When Is A Cyber Incident Likely to Be Litigated and How Much Will It Cost? An Empirical Study

Invited Contribution to Symposium on Cyber Insurance

Connecticut Insurance Law Journal, Forthcoming

40 Pages Posted: 9 Apr 2021

See all articles by Jay P. Kesan

Jay P. Kesan

University of Illinois College of Law

Linfeng Zhang

University of Illinois Department of Mathematics

Date Written: March 27, 2021

Abstract

Numerous cyber incidents have shown that there are substantial legal risks associated with these events. However, empirical analysis of the legal aspects of cyber risk is largely missing in the existing literature. Based on a dataset of historical cyber incidents and cyber-related litigation cases, we provide one of the earliest quantitative studies on the likelihood of cyber incidents being litigated and the cost of settling a cyber-related case. Using regression models, we showed that some company and incident characteristics play an important role in determining the litigation probability and settlement costs, and the models proposed in the paper display good explanatory power. Our findings show that the lack of Article III standing is commonplace in cyber-related cases and that solely relying on the common law system makes it difficult for victims of malicious data breaches to sue and receive legal remedies. In addition, we demonstrate that our findings have valuable implications for enterprise risk management in terms of how the legal risk associated with different types of cyber risk should be properly addressed.

Keywords: cyber loss, cyber incident, legal risk, litigation

Suggested Citation

Kesan, Jay P. and Zhang, Linfeng, When Is A Cyber Incident Likely to Be Litigated and How Much Will It Cost? An Empirical Study (March 27, 2021). Invited Contribution to Symposium on Cyber Insurance, Connecticut Insurance Law Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3822049

Jay P. Kesan (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
217-333-7887 (Phone)
217-244-1478 (Fax)

HOME PAGE: http://www.jaykesan.com

Linfeng Zhang

University of Illinois Department of Mathematics ( email )

Champaign, IL 61820
United States

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