Zurich American Insurance Co., one of Sony Corp’s insurers, has asked a court to declare that it does not have to pay to defend the media and electronics conglomerate from mounting legal claims related to a massive data breach earlier this year. The dispute, which pits corporate giants against each other, comes as demand soars for “cyber insurance,” with companies seeking to protect themselves against customer claims and associated costs for data and identity theft. The manner in which to write such policies has become a huge subject of debate in the insurance industry.
Zurich asked a New York state court to rule it does not have to defend or indemnify Sony against any claims “asserted in the class-action lawsuits, miscellaneous claims, or potential future actions instituted by any state attorney general.” Zurich American, a unit of Zurich Financial Services, also sued units of Mitsui Sumitomo Insurance, AIG and ACE Ltd, asking the court to clarify their responsibilities under various insurance policies they had written for Sony.
One legal expert said that “Zurich doesn’t think there’s coverage, but to the extent there may be a duty to defend it wants to make sure all of the insurers with a potential duty to defend are contributing.” This is the opinion of Richard Bortnick, a lawyer with Cozen O’Connor and publisher of the digital law blog CyberInquirer. He is not involved in the case. The lawyer said that while Sony may be able to claim there was property damage as a result of the data breach, Zurich is likely to argue that the sort of general liability insurance it wrote for Sony was never intended to cover digital attacks.
In April, hackers accessed personal data for more than 100 million users of Sony’s online video games. Sony has said it could not rule out that some 12.3 million credit card numbers had been obtained during the hacking. In May, Sony said it was looking to its insurers to help pay for its massive data breach. Sony has said it expects the hacking to drag down operating profit by $178 million in the current financial year, including costs for boosting security measures.
According to Zurich American, 55 purported class-action Complaints have been filed in the United States against Sony. The insurer also said Sony has been subject to investigations by state and federal regulators since the breach. Zurich American has subsequently received claims for coverage from Sony under its policy, a commercial general liability policy written for Sony Computer Entertainment of America as of April 1.
Zurich American contends that it has no obligation to defend any other Sony unit under that primary policy, since it only applies to the specific business in question. In addition, the insurer said its policy only covers the Sony unit for “bodily injury, property damage or personal and advertising injury.” It said no such claims have been made in any of the class-action lawsuits. Even if such claims had been made, Zurich American said, the policy had exclusions in place that would deny Sony coverage for the claims made.
Source: Insurance Journal
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