RealPage Battles National Union Over Millions Recovered After Cyberattack
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A high-stakes legal battle between property management software giant RealPage and its insurer, National Union Fire Insurance, sheds light on the intricate world of insurance coverage and recovery allocation following a major cyberattack. The case, decided in the Northern District of Texas, raises crucial questions about how insurers and insureds should navigate recovery provisions when losses exceed policy limits.
In 2018, hackers targeted RealPage, siphoning over $10 million. This sum included $9 million in rental payments belonging to RealPage’s clients and approximately $1 million in RealPage’s transaction fees. After reimbursing its clients,RealPage filed a claim with National Union under its commercial crime policy. National Union, however, determined that its policy only covered the $1 million in transaction fees, not the rental proceeds. They afterward paid RealPage $1.2 million.
The plot thickened when the U.S. Secret Service, investigating the cybertheft, recovered $2.9 million of the stolen funds and returned them to RealPage. This recovery triggered a dispute between realpage and National Union. National Union, citing the policy’s Allocation of Recovery Provision (ARP), demanded reimbursement for the $1.2 million it had already paid.RealPage refused, leading to a lawsuit.
The court’s decision was a partial victory for RealPage. The judge ruled that the policy’s ARP did not apply to the recovery of losses not covered by the original policy. The court reasoned that the phrase “any recoveries,” as used in the ARP, specifically referred to recoveries directly related to covered occurrences. Therefore, any portion of the $2.9 million representing the stolen rental payments did not belong to National Union.
Though, a key question remained unresolved: Did the recovered $2.9 million consist solely of the stolen rental payments, or did it also include funds representing the transaction fees covered by National Union? This uncertainty kept National Union’s breach of contract claim alive, sending the case back for further fact-finding. RealPage’s counterclaims alleging deceptive trade practices under the Texas Insurance Code were dismissed due to a lack of demonstrable damages beyond the ongoing litigation costs.
This case serves as a cautionary tale for businesses. The complexities of insurance policies,especially concerning recovery allocation provisions,can have important financial implications. Businesses should carefully review their policies, paying close attention to such provisions to ensure they understand their rights and obligations in the event of a major loss. Sophisticated companies pursuing recoveries beyond their policy limits should proactively address potential conflicts with their insurers to avoid costly legal battles.
Key Takeaways for Businesses
- Thoroughly review insurance policy terms, especially recovery allocation provisions.
- Understand the scope of coverage for cybertheft and other potential losses.
- Consult with legal counsel to ensure compliance and protect your interests.
The RealPage-National Union case underscores the importance of proactive risk management and a clear understanding of insurance policies. In today’s digital landscape, where cyberattacks are increasingly prevalent, this case provides valuable insights for businesses of all sizes.
RealPage vs. National Union: Decoding the Complexities of Cybercrime Insurance
This case sheds light on the important and often confusing world of cybercrime insurance. After a major cyberattack, property management software giant RealPage and its insurer, national Union Fire Insurance, found themselves locked in a legal battle over millions of dollars.
World Today News senior Editor, emily Carter, sits down with cybersecurity and insurance litigation expert, Daniella Diaz, to break down the key takeaways for businesses.
Emily Carter: Daniella, thank you for joining us today. The RealPage case is quite complex. Can you give our readers a brief overview of what happened?
Daniella Diaz: Absolutely.
In 2018, RealPage was hit by hackers who stole over $10 million. This included both client rental payments and realpage’s own transaction fees. realpage filed a claim with National Union, who, citing their policy, only covered the $1 million in fees, not the stolen rental funds.
After the US Secret Service recovered $2.9 million, the dispute really heated up. National Union wanted that money back, claiming it was due to them under “recovery allocation provisions” in the policy. RealPage disagreed, leading to a lawsuit.
Emily Carter: So, what was the court’s decision?
daniella Diaz:
It was a partial victory for RealPage. The judge ruled that the “recovery allocation provision” did not apply to the recovered rental payments because they weren’t initially covered by the policy.
However, a key question remained unanswered: Did the recovered $2.9 million consist only of stolen rental funds, or did it also include some of the transaction fees covered by National Union’s policy? This uncertainty kept the case alive, and further examination is needed to resolve it fully.
Emily Carter: This case highlights the importance of understanding insurance policies,particularly the fine print. What are some key takeaways for businesses?
Daniella Diaz:
Absolutely. Businesses need to be proactive about risk management and insurance. Here are some key things to remember:
Thoroughly review your insurance policy. Pay close attention to recovery allocation provisions and make sure you fully understand your coverage for cyberattacks and othre potential losses.
Don’t assume you’re fully covered. Cyber threats are constantly evolving, so regularly review your policy with your broker to ensure it meets your current needs.
Consult with legal counsel. Having an attorney specializing in insurance law can be invaluable in navigating complex claims and potential disputes.
Don’t wait until you’re in a crisis. Proactively address any potential conflicts with your insurer before a major loss occurs.
Emily Carter: Daniella, thank you for shedding light on this critically important issue.
Daniella Diaz: It was my pleasure. I hope this case serves as a wake-up call for businesses to carefully assess their cyber insurance needs and proactively manage potential risks.
