United States: Jeep Hack Drives Cyber, Crisis, Liability And Supply Chain Coverage Issues

A recall notice to fix critical control software on 1.4 million vehicles should raise concerns for companies, brokers and insurers across several business lines. The vulnerability of vital control systems to a remote hacking threat is a significant exposure that raises concerns for many industries and supply chains. As we learned late last year with a German steel mill cyber event, the threat of physical harm caused by a control system hack is no longer theoretical. Governments, companies, brokers and insurers must recognize and understand the risks, implement safety measures and consider loss contingencies. Emerging coverages for cyber exposures, automotive or components product recalls and supply chain risks can assist companies with surviving crisis cyber events.

Jeep Hack Exposure

Security experts teamed with Wired magazine to demonstrate the ability of anyone to wirelessly hack into and control a vehicle's entertainment and control systems. An entertainment system, or head unit, is usually connected to numerous electronic control units (ECUs) found throughout a vehicle. Today's vehicles can contain up to as many as two hundred ECUs. The experts showed how to wirelessly break into a car's control systems and electronically operate vital vehicle functions. They advised that they could have easily demonstrated the same ability to hack ECUs found in hundreds of thousands of vulnerable vehicles traveling the world's highways. 

Government Response to Vehicle ECU Cyber Threats

Two United States senators, Edward Markey and Richard Blumenthal, reacted quickly to the demonstrated threat and have introduced a bill in the Senate that would require automobile manufacturers to develop standards that secure drivers against vehicle cyber-attacks. The Security and Privacy in Your Car Act of 2015 (the Act) would require automakers to comply with cybersecurity standards and equip vehicles with software that would detect, report and stop attempts by hackers to intercept driving data or control the vehicle. The Act would also seek to incorporate isolation measures to separate critical software systems from non-critical software systems. However, under the proposed Act's current language, the measures would not be implanted for several years.

Control System Exposure to Cyber Threats Is Widespread

Before late 2014, cyber events were thought to concentrate on the loss or theft of information or data. At the end of last year, we learned cyber events have evolved into a more dangerous and malicious threat as industrial control systems/supervisory control and data acquisition (ICS/SCADA) systems are being targeted. The use of malware to compromise and manipulate ICS/SCADA systems has raised the stakes for many business lines.

The emergence of this cyber threat is not surprising as more and more control systems become accessible directly from the Internet. By allowing employees to gain remote access to control systems networks, companies face an increased risk of cyber attacks gaining unauthorized access to control environments. Recent, though little noticed events have increased concerns about ICS/SCADA attacks.

For example, in late 2014, the control systems of a German steel mill were remotely manipulated causing significant plant damage. Using sophisticated spear-phishing (use of emails that appear to come from within an organization or from a trusted source) and social media engineering techniques, the attackers gained access to the plant's business network. From there, the attackers were able to infiltrate the facility's production network. As they explored the company's networks, they were able to compromise a number of systems, including various industrial components on the facility's production network. The manipulations of the company's systems caused a number of internal failures and the company was unable to properly shut down a blast furnace, which resulted in massive damage to the facility.

The Industrial Control Systems Cyber Emergency Response Team (ICS-CERT), which is part of the U.S. Department of Homeland Security, reported that U.S. ICS were hit by cyber attacks at least 245 times in 2014. Significantly, the ICS-CERT reported that the Energy and Critical Manufacturing sectors were the most sought-after targets. Other targeted sectors include Health Care, Communications, Water Supply and Transportation. The identified incidents included a range of threats and methods that successfully gained access to business and control systems infrastructure, including ICS/SCADA. The evolution and emergence of cyber events involving ICS/SCADA systems raises significant concerns in regard to damaged property and potentially to resulting bodily injuries.

Supply Chains May Deliver Hidden Cyber Threats

The Internet of Things, or the ability of conventional or everyday objects to connect to the web to send and receive data, continues to grow and spread into every aspect of our daily lives. See The Internet of Things: Liability Risks for Tech Cos.  All of these devices, appliances, gadgets, mechanisms and components reach companies and consumers in the same manner: the supply chain. Today, global supply chains are common and are fraught with vulnerabilities enhanced by cyber threats. The very nature of supply chains makes them inherently vulnerable and hard to protect against cyber threats. Supply chains are extended, complex and interconnected with various links that do not follow regular routes. The supply chains that will connect component parts and deliver finished goods can begin far, far away from the ultimate destination. Thus, various links in any supply chain may be vulnerable to the installation of malware. In other words, the product a company purchases for incorporation into its ICS may already be loaded with malware or a malicious code, which is impossible to remove. Understanding and protecting against such vulnerabilities is critical to auto, components and other supply chains.

Emerging Risk: Cyber Events Resulting in Bodily Injuries and Property Damage

Physical injury or damage arising from cyber threats is an emerging risk. Generally, it has been understood that the theft or corruption of data is not covered under standard general liability and property policies as data is not considered tangible property. However, as Wilson Elser advised in December 2014, cyber threats are evolving and the threat of physical damage and resulting losses must be considered and understood by companies, brokers and insurers. While exclusions contained in general liability and property policies have developed, especially recently, in regard to electronic data issues, the question raised is whether such exclusions would be applicable if a cyber event resulted in bodily injuries or property damage.

Cyberpolicies

Cyberpolicies emerged to assist companies with losses resulting from data theft and corruption. Because standard general liability and property policies generally do not cover or exclude coverage for data theft and corruption events, cyberpolicies have filled a gap in traditional insurance portfolios. The issue raised by the emerging threat of physical damage resulting from a cyber event is two-fold: Whether the losses are covered under cyberpolicies, and if so, to what  extent. Cyber-experienced brokers and insurers are able to properly analyze and enhance a company's insurance portfolio to help ensure that the policies properly interact and respond, gaining a company extensive coverage when it incurs a cyber event.

Automotive and Component Parts Specialty Policies

Automotive product recall, automotive components product recall and component parts specialty policies generally provide coverage for Insured Events involving Product Safety and Product Guarantee recalls. Companies involved with automotive supply chains also must consider the risks raised by emerging threats. Malware or malicious code could be installed at various links in a global, extended vulnerable automotive supply chain. An expensive recall involving such a defect could be costly for many of the links or suppliers involved with the affected supply chain. Automotive suppliers and component parts manufacturers would be well-advised to consider enhancing their standard insurance portfolio with specialty recall coverages.

Conclusion

The Jeep ECU hack demonstration further exemplifies another control system emerging risk for companies, brokers and insurers across several business lines. Companies in all industries should analyze operations and understand the increased exposure when control systems face the Internet and are vulnerable from remote hacking risks. The threat of bodily injury or physical damage from a control system hack is no longer science fiction. The threat will continue to grow and companies are now aware of the potential exposures and liabilities. Companies would be well-advised to collaborate with brokers and insurers to enhance standard insurance portfolios and include emerging coverages so that they are able to survive the next cyber crisis event.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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