Be Proactive Now: Commercial Construction Quickly Joining List of Industries Vulnerable to Cyber Attacks
June 15, 2017 —
Jeffrey M. Dennis & Nathan Owens – Newmeyer & Dillion LLPCommercial contractors have long faced their own unique business risks - labor and material shortages, delay claims, bonding issues, and defects in workmanship. But, in today's ever-evolving cyber world, it is imperative that contractors understand they are vulnerable to risks beyond finishing a project on time and on budget. As we are seeing more and more each day, cyber threats impact all businesses, including the construction industry, and the failure to protect against these threats will cost your company millions in damages and reputational harm.
UNDERSTANDING CYBER THREATS
Traditionally, cyber threats are thought of as the theft of employee and customer information over the internet. Given the construction industry is the largest employer in the world, the need to protect this information is obvious. The release or loss of personnel or consumer data could lead to extensive liability under a variety of potential claims, including statutory fines. In addition to securing confidential information, companies have to protect against outside agents accessing control of a company’s security protocols, equipment or encrypting files using malicious software. The recent “WannaCry” attack demonstrates that no business is immune from cyber attacks.
EXAMPLES OF RELATED BREACHES
For those that think these scenarios do not happen, here are two examples of these types of breaches:
* In May 2013, Chinese hackers stole floor plans, server information, and security system designs from an Australian prime contractor. Fearing the risks of compromised physical and network security, the contractor incurred additional costs of $132.6 million in project delays and costs to rework the various components that had been stolen.
* Then, in December 2014, a German governmental office reported that a steel mill suffered massive damage when malware prevented a blast furnace from being properly shut down. Hackers gained access to key technology within the company, which eventually allowed them to control the production line.
THE NEW WORLD OF THE IoT
In addition to these types of “traditional” hacking threats, cybersecurity risks continue to evolve and become more complicated every day. Some of these new threats are driven by the development of a phenomenon known as the Internet of things, or IoT. The IoT is most basically defined as the interconnection of devices with on / off switches to the Internet and each other. Since the IoT is estimated to be 20 billion or more devices within 3 years, and can be combined with malicious software, IoT poses one of the most challenging risks for contractors to protect against.
The technology included in today's commercial buildings clearly opens this avenue of risk. A centralized computer control center, typically employed in new buildings, controls and maintains the systems that are vital to the operation of the building, e.g., power, elevators, HVAC, lighting, and security. What happens if a hacker gains control to one of these systems, let alone all of them? What if a hacker simply utilizes an IoT attack to overwhelm a building’s computer systems? In either scenario, at a minimum, significant disruption would occur. Worse, the health and safety of those within the building could be jeopardized. A hacker may utilize ransomware in combination with an IoT attack to take over control of the building and hold it and possibly the occupants “hostage” until a ransom is paid.
The first significant IoT attack happened in October 2016 when a major web hosting company was attacked through the IoT, causing the host site to crash. The attack did not steal information, it simply caused the site to crash. But, that crash caused world-wide disruption across the Internet.
Hackers used malicious software to access a hundred thousand common household devices — web cameras, fitness trackers, DVR’s, smart TVs and even baby monitors — to flood the hosting company’s servers with incredibly high internet traffic. This attack showed that everyday items can be hacked and controlled by cyber criminals and then used against anyone else.
As we have all seen in recent news, the WannaCry cyber attack impacted businesses across the globe. Days after the attacks, hospitals were still left feeling its impact with continued appointment and planned operation cancellations, and delays in service. We should expect to see these types of attacks increasing in frequency.
PAY ATTENTION OR FACE THE CONSEQUENCES
Make no mistake about it, the stakes are incredibly high in the realm of cyber security protection. By 2021, the annual worldwide cost attributable to cyber attacks is estimated to reach the trillions of dollars. If any of these potential attacks occur, a contractor faces significant exposure, in many forms, including:
* Monetary. Cybersecurity events result in direct monetary losses in the form of notification costs, data recovery costs, and, of course, legal and public relations fees. States are also starting to impose strict standards on companies which will result in significant regulatory punishment in the cases of cyber breaches, including the added costs associated with agency investigations, regulatory fines and consumer redress funds.
* Reputation. Perhaps more important than the monetary risk, a contractor may incur substantial reputational harm if such a breach or attack is successful. Recent data has shown that small to medium-sized companies that experience a significant cybersecurity breach go out of business within six months of the breach – due to not only high monetary costs, but severe reputational damage.
