We previously reported here that CNA filed a lawsuit against its insured Cottage Health System seeking reimbursement of amounts that it previously paid under Cottage’s cyber liability insurance policy. On Friday, a federal district court dismissed, without prejudice, CNA’s lawsuit because CNA failed to exhaust the policy’s required non-judicial remedies before filing suit. The applicable cyber liability insurance policy provided that “[a]ll disputes and differences between the Insured and the Insurer which may arise under or in connection with this policy … shall be submitted to the alternative dispute resolution (“ADR”) process” and, if mediation is chosen, a lawsuit cannot be filed “until the mediation shall have been terminated and at least 60 days shall have elapsed from the date of termination ….” The federal district court found that CNA did not allege in the complaint, nor did CNA allege otherwise, that it satisfied the ADR provision. “That [CNA] has not exhausted the non-judicial remedies required by the contract is therefore apparent on the face of the Complaint.” Although CNA requested that the court stay the lawsuit pending the parties’ mediation, the federal court dismissed the complaint without prejudice to permit the parties to pursue ADR under the terms of the policy.
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