In 2024, class action lawsuits cost businesses over $42 billion globally. But for MSPs, the costliest threat isn’t ransomware—it’s litigation. And the legal doctrines you're relying on to protect you? They're not nearly as safe as you think.

Class action lawsuits triggered by cyberattacks are growing at an alarming rate. A recent report showed ransomware-related litigation more than doubled in 2023 and continued to increase in 2024.

Worse, MSPs are increasingly being dragged into lawsuits not because they were breached, but because they “should have known better.” Courts are starting to hold technology vendors liable even when there’s no physical damage—just economic harm.

Here’s where it gets dangerous: whether or not you can be sued successfully depends heavily on something most MSPs have never even heard of…

The Economic Loss Doctrine: Your Invisible Legal Minefield

Traditionally, if a breach only caused economic losses—say, business interruption or lost profits—plaintiffs had to sue under contract law, not tort (negligence). This shielded many MSPs from lawsuits when they had strong contracts in place.

But now? Plaintiffs are successfully arguing around it.

In ransomware-related litigation, courts are increasingly accepting what’s called the “independent duty exception.” That means: if you had a separate duty (outside the contract) to protect data, you can be sued for negligence—even if the losses were purely economic.

Different states are handling it differently:

  • In Aveanna Healthcare, the California court found the vendor had an independent common law duty to protect patient data—even though no property damage occurred.
  • Conversely, in CDK Global, an Illinois court rejected negligence claims because the plaintiff only suffered lost profits, reaffirming Illinois’s stricter application of the doctrine.

So how do plaintiffs’ attorneys circumvent those state differences?  Choice of venue! Courts in California, for example, are more likely to allow tort claims based on independent duties, especially when there's fraud or misrepresentation involved. Illinois, on the other hand, has shown a preference for strictly enforcing the doctrine.

That’s why choice of law clauses in your contracts matter more than ever. Plaintiffs are targeting jurisdictions where economic loss doctrine protections are weaker—and often succeeding.

What You Can Do Right Now

  1. Tighten your contracts. Include strong limitation of liability clauses and forum selection language that points to favorable jurisdictions.
  2. Standardize your documentation. Have proof of every recommendation, rejection, and client risk acceptance form.
  3. Vet your own vendors. If your downstream vendor is breached, and you didn’t assess them, you could be the next named defendant.
  4. Adopt a defensible compliance model. Use frameworks like NIST and SOC 2—not just for client trust, but for legal protection.

Bottom Line:
Legal exposure is no longer a theoretical risk for MSPs—it’s a quantifiable one. Understanding doctrines like economic loss and the independent duty rule could be the difference between a dropped lawsuit and a six-figure settlement.

Want a clearer picture of your legal exposure? Schedule a free Cyber Liability Readiness Audit—we’ll show you how top MSPs are insulating themselves from lawsuits before they start.