merck, it will prompt insurers across the board to reevaluate and fortify their exclusions. 

We recommend that businesses take a proactive stance by reviewing their existing policies. Should any uncertainties arise or if a deeper understanding of coverages and exclusions is needed, reaching out to an independent insurance advisor becomes imperative. In the coming 12-24 months, businesses may receive "Change in Terms" notices, signaling revisions to their coverages and exclusions. It's crucial to review these revisions closely to address any potential impact effectively. 

Furthermore, this settlement highlights the invaluable role of a claims advocate, distinct from the insurance company. While not all cases escalate to this magnitude, the initial denial of the claim in this example required a legal team's intervention. We've encountered similar situations where an insurer's denial seemed unjust, leading us to engage Brandon Newlands, Esq., B. F. Saul’s SVP and Senior Director of Coverage and Claims, to champion the insured's cause. It's a practice we stand by, ensuring that our clients receive the support and representation they deserve in navigating the complexities of insurance claims.

Want to learn more about the benefits of having an insurance expert on your side? Contact the B. F. Saul team today.

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About The Author

Jennifer Neal is a Vice President and Account Executive in B. F. Saul Insurance’s Commercial Lines practice. With over two decades of experience in the industry, Jennifer oversees and manages the commercial book of business and assists with agency policies and procedures. She has spent most of her career balancing the producer and account executive roles, working in commercial lines, employee benefits, and personal lines.

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