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While the White House and federal agencies such as the Cybersecurity and Infrastructure Agency have recently stressed the risk of Russian attacks on critical infrastructure companies, it is the potential of collateral damage against much smaller downstream vendors and unrelated companies that remains high due to the potential for self-propagating malware. (Credit: Anatoliy Babiy) While the White House and federal agencies such as the Cybersecurity and Infrastructure Agency have recently stressed the risk of Russian attacks on critical infrastructure companies, it is the potential of collateral damage against much smaller downstream vendors and unrelated companies that remains high due to the potential for self-propagating malware. (Credit: Anatoliy Babiy)

On March 21, 2022, President Biden warned the nation that intelligence reports indicated that Russia was exploring cyberattacks against American companies, stating “… one of the tools [Putin is] most likely to use in my view, in our view, is cyberattacks.” This escalated threat comes on the heels of the imposition of severe sanctions on Russia as a result of its invasion of Ukraine.

This increased risk of potentially devastating cyberattacks occurs amidst an already fraught environment in which ransomware attacks more than doubled in 2021, and after a brief retreat this past January are back on the rise. As a result, cyber insurance providers have had to re-evaluate how to account for the additional risk posed by cyberattacks in a war-time setting. It is against this already-complicated background that made the December 2021 decision in Merck & Co., Inc. and International Indemnity v. Ace American Insurance Company by a New Jersey Superior Court notable for its potential consequences to the cyber insurance market for small- to medium-sized American businesses.

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