The Risks and Challenges of Silent Cyber Coverage

Many clients are reluctant to purchase a cyber risk policy out of fear that it is illusory coverage.

Illusory coverage is when the literal language or structure of an insurance policy gives the policyholder the impression of coverage but effectively negates any meaningful coverage.

Because of this, cyber insurance has received an undeserved reputation for denying claims, when in fact, the claimants are trying to collect under non-cyber policies.

Often times there is no Cyber insurance policy or the limits are inadequate, so the insureds look to alternate policies to respond. For instance, looking to the property policy to offset business income loss from a non-physical business interruption or a kidnap and ransom policy for cyber extortion demands.

Lawsuits have ensued over the years as insurers denied claims and their clients have challenged their decisions. Among the largest battles involved Mondelez International, an American multinational confectionery food and beverage conglomerate, and Zurich Insurance Group.

In this case, Zurich denied Mondelez’s claim that occurred during NotPetya, one of the largest cyber events to date, because of the War exclusion. Mondelez and Zurich settled the case in 2022.

Ambiguities such as Mondelez v. Zurich, have led to some big headlines proclaiming cyber insurance buyers to beware. It is important to note there is no standard cyber form and having a knowledgeable cyber insurance broker is key. There are many coverage exclusions to watch out for and enhancements to request. It is also important for Cyber insurance policies to affirmatively cover cyber terrorism and to have a cyber broker that knows the difference.

The policy that can best respond to a cyber incident is a cyber policy. Equally important is the coordination of all policies to avoid coverage gaps and overlaps. Oswald’s experienced team can help you determine the right coverage for all your needs.

CLICK HERE to learn more about Oswald’s Cyber Risk Solutions.

This article originally posted in 2019 and was updated in 2025.