Risk Update

Conflicts, Security & Insurance — Deferred Withdrawal Determination Denied, ‘War Exclusion’ Clause Causing Insurance Consternation

Texas Attorney Prevails in Appeal Over Withdrawal Request” —

  • “A Texas lawyer who says he would face a conflict of interest if he is compelled to continue representing a client successfully argued that his withdrawal bid has remained pending for an unreasonable period of time.”
  • “Robinson attempted to withdraw as Walker’s counsel in the trial court in October 2021, saying there were irreconcilable differences between the two. In a later filing, Robinson said conflicts between he and his client prevent continued representation.”
  • “In June, Robinson filed a petition for writ of mandamus to a Texas court of appeal regarding the trial court’s failure to rule on the bid for withdrawal. He said the lower court failed to act for an unreasonable amount of time, and that he needed to withdraw to properly defend himself from allegations brought against him by his client.”
  • “The Court of Appeals of Texas, Dallas division, sided with Robinson Sept. 23, saying there are no ‘special docket conditions or other matters that might have prevented the trial judge from ruling on the motion to withdraw.'”
  • “The appeals court refused to adopt a bright-line rule on the time to act on a withdrawal request, but said that, based on the facts, 10 months from filing the motion to withdraw and six months from the trial court’s hearing of the motion without ruling is ‘an unreasonable time warranting mandamus relief.'”
  • “Without ruling on the merits of the motion, the appeals court said the trial court must make a ruling one way or the other. The appeals court said it is confident the lower judge will comply.”

As War Rages on, Cyber Insurers’ ‘War Exclusion Clauses’ Face Reckoning” —

  • “Russia’s invasion of Ukraine is a reminder that modern conflicts can spur cyberthreats well beyond a war’s frontlines.”
  • “As businesses face more cyberthreats than ever before, many are seeing higher premiums. Meanwhile, insurance companies are looking for ways to skirt coverage obligations that end up proving far too expensive. In fact, some providers are losing profit at a high enough rate to leave the marketplace altogether, adding even more pressure on the remaining players.”
  • “To be sure, cybersecurity experts don’t see the tension between the two sides easing any time soon. This environment is likely to spur more lawsuits against insurance providers denying coverage. One central focus of litigation is likely to be the ‘War Exclusion Clause,’ which exempts the insurer from covering damages from war-like acts between sovereign entities.”
  • “However, businesses are succeeding in separating acts of war from cyberattacks, forcing insurance companies to pay high amounts in coverage despite their war exclusion clauses. Take, for example, pharmaceutical company Merck’s lawsuit against insurer Aetna, or cookie manufacturer Mondelez’s dispute with insurer Zurich, both regarding the NotPetya ransomware attack.”
  • “Cyber insurance companies aren’t backing down either. The largest global insurance marketplace, Lloyd’s of London, issued a mandate last month that all cyber insurers selling through its platform must rewrite their policies to specify that they will stop selling insurance for cyberattacks sanctioned by government entities—essentially expanding the war exclusion to avoid a Merck-like win that hinged on the ambiguity of whether the NotPetya attack was a ‘traditional form of warfare,’ as per the language in the war exclusion clause.”
  • “Additionally, for law firms and businesses trying to find the right coverage, the situation is getting more complex, and Simek and Nelson stress the use of an insurance broker to help consumers navigate the expensive market. ‘Because even with the cost of cyber insurance, they can’t drop their coverage, because the damage from a breach would be catastrophic,’ Nelson said. ‘And again, it is going to be very hard to prove if a particular attack is coming from a particular place or what the attacker’s motivation was even with litigation. So, the industry is in considerable turmoil at this point.'”