Businesses, even very large ones, are typically not insured for data breach liability claims.  Companies that rely on a Commercial General Liability (CGL) form, the most common policy form, to cover this cyber exposure will find that no coverage will apply to their loss.  The CGL covers “bodily injury” and “property damage” caused by occurrences but does NOT cover the economic damages from failure to protect personal information held by the insured.  

THE CASE OF SONY:  According to ComputerWorld, the 2011 data breaches at Sony's PlayStation Network, Sony Entertainment Online and Sony Pictures resulted in account data on close to 100 million individuals becoming exposed and over 12 million credit and debit cards being compromised. The breaches have so far resulted in at least 55 putative class-action lawsuits being filed against Sony in the U.S and another three lawsuits filed against it in Canada. Sony expects to spend close to $180 million in the next year alone on breach-related costs.

Now, Sony is suing their insurer, Zurich American Insurance Co, over data breach liability claims that Zurich says is not covered by their Commercial General Liability (CGL) policy.  Zurich is likely to prevail in this case.  Although specialized insurance coverage has become available to cover cyber incidents even a large company like Sony, with risk managers, did not fully appreciate the risk and directly cover this exposure. 

CYBER LIABILITY INSURANCE:  AMERICAN INSURANCE has access to Data Breach and Cyber Liability policies from a variety of insurance companies.  Coverage varies widely between policies and must be tailored to the specific exposure and needs of a business.   Premiums for $1,000,000 of cyber liability range from minimums of $500 for small business, $2,000 for medium sizes business, to larger premiums for big business entities.  For more information contact us.