It was reported recently that the parties in the closely watched data breach case of Zurich American Insurance v. Sony Corp. of America (N.Y. Sup. Ct. Feb. 21, 2014) settled while Sony’s appeal of an unfavorable trial court opinion was pending. That opinion found that no coverage was available to Sony for a massive data breach under its commercial general liability (CGL) policy. This settlement leaves open questions regarding claims by insureds regarding data hacks in existing data breach cases, especially in light of recent changes to the CGL forms.
Zurich‘s Controversial Decision
Zurich centered on a data hack that Sony experienced in April 2011. During that hack, the personal information of tens of millions of Sony PlayStation users was exposed. Sony was subsequently sued in over 50 separate class actions from the users; Sony estimated its losses to be as high as $2 billion. Consequently, Sony sought coverage from its insurers, arguing that the data breach was a “publication” of private information under Coverage B of its CGL policy, and thus constituted an invasion of privacy.
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