Their Vendor Got Hacked. They Lost $405,000

The Incident

A new automobile dealer and repair services provider depended on a cloud-based Dealer Management System (DMS) for everything: sales, service scheduling, inventory, and customer records. When the DMS SaaS provider was hit by a cyberattack, the dealership lost access to the system for several weeks.

No one hacked the dealership. No data was stolen from their network. The insured's own systems were never touched. But without the DMS, the business could not operate normally. Staff reverted to manual processes for sales and service, and both volume and revenue dropped significantly.

This is the scenario that contingent business interruption coverage is built for: a third-party vendor incident that causes real financial harm to the policyholder, even when the policyholder's own systems are clean.

The Response

Because no systems were breached at the insured, there was no forensic investigation or breach notification to manage. The work here was entirely financial.

Once the DMS was restored and business returned to normal, Converge engaged a panel forensic accounting firm to help the insured document its losses. The firm worked with the dealership to build a comprehensive Proof of Loss that captured the full scope of the revenue impact during the outage: lost sales, reduced service tickets, and the operational cost of running manual workarounds for weeks.

The forensic accounting firm's fees came to $15,000, covered under the policy's Proof of Loss Expense provision.

The Outcome

The insured's business interruption claim was fully documented and submitted. Total losses came to approximately $405,000, covering lost revenue during the weeks the DMS was unavailable.

This case shows how cyber risk extends well beyond your own four walls. The insured did nothing wrong. Their systems were clean. But their dependence on a single vendor created a $405,000 exposure.

Key Takeaway

Have backup processes in place for every critical vendor system. If a key SaaS provider goes down for weeks, manual workarounds can keep the lights on, but the revenue impact can still be enormous. Know which vendors you depend on, have contingency plans for each, and make sure your cyber policy includes contingent business interruption coverage.