Insurance Claims After AWS Outage Won’t be a One-Size-Fits-All Solution

Early in the morning on Oct. 20, 2025, Amazon Web Services experienced an outage that lasted more than 12 hours. The impact of this outage was felt by websites, apps and other web-based platforms as well as well-known companies like Snapchat, Venmo and Ring. Financial losses suffered by AWS’s clients are projected to be significant.

Affected parties may look to their insurance carriers to be made whole for the economic losses suffered due to the outage. Some parties, however, may not have confidence in the claims strategy they should take, or which part of their policy will cover their losses.

Below are three avenues that affected parties may seek to be indemnified:

Liability Claims: Companies may file directly against AWS and seek to be made whole under AWS’s liability coverage. The likelihood of prevailing through this claim process is limited due to the language included in the service agreement that holds AWS blameless in the event of outage.

Cyber Business Interruption Claim: Policyholders may seek to be made whole under their cyber insurance policy. While cyber policies tend to focus on indemnifying their insureds from cyber-attacks such as ransomware, they may also address system failures and data loss due to equipment failure and human error. However, this typically relates to data warehoused and managed by the insured. As such, unless there is specific language in the policy covering damages suffered due to data loss caused by a third party, such as AWS, there may not be coverage. An additional consideration for cyber business interruption is that coverage is normally subject to a deductible waiting period. Waiting periods commonly range from six to twelve hours. In the case of the recent AWS outage, it is reported that outages lasted up to 18 hours. Assuming an insured experienced the 18-hour outage period and had a 12-hour waiting period, they would only be able to recover losses for the last six hours of the outage period, which could significantly impact recovery as the period of restoration only related to the time period the outage occurred.

Contingent Cyber Business Interruption: Cyber policies may include coverage for contingent cyber business interruption or offer it as an endorsement to the policy that may be added on for additional premium. In the event that an insured has purchased this coverage, it is most probable that they will be able to recover losses suffered due to the AWS outage. As mentioned above, the insured’s recovery would most likely be subject to a waiting period.

A recent contingent cyber business interruption claim our group handled relates to a professional services company that utilized a cloud based data storage service to warehouse their client files and email archives.

The data storage company suffered a ransomware attack which blocked their clients from accessing their data. The loss measurement was subject to a waiting period deductible. During our review of the books and records of the insured, we identified that the insured had the capacity to make up most of the hours lost due to the outage and mitigate a large portion of their losses. When measuring these losses, mitigation and make up sales opportunities need to be addressed, or the claim may be overpaid. Loss mitigation activities may also result in extra expenses incurred by the insured. These extra costs incurred above normal operational expenses would likely be recoverable in as much as they reduce the overall loss exposure.

It goes without saying that affected parties should closely review their insurance policies and decide on the best course of action for indemnification.

Wells is director of forensic accounting services at Sedgwick. Wells has experience in public and forensic accounting with expertise in business valuation, litigation support, and financial loss analysis. He leads complex investigations into fraud, cyber incidents, and business interruptions claims.

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