The Crowdstrike outage in July 2024 and the Amazon Web Services (AWS) outage in October 2025 demonstrate the risk organizations run when they rely on third-party systems.

Providers like Crowdstrike and AWS make many highly technical, highly necessary services—cyber security, website hosting, data storage and backup, and so on—available and affordable. But because today’s interconnected world counts so much on these systems, unintentional or deliberate disruptions to them can wreak widespread havoc.

For Zane Goldthorp, director of broker development at ProWriters, both outages underscore organizations’ need for Cyber Liability Insurance.

“We were lucky that both CrowdStrike and AWS were resolved quickly,” says Goldthorp. “Had they been down for a while, businesses would have been shut down for an extended period of time, unable to make sales or generate revenue, and dependent system failure coverage would have stepped in and reimbursed businesses.”

Goldthorp recently answered some questions about this important but little-known kind of Cyber Insurance. Watch the video, and then keep reading for more information about how dependent system failure coverage could help safeguard your business clients’ operations, revenue, and viability in the event of massive third-party outages.

What Is Dependent System Failure?

Such long-standing threats as ransomware, phishing attacks, and funds transfer fraud are still concerns. But the consolidated critical infrastructure of the digital economy has introduced a new class of cyber risk.

A dependent system failure happens when one component or subsystem in a widely used cloud platform or vendor’s service fails, causing a cascade of disruptions across thousands of organizations, irrespective of each one’s cyber security posture.

For example, the Crowdstrike outage caused airlines to delay and cancel thousands of flights. It locked health care providers out of their electronic health records. It kept consumers from accessing financial accounts. And when AWS went down, so did thousands of messaging, media, and banking websites and apps.

Are Dependent System Failures a Type of Cyber Attack?

Dependent system failures can be but aren’t necessarily the result of criminal activity.

When their AWS-hosted sites and services went dark, some people wondered and worried, “Is the AWS outage a cyber attack?” It wasn’t. The real culprit? A common Domain Name System (DNS) error.

Similarly, as Goldthorp notes, although the Crowdstrike outage “shut down the world… there was no breach involved. It was simply a patch update error.”

The absence of digital wrongdoing doesn’t diminish the severe risk dependent system failure poses to companies, especially when the failure occurs in services that have made themselves nearly omnipresent and indispensable. Businesses can’t do business when the services and systems they depend on are down for the count.

Does Cyber Insurance Cover Dependent System Failure?

Depending on its specifics, a Cyber Liability Insurance policy can cover the costs of dependent system failure.

A Contingent Business Interruption (CBI) clause and specific “System Failure” clauses most explicitly address such coverage. These clauses indemnify businesses for losses incurred when a critical supplier or service provider experiences a disruption that affects the insured’s business.

First-party coverage in such policies compensates for lost income and ongoing operational expenses incurred during the period of disruption. It also covers costs associated with disaster response and recovery efforts.

Meanwhile, third-party coverage in such policies covers defense costs and potential settlements or judgments arising from claims that an operational failure had a direct impact on an affected organization’s clients. Third-party coverage is crucial, as a failure to deliver services or products due to an external system issue could lead to contractual disputes and legal challenges.

How Will You Find Your Clients the Coverage They Need?

According to Goldthorp, many businesses and many brokers and agents don’t realize dependent system failure coverage exists. Those that do may not know how to procure the best possible coverage.

“There’s a lot of Cyber policies in the market right now,” Goldthorp cautions, “and many of them do not include this coverage. If an insured is buying Cyber as an endorsement or an add-on to their BOP, there’s a high probability they do not have this coverage at all.”

As you review Cyber Liability Insurance options for your clients, examine them for specific dependent system failure clauses. Investigate and clarify such points as:

• How the insurer defines a “critical vendor” and “system failure.”
• What constitutes a covered event under CBI or System Failure clauses.
• What documentation the insurer requires to substantiate claims.
• What limitations or sublimits are applicable to these types of losses.

Fully understanding dependent system failure coverage is important, but it can also be “time- consuming and complex for agents who also have to work on other lines of coverage,” says Goldthorp. “Agents should be utilizing Cyber Insurance specialists to be sure they’re getting their clients the best coverage in the marketplace.”

The specialists at ProWriters have been streamlining and simplifying the professional liability process for brokers and their clients for more than two decades.

They can answer your questions and give you the resources and strategies you need to secure the robust policies your clients need.

Don’t wait for the next major outage to hit and harm your clients. Get more information about Cyber Liability Insurance from ProWriters now.