Insurance Risks of Data Centers: Navigating Coverage Gaps in Construction, Business Interruptions, and Cyber Policies

This CLE webinar will provide an overview of data center insurance risks and offer proactive considerations to reduce the likelihood of unexpected gaps in coverage. The panel will discuss the new types and increased levels of risk for tech companies, developers, and operators in the design, construction, and operation of data centers.

The complexity of data center insurance springs from the unprecedented scale, novelty, complexity, expense, and interconnectedness of data centers themselves. All the systems are so interconnected and sensitive that if anything goes wrong, a cascade of first and third-party losses could ensue. Tech companies, developers, and operators worry about physical damage from outside (natural or man-made disasters) or inside (failed systems, employee actions, security breaches), cyberattacks, shutdowns, professional negligence by design or construction professionals, harmful discharges (toxic, uncooled water), and much more.

Presently, the most foreseeable concern is the applicability of business interruption policies and whether their unique definitions and exclusions would afford any meaningful coverage. Disputes would be expected over the requirement of physical damage, how to define the period of restoration, the availability of contingent business interruption coverage, valuation, and whether the damage extends to other connected campuses. Property and construction risks increase because installation of highly technical components is being demanded on an expedited or urgent timetable, yet builder's risk policies will not cover defective work, and it might not surface for some time.

Cyberattacks, physical security, and equipment failures present a third category of concerning risks where existing policies do not appear to offer adequate coverage. These types of events can produce a cascading series of first- and third-party claims for which coverage could prove illusive without proper planning. Experts agree that a layered insurance program based on consistent language across policies is a best practice, but recovering for losses can be especially difficult if multiple carriers and reinsurers are involved.

Listen as our esteemed panel of insurance practitioners discusses the novel issues and coverage gaps prevalent in data center insurance programs and provides recommendations for avoiding coverage surprises too late.