Ride the Lightning

Law Firm Sues Insurance Company Over Ransomware Damages

May 10, 2017

The Providence Journal recently reported that a prominent Providence, Rhode Island law firm has sued its insurance company, Sentinel Insurance Co., for breach of contract and bad faith after it denied the firm's claim for lost billings over the three-month period during which documents were encrypted in a ransomware attack.

An unknown person or group demanded $25,000 in ransom paid in bitcoins to restore access, according to a lawsuit filed in U.S. District Court by Moses Afonso Ryan Ltd. During the time its system was disabled, the law firm negotiated ransom to be paid in bitcoins and then had to re-negotiate those terms after the initial key to de-crypt its records failed to work. It arranged to purchase more bitcoins in exchange for other tools to recover its documents.

During the seizure, the firm's 10 lawyers were left unproductive and inefficient — amounting to $700,000 in lost billings, according to the lawsuit.

According to the insurance company answer to the complaint, the only coverage under the policy for loss or damage caused by a computer virus is under the Computers and Media Endorsement, which changes the policy to provide additional coverage for certain computer-related losses. The insurance company stated that the maximum amount available for Computers and Media coverage under the policy was $20,000 – which it paid.

The insurance company said that additional monies would have been due for direct physical damages to computers, but that data was not protected. This, according to the document, also meant that business losses in this case were not covered.

Clearly, this is a case to watch . . . I will report back when there are further developments.

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