Nearly a year ago, a major cyberattack disrupted operations across many auto dealerships. In the wake of these attacks and cyber losses, auto dealers as well as many other industry groups are navigating complex insurance challenges. The aftermath of a cyber intrusion is often chaotic, testing the resilience of an organization despite having robust defenses and protocols. As dealers work tirelessly to restore systems, recover files, and collaborate with authorities, there are crucial steps related to insurance and recovery that should not be overlooked.
Key Considerations for Auto Dealers Post-Cyber Loss
- DMS Contract Limitations: Many Dealer Management System (DMS) contracts impose a one-year limitation for initiating recovery claims. Dealers must review their contract terms and act swiftly to avoid waiving their rights to recover losses.
- Insurance Policy Deadlines: With insurance policies from last summer nearing expiration, it is essential to adhere to claim reporting deadlines, typically within 30-60 days of policy expiration. Failure to submit claims on time may result in violations that could hinder recovery efforts.
- Data Preservation: As time progresses, the risk of losing critical data and correspondence increases. Important documentation such as customer complaint emails, service and sales staff memos, and records from key employees must be preserved to facilitate the cyber claim process and prevent complications.
- Impact of Hurricane Season: The upcoming hurricane season may overwhelm adjusters and forensic accountants with property damage claims, potentially deprioritizing older cyber claims. Dealers should proactively manage their cyber claims to ensure they remain a priority during busy periods.
Navigating a Cyber Insurance Claim
To move towards financial recovery, auto dealers must:
- Compile claim-related expenses, including incident response and system restoration costs, for insurer reimbursement.
- Capture incremental business costs incurred during the cyber incident recovery.
- Measure lost business income and profits by evaluating market conditions, historical financial records, and customer sales trends.
- Submit claims and facilitate discussions with the adjustment team through to final resolution.
- Draft proofs of loss and narratives required by claims adjusters.
- Develop a narrative explaining the cyber incident's impact on operations and helping the adjustment team understand the scope of the loss.
Specific Areas of Loss Relevant to Auto Dealerships
Dealers should focus on:
- Establishing true lost sales rather than deferred sales.
- Measuring ancillary revenue loss, including parts, service, warranty repairs, and financing.
- Capturing additional income losses related to factory incentives and administrative fees.
- Calculating incremental expenses associated with manual processes.
- Understanding the ordinary payroll provision of the insurance policy to ensure workforce retention.
- Integrating seasonality and special programs into the financial model.
How BDO Can Help
BDO’s Forensic Insurance & Recovery team provides an independent and objective perspective to quantifying, compiling, and substantiating complex cyber insurance claims. Timely submission of a supportable claim often accelerates the indemnification process. By focusing on significant documentation issues immediately, BDO anticipates and prepares for contentious issues, alleviating the burden of interacting with insurers so dealers can focus on business recovery.
For further guidance, reach out to BDO. We are here to support you in navigating the complexities of cyber insurance claims.