* Criminal. The recently passed New York cybersecurity regulations place potential criminal penalties on compliance personnel. Other states are likely to follow New York.
As a business leader and commercial builder, the time to act is now. While the purchase of specific cyber insurance is an important part of protecting against the risks of a cyber attack, many cyber policies contain exclusionary language embedded in the policy making coverage potentially illusory. Additional steps can and need to be taken immediately, including an honest discussion of internal cybersecurity protections, examination of risk management strategy, and the training of employees. Failure to take these important steps could result in a disastrous cybersecurity breach and the loss of millions of dollars.
Jeffrey M. Dennis currently serves as Newmeyer and Dillion’s Managing Partner and, as a business leader, advises his clients on cybersecurity related issues, introducing contractual and insurance opportunities to lessen their risk. You can reach Jeff at jeff.dennis@ndlf.com.
J. Nathan Owens is the Managing Partner for Newmeyer & Dillion’s Las Vegas office. With more than 10 years in the construction industry as a former contractor himself, Nathan understands the complex issues builders and developers face in all aspects of development and construction. You can reach Nathan at nathan.owens@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit http://www.newmeyeranddillion.com/.
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Overview of New Mexico Construction Law
June 25, 2019 —
Walter F. Crowson - Snell & Wilmer Under Construction BlogWe’ve seen an uptick in out-of-state companies working on construction projects in New Mexico. The following is an overview of some of the nuances of New Mexico construction law about which companies may want to be aware.
Construction Contract Issues
Limitation of Liability Clauses are usually Enforceable, but Anti-Indemnity Clauses Are Not
New Mexico courts have enforced limitation of liability clauses included in construction contracts. See Fort Knox Self Storage, Inc. v. W. Techs., Inc., 140 N.M. 233, 237 (N.M. Ct. App 2006). New Mexico law recognizes the difference between contracts that insulate a party from any and all liability and those that simply limit liability. Fort Knox Self Storage, Inc., 140 N.M. 233 at 237. An exculpatory clause immunizes a party from liability, whereas a limitation of liability clause merely curtails liability. Id. A limitation of liability clause has been held not to violate New Mexico public policy because the party “still bears substantial responsibility for its actions.” Id.; see also Cowan v. D'Angelico, 2010 WL 11493789, *6 (D. N.M. Apr. 26, 2010).
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Walker F. Crowson, Snell & WilmerMr. Crowson may be contacted at
wcrowson@swlaw.com
Around the State
March 27, 2019 —
Richard Glucksman & Chelsea Zwart – Construction Claims MagazineIn late 2018, Governor Jerry Brown signed two potentially impactful Senate bills relating to the construction of apartment buildings. These bills, discussed further below, were introduced, in part, in response to the Berkeley balcony collapse in June 2015, which was determined by the California Contractors State License Board to have been caused by the failure of severely rotted structural support joists—the repairs of which were deferred by the property manager despite indications of water damage.
In addition, 2018 saw the passage of California’s updated 2019 Building Energy Efficiency Standards. The new standards, which take effect in 2020, require, in part, the installation of solar systems on certain homes. The goal of the standards is to significantly decrease the energy usage in new homes while contributing to California’s greenhouse gas emissions reduction plans. Relatedly, new legislation, effective in 2019, aims to increase consumer protections for homeowners purchasing solar energy systems.
Reprinted courtesy of
Richard H. Glucksman, Chapman, Glucksman, Dean, Roeb & Barger and
Chelsea Zwart, Chapman, Glucksman, Dean, Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com
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Claims for Negligence? Duty to Defend Triggered
July 09, 2019 —
Michael S. Levine & Adriana A. Perez - Hunton Andrews KurthOn June 17, 2019, the First Circuit held that an insurer’s duty to defend was triggered because the underlying complaint set forth claims that required a showing of intent as well as claims that sought recovery for conduct that “fits comfortably within the definition of an ‘accident.’” In Zurich American Ins. Co v. Electricity Maine, LLC, Zurich sought declaratory judgment that, under a D&O policy, it had no duty to defend the insured, Electricity Maine, an electrical utility company being sued in the underlying class action. Zurich argued it had no duty to defend because the underlying complaint failed to allege that Electricity Maine engaged in conduct that qualified as an “occurrence” or that caused “bodily injury” under the terms of the policy. The First Circuit disagreed.
Reprinted courtesy of
Michael S. Levine, Hunton Andrews Kurth and
Adriana A. Perez, Hunton Andrews Kurth
Mr. Levine may be contacted at mlevine@HuntonAK.com
Ms. Perez may be contacted at aperez@HuntonAK.com
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William Doerler Recognized by JD Supra 2022 Readers’ Choice Awards
March 14, 2022 —
William Doerler - White and Williams LLPCongratulations to Bill Doerler, Counsel of the Subrogation Group who has been recognized as a
top author in Product Liability in the 2022 JD Supra Readers' Choice Awards. Bill was ranked number 9 out of a pool of approximately 800 authors writing about product liability matters on JD Supra in 2021.
The Readers’ Choice Awards recognize top authors and firms for their thought leadership in key topics read by C-suite executives, in-house counsel, media and other professionals across the JD Supra platform during 2021. These annual awards (now in their seventh year) recognize JD Supra contributors for the visibility and engagement their thought leadership earned among readers in select subjects during the previous 12 months.
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William Doerler, White and Williams LLPMr. Doerler may be contacted at
doerlerw@whiteandwilliams.com
Negligent Misrepresentation Claim Does Not Allege Property Damage, Barring Coverage
December 20, 2017 —
Tred Eyerly - Insurance Law Hawaii The Tennessee Court of Appeals reversed the trial court's determination that the seller's alleged negligent misrepresentation regarding the propensity of the property to flood was covered. Erie Ins. Exh. v. Maxwell, 2017 Tenn. App. LEXIS 746 (Tenn. Ct. App. Nov. 15, 2017).
The Chapmans purchased a residence from the Maxwells on March 7, 2014. Prior to the sale, the Maxwells completed a residential property disclosure in which they allegedly misrepresented the propensity of the property to flood. Five months after the purchase, the residence sustained damage as a result of two floods within three days. The Chapmans sued, alleging they relied on the Maxwells' representations regarding the propensity of the property to flood. The Chapmans further alleged that they sustained property damage as a result of the Maxwells' negligence and negligent misrepresentations.
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Tred Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
No Repeal Process for Rejected Superstorm Sandy Grant Applications
February 12, 2014 —
Beverley BevenFlorez-CDJ STAFFEven though it’s been revealed that “faulty data” was used to reject many New Jersey recovery grants for victims of Superstorm Sandy, the state has announced that it’s too late to appeal, according to The Wall Street Journal.
“The applicants were informed by letter that they weren't eligible,” state officials told The Wall Street Journal, “and it should have been clear that they needed to appeal last year, so the application process won't be reopened.”
The majority of the rejected applicants that did appeal within the open period were found to be eligible for the grant: “Nearly 80% of people who appealed their rejections ended up winning their cases, according to data released by the Fair Share Housing Center, a public-interest law firm critical of the Christie administration. And of the 8,007 applicants rejected from both programs, 5,583 didn't appeal, or 70%, according to Fair Share Housing Center's analysis.”
U.S. Representative Bill Pascrell called for “an independent monitor” to be “appointed to oversee the state’s storm spending ‘to ensure there isn’t further mismanagement.’”
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Beyond the Disneyland Resort: Museums
May 03, 2018 —
Beverley BevenFlorez-CDJ STAFFNorth Orange County has a variety of interesting museums from intimate to extravagant to peruse.
Bowers Museum, located in Santa Ana, has several special exhibitions on display around WCC Seminar: Endurance: The Antarctic Legacy Of Sir Ernest Shackleton And Frank Hurley, American Visionary: John F. Kennedy’s Life And Times, Gemstone Carvings: The Masterworks Of Harold Van Pelt, And First Americans: Tribal Art From North America.
Muzeo, a Museum and Cultural Center located in Anaheim, will be showcasing the Trash Artist Challenge Expo & Exhibition from May 12th -27th, and also has on permanent display Anaheim: A Walk through Local History.
Star Wars and Disney fans will want to make their way to the
Hilbert Museum of California Art. In the city of Orange, this museum is located at Chapman University. Two of their many exhibitions include Magical Visions: The Enchanted Worlds Of Eyvind Earle (Disney’s Sleeping Beauty designer) and A New Hope: The Star Wars Art of Robert Bailey.
Learn about American history at the
Richard Nixon Library, located in nearby Yorba Linda.
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