Ride the Lightning

Insurance Company Refuses to Pay for Data Breach – Will Yours?

August 26, 2013

Last week, we were reminded once again that businesses need to be crystal clear about what their insurance policies cover. An SC Magazine article reported that