Even Sony Can Mess Up Their Insurance

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Carl Niedbala

COO & Co-Founder

Admittedly this probably can’t be considered a “current” event, but we stumbled across this article somewhere on the interwebs and it’s an important story to tell (particularly on an insurance blog).   Big lessons can be learned by this one.  Here’s the gist:

Sony’s Playstation Network was hacked in 2011.  The data breach was massive and resulted in hacked access to 77 million user accounts.  In fact, the breach was so astronomical that it has its own Wikipedia page.  The hackers gained access to all sorts of personal private information (including payment info) and users couldn’t play online games weeks.  I distinctly remember having to reboot my account and verify all of my information.  Thankfully by early 2011 my horrible addiction to Call of Duty had subsided; however, I’m sure the lack of C.O.D. action ruined at least a few college kids’ lives for April 2011.

As is to be expected, Sony was served with class action lawsuit alleging inadequate security measures, failure to adequately notify users of the breach, etc.  The damages were estimated to be somewhere around $2 Billion.  Sony is a massive company and obviously has insurance in place for this sort of thing…or so they thought.

Here’s the problem: Sony tried to claim the legal fees and settlement costs under their General Liability policy.  The company’s insurance carrier disputed the claims and refused to indemnify or defend Sony because the claims were based on data breach issues.  The carrier argued, therefore, that Sony was not covered by its GL policy and needed a Cyber Liability policy to cover the claims.  GL policies only cover physical damage resulting from a companies operations, and financial damage resulting from any data breach would have to be covered by a Cyber policy.

If a global corporation like Sony can screw up their insurance coverage, anyone can!  That’s why it’s so important to make sure you educate yourself about the proper coverage for your company and/or work with a broker that truly understands what you’re doing.  This way, you’ll be sure to cover all the bases and not leave yourself exposed!  Be sure to check out any of our blog posts to read up on what your company might need, and check out our coverage page to learn about individual insurance products.  Don’t find yourself in a messy situation like Sony!

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