A technology company applies for a cyber liability insurance policy. On the application, the CEO states that, to the best of their knowledge, the company has not experienced any data breaches in the past five years. Additionally, the policy includes a clause expressly incorporated into the contract guaranteeing that multi-factor authentication (MFA) will be actively required for all remote network access. Six months later, a ransomware attack occurs through a remote employee's compromised password. The insurer's investigation reveals that a minor, undetected data breach had actually occurred three years ago, and the company never implemented the MFA requirement for remote access. Based on the legal doctrines of warranties and representations, how will the insurer most likely respond to the claim?
- The insurer will deny the claim because the failure to implement MFA is a breach of warranty, which voids coverage, even though the statement about prior breaches was a valid representation.Cevap
- BThe insurer must pay the claim because the CEO's statement about prior breaches was made to the best of their knowledge, which prevents the insurer from voiding the policy for any other reason.
- CThe insurer will deny the claim because the prior undetected breach means the CEO's representation was not strictly true, automatically voiding the policy on those grounds.
- DThe insurer must pay the claim because the failure to use MFA is considered an unauthorized application change that the insurer's agent should have corrected prior to policy delivery.