The Improbable Intersection of Baseball, Cybercrime, and Insurance — St. Louis Cardinals Get Called Out on Third Strike for Computer Hacking

What do you get when you combine Major League Baseball, alleged cybercrime theft by one team against another team, and an FBI investigation?  A need for a thorough review of applicable insurance policies and pursuit of insurance coverage, of course.

The Alleged Baseball Computer Hacking Scandal

Major League Baseball recently confirmed that federal investigators are looking into a 2014 breach of the Houston Astros’ internal database, allegedly hacked by employees of the St. Louis Cardinals.  The scandal allegedly is related to the Astros’ hiring in 2011 of a former Cardinals’ employee who developed a proprietary system to evaluate players using analytics. Federal authorities reportedly are looking to prosecute possible cybercrimes, such as theft of trade secrets or corporate espionage and liability under the federal Computer Fraud and Abuse Act.  Also, key players and teams could face civil lawsuits as well.

Although the key players need to be concerned about possible criminal and civil liability, they should also be focused on accessing insurance coverage to pay for some or all of the costs and losses involved.

Insurance for the St. Louis Cardinals’ Costs of Responding to the Government Investigation

Along with potential liability, the Cardinals are dealing with responding to a federal government investigation.  The costs of responding to a government investigation, including the costs of lawyers, experts, and electronic discovery, can be enormous.  But, companies may not be aware they may have insurance coverage to pay for governmental investigations, even if cyber-coverage has not been purchased.  Directors & Officers and Professional Liability or Errors & Omissions policies often provide coverage for such investigations.  In order to access that coverage, a policyholder needs to determine if there is a claim, provide proper notice, and avoid the traps that can lead to loss of coverage.  See  Insurance Coverage for Governmental Investigations; Insurance Coverage for Government Investigations – The Trend for Coverage Continues.

Insurance for the Houston Astros’ Loss Due to Cyber Theft

The Astros are dealing with possible losses of trade secrets and data.  Coverage for those losses could be recovered under fidelity or theft policies, other first-party property or third-party liability policies, as well as new cyber liability policies.  See Insurance for Cyber Attacks: Despite the Hype, You May Already be Covered. Careful review of multiple policies, prompt notice to the proper insurers, and aggressive pursuit of coverage are keys to getting coverage for cyber losses.  Further, even if they are not a target of the investigation, the Astros may also incur costs to respond to the investigation and may have insurance coverage for those costs.

From the Baseball Diamond to the Corporate Boardroom

Although the investigation is drawing headlines because it involves two professional baseball teams, the scenario is not uncommon to corporate America.  To avoid striking out on insurance coverage, policies need to analyzed and reviewed at the outset of an investigation, and companies need experienced coverage counsel to help them maximize their insurance recovery.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage.  Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results.  Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.  For additional information about this post, please call 202-760-3160.

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