Australia: The fallout — your losses from a cyber breach

Businesses, large and small, continue to be the primary targets of cyber attacks in Australia and, as a result, frequently face breaches that can lead to substantial losses. In July 2016, Trend Micro reported that Australia had the second highest level of ransomware attacks (attacks designed to lock users out of computer systems until a ransom is paid) during the period of April to May 2016— second only to Japan.

On a global level, recent attacks on the medical and medico-insurance industries highlight the cost of such cyber breaches as noted online in SC Magazine. A breach of a large US health insurance company's system led to nearly 10 million medical records being offered for sale online at a price of 750 bitcoins (an uncontrolled online currency, which approximately equates to AUD$652,000). Once such information is obtained it opens up the opportunity for identity theft.

In an article published in Insurance Matters Issue 9, we looked at preventing cyber risks by posing the question: are you ready for the breach? Many breaches—and the associated losses—can be prevented through the implementation of simple security controls. For example, the controls implemented by Ottawa Hospital meant that when it suffered a cyber breach in March 2016, no patient information was affected, no ransom had to be paid and its IT department was able to resolve the issue internally.

We now look at some first party losses that arise from such cyber breaches and that may be payable by insurers under cyber insurance policies. In particular, we focus on the following first party losses:

  • extortion costs
  • business interruption, and
  • response costs to rectify harm.

Extortion costs

Extortion costs are any amounts paid to cybercriminals to prevent the sale of stolen data or, alternatively, to decrypt and regain access by users who have been locked out of a computer system.

Ransomware-style breaches are effective in forcing victims to make payments— creating financial incentives for cyber criminals. An article on the Wired website notes that in 2014 the FBI reported the cyber virus "CryptoLocker" led to $27 million in payouts in just six months. The same article reported that in February to March 2016, three hospitals suffered cyber breaches. The Hollywood Presbyterian Medical Centre in Los Angeles had key computer systems taken offline for more than a week until it paid a ransom of USD$17,000. The Methodist Hospital in Kentucky was also the victim of a breach, which prevented access to patient files over a four-day period (although administrators were able to recover the systems from backups). Similarly, MedStar Health suffered a breach that meant employees were unable to access emails or a database of patient records for a period of 24 to 48 hours.

Some insurance policies cover the cost of paying the extortion, if the insurer agrees to the payment. It doesn't prevent breaches occurring but it can be the simplest way to unlock a system and mitigate loss.

Business interruption

If emails, databases, records and other key computer systems are inaccessible or offline, it can interrupt or impair a company's revenue and lead to losses.

As everyday devices and systems become more interconnected, and communicate more in real-time (otherwise known as the "Internet of Things"), the potential for business interruption following a cyber breach increases. Forbes estimates that by 2020, there will be over 26 billion connected devices. While that makes corporate systems more efficient and more effective, it also increases the risk of significant business interruption losses if a breach does occur. For example, not being able to access a payment system due to ransomware may not only impact business operations but may also result in the loss of customers and revenue.

The type of business interruption cover offered and the period of business interruption covered varies significantly between policies. It is also worth being aware that while interruptions can have a significant impact on a business's reputation, unless it is reflected in the business interruption claim, the cost of loss of reputation or reduction in share price will not be covered under a cyber insurance policy.

Response costs to rectify harm

Response costs to rectify harm may also arise from cyber breaches. Some of these costs are directly related to IT, with the first step after a breach usually being the appointment of IT specialists to determine the extent of the damage, to prevent a repeat of the breach and to conduct a forensic investigation. Such investigations are necessary where cyber breaches may have led to the theft of personal data, such as medical records or credit card information.

Other IT-related costs include repairing and restoring systems that have been compromised because of a breach and recreating data that has either been deleted or encrypted (and made inaccessible). If the personal data you hold is compromised, response costs can include the cost of notifying customers of the breach, credit monitoring for affected customers and engaging external public relations/communications experts.


As companies become more interconnected and reliant on technology, the likelihood of cyber breaches increase. As a result, companies should seek appropriate cover through their insurance broker.

Companies should also ensure their cyber insurance policy covers first party losses as well as third party losses. There are many types of first party losses in addition to the three losses we have covered. Consider all potential losses before deciding on the best insurance policy for your business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Sparke Helmore Lawyers
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Sparke Helmore Lawyers
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions