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The Hanover unit must pay at least $148 million to the software company



A federal district court in St. Paul, Minn., has ruled that a unit of Hanover Insurance Group Inc. must pay at least $148 million under a cyber business interruption and extra expense claim in its policy to a software company that fell victim to a scam.

In December 2019, an unknown bad actor gained access to an accountant’s email account at St. Louis Park, Minn.-based Fishbowl Solutions Inc., a technology consulting and software development company, according to Thursday’s ruling in Fishbowl Solution Inc. v. The Hanover Insurance Co.

The breach led Fishbowl client Owatonna, Minnesota-based Federated Mutual Insurance Co. paid two Fishbowl invoices totaling $1

76,962 in December 2019, of which Federated recovered $29,078 with the help of the US Secret Service, according to the ruling.

After Hanover denied coverage under its technical professional liability policy, Fishbowl sued it, seeking a declaratory judgment that its loss was covered under the cyber clause, the unrecovered amount Federated had paid, plus attorneys’ fees and prejudgment interest.

In determining that the loss was covered by the policy, the court said that Fishbowl’s policy covered net revenue that would have been earned or incurred had there not been an impairment or denial of “business” due to a covered “data breach.”

The definition of “business” includes Fishbowl’s communications with, and billing of, its customers, the ruling says. As to whether it suffered a loss of “business income,” Hanover’s property claims director acknowledged the company suffered an “actual loss of business income,” the ruling said in the policyholder’s favor.

The ruling gives Fishbowl until November 17 to submit a letter on whether it is also entitled to prejudgment interest and/or attorney’s fees in the case.

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

A federal appeals court last week affirmed a lower court and ruled in favor of Hanover Insurance Co., ruling that a lawsuit filed by a sports broker whose chief financial officer allegedly embezzled it was filed too late.


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