One strategy that businesses use to protect against data breach losses is to obtain insurance coverage. Sometimes litigation ensues over the nature and extent of coverage or even whether another party is ultimately responsible for the loss. Here are two recent examples:
- In April 2011, Sony Corp. Of America’s PlayStation online services were hacked, generating more than 50 consumer class action complaints. Sony’s commercial general liability carrier, Zurich American, filed suit against Sony denying coverage and, in February 2014, Zurich received a favorable ruling from the court, which Sony appealed. Sony and Zurich have now settled for an undisclosed amount, so the appellate court won’t be ruling on the question of coverage.
- Travelers Casualty and Surety Co. of America paid over $150,000 to Alpine Bank for customer notification costs resulting from a hacker accessing the bank’s website. Travelers then sued Ignition Studio, an Illinois-based web designer, to recover the $150,000, claiming that negligence and “lax Internet security” resulted in the data breach. Travelers and Ignition have now reached a settlement of this suit.