Professional Liability Blog

It seems like we can’t go a week without hearing about a cybersecurity breach at a major US corporation. Corporate boards need to be aware that improper oversight of cybersecurity issues could lead to a shareholder derivative lawsuit. One such example from within the last couple of years is Palkon v. Holmes, 2014 WL 5341880, at *1 (D.N.J. Oct. 20, 2014) (No. 2:14-CV-01234 SRC). Palkon involved the global hotel operator Wyndham, which between April 2008 and January 2010 was subject to three cyber-attacks, each resulting in a loss of customer data.

They say fraud doesn’t pay—or, at least they say that about crime. Anyway, it sure didn’t pay in the case of Protection Strategies, Inc. v. Starr Indem. & Liab. Co., in which the U.S. Court of Appeals for the Fourth Circuit agreed that an insurance company should get its money back from the company it insured.