1. Forms
2. EB
3. EB-10-01

What the Form Is

The EB 10 01 Cyber Incident Exclusion is an endorsement used with Equipment Breakdown (EB) insurance policies. Its primary purpose is to explicitly remove coverage for loss or damage that is directly or indirectly caused by a "cyber incident". A "cyber incident" generally includes unauthorized access to or use of any computer system, including electronic data. The form contains anti-concurrent causation language, meaning the exclusion applies even if other causes contribute to the loss, if a cyber incident is involved in any part of the loss sequence.

Classes of Business It Applies To

This endorsement applies to any class of business that has Equipment Breakdown coverage where the insurer intends to exclude losses originating from cyber events under that specific policy. Given the increasing computerization of equipment and control systems, this can impact a wide array of industries. Examples include:

• Manufacturing facilities with automated production lines or robotic systems.
• Power generation plants and utilities that rely on SCADA (Supervisory Control and Data Acquisition) systems.
• Hospitals and healthcare facilities with critical medical equipment networked or controlled by computer systems.
• Commercial buildings with sophisticated, computer-controlled HVAC, security, or building management systems.
• Data centers and technology companies.
• Any business where the breakdown of essential equipment due to a cyber attack could lead to significant property damage or business interruption.

For instance, if a hacker gains access to a manufacturing plant's control system and causes machinery to operate outside its tolerances, leading to physical damage, this exclusion would likely prevent coverage under the Equipment Breakdown policy for that damage.

Special Considerations

The EB 10 01 is a significant exclusion that creates a clear coverage gap for physical damage to equipment resulting from cyber incidents within the Equipment Breakdown policy. Key considerations include:

• Coverage Gap: Insureds must understand that if a cyber attack leads to the physical breakdown of their covered equipment, this endorsement will likely mean the Equipment Breakdown policy will not respond. They would need to look to a dedicated Cyber Insurance policy for potential coverage, which may or may not extend to physical property damage or may have specific sublimits for such events.
• Silent Cyber: This endorsement is part of a broader insurance industry initiative to address "silent cyber" or "non-affirmative cyber" exposure, where traditional policies might unintentionally cover cyber-related losses because they don't specifically exclude them. The EB 10 01 makes the exclusion of such perils explicit within the EB coverage.
• Mandatory Nature: In some insurance programs or for some insurers, the use of this or a similar cyber incident exclusion has become mandatory for Equipment Breakdown policies.
• Interaction with Cyber Policies: It's crucial to review how this exclusion interacts with any standalone Cyber Insurance policies the insured may have. A comprehensive review is needed to identify potential gaps between where the EB coverage ends (due to this exclusion) and where dedicated cyber coverage begins.

Key Information for Agents and Underwriters

• Agents: Agents have a critical role in explaining the impact of this exclusion to their clients. They should emphasize that the Equipment Breakdown policy, with this endorsement, will not cover equipment damage stemming from cyber attacks and discuss the importance of specific Cyber Insurance coverage. Documenting this conversation is advisable.
• Underwriters: Underwriters should understand that this form helps to clearly define the scope of the Equipment Breakdown coverage and manage systemic cyber risk within their property and EB portfolios. They need to be aware of the definition of "cyber incident" within the form and how it applies to various loss scenarios. When evaluating an account, the presence of this exclusion in the EB policy reinforces the need to assess the insured's separate cyber insurance arrangements and overall cyber risk management practices. Pricing and risk assessment for Equipment Breakdown coverage would assume that cyber-induced losses are not covered when this endorsement is attached.