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A business owner’s policy does not cover ransomware attacks



An insurer need not provide coverage under a company policy for a ransomware attack because there was no physical damage, the Ohio Supreme Court ruled, overturning a lower court decision.

Kettering, Ohio-based EMOI, a medical software company, was the target of a ransomware attack in September 2019, according to Wednesday’s unanimous ruling by the Ohio Supreme Court in EMOI Services LLC v. Owners Insurance Co.

EMOI paid the $35,000 ransom and most of its system files returned to normal after a decryption process. There was no damage to hardware or equipment.

After Lansing, Michigan-based Owners denied coverage, EMOI sued the insurance company.

A trial court granted Owner̵

7;s summary judgment but was overturned by a state appeals court, which ruled that an electronic equipment endorsement would potentially apply to EMOI’s claim if the company could prove its software was damaged by the encryption.

The Ohio Supreme Court unanimously overturned the appeals court’s decision.

“This case turns on the legal interpretation of the acceptance of electronic equipment in EMOI’s business owner’s policy,” the ruling said.

The language of the recommendation is “clear and unequivocal in requiring that there be direct physical loss of or direct physical damage to electronic equipment or media before the recommendation is applicable,” it said.

“Because software is an intangible object that cannot experience direct physical loss or direct physical damage, the recommendation does not apply in this case,” the Supreme Court said, overruling the state appeals court and ruling in favor of the insurer.

Attorneys in the case did not respond to requests for comment.

Last month, the Ohio Supreme Court became the eighth state high court to rule that policyholders were not eligible for covid-19 business interruption coverage because there must be physical loss or damage.


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