Is a Virus Deliberate?

Insurance claims can often result in a dispute over the meaning of the wording of the insurance policy. Recently, a case was heard which could have implications for businesses where the business processes are dependent on software or IT systems.

The case involved a company which made a claim on its business interruption policy when a computer virus destroyed computer code, leaving the software on the ‘backup copy’ (held on a laptop computer by a director) useless. A subsequent burglary then resulted in the loss of the remaining copies of the source code of the program in electronic and printout form.

The policy excluded deliberate damage and damage by malicious persons. The company argued that a virus was not deliberately introduced into their system, nor was it knowingly put there by malicious persons.

The court decided that the loss caused by the virus was due to people who deliberately sought to create damage and accordingly it was excluded from cover. Although the burglary had also contributed to the loss (indeed, it was the main reason for it) the damage done by the virus had increased the risk of the loss of all the data occurring. The overall loss could therefore be considered to have resulted indirectly from the virus. The occurrence of loss due to a single excluded act would prevent the claim.

This case has lessons for businesses. It is important to create frequent backups of all critical data and software. The backups should be verified. Data and program integrity should also be subject to periodic verification, especially after dealing with any known virus attacks. Make sure you have very strong anti-virus measures in place and an effective disaster recovery plan should data be corrupted or lost. Lastly, make sure you understand what your insurance policy does and does not cover and obtain confirmation from the insurer if you are in any doubt.

Any business would hope to avoid having to make an insurance claim of this kind but, when one needs to be made, you need to know the claim is well-founded. If your insurance policy does not afford cover for loss resulting from a virus attack, your ability to obtain compensation (by way of damages) from the perpetrator for the harm caused is slight.

Contact us if you require advice on the meaning of any of your contracts.