Federal Court Dismisses (Without Prejudice) CNA’s Cyber Insurance Lawsuit

By Cynthia J. Larose, Nancy D. Adams

We previously reported here that CNA filed a lawsuit against its insured Cottage Health System seeking reimbursement of amounts that it previously paid under Cottage’s cyber liability insurance policy.   On Friday, a federal district court dismissed, without prejudice, CNA’s lawsuit because CNA failed to exhaust the policy’s required non-judicial remedies before filing suit.   The applicable cyber liability insurance policy provided that “[a]ll disputes and differences between the Insured and the Insurer which may arise under or in connection with this policy … shall be submitted to the alternative dispute resolution (“ADR”) process” and, if mediation is chosen, a lawsuit cannot be filed “until the mediation shall have been terminated and at least 60 days shall have elapsed from the date of termination ….”     The federal district court found that  CNA did not allege in the complaint, nor did CNA allege otherwise, that it satisfied the ADR provision.   “That [CNA] has not exhausted the non-judicial remedies required by the contract is therefore apparent on the face of the Complaint.”   Although CNA requested that the court stay the lawsuit pending the parties’ mediation, the federal court dismissed the complaint without prejudice to permit the parties to pursue ADR under the terms of the policy.

 

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Cynthia J. Larose

Member / Chair, Privacy & Cybersecurity Practice

Cynthia J. Larose is Chair of the firm's Privacy & Cybersecurity Practice, a Certified Information Privacy Professional-US (CIPP-US), and a Certified Information Privacy Professional-Europe (CIPP-E). She works with clients in various industries to develop comprehensive information security programs on the front end, and provides timely counsel when it becomes necessary to respond to a data breach.

Nancy D. Adams

Member / Co-chair, Insurance Practice

Nancy D. Adams is a coverage litigator at Mintz who advises insurers on the business and legal implications of complex coverage issues involving commercial, transactional, and personal lines of insurance. Nancy serves as lead counsel in coverage litigation in state, bankruptcy, and federal courts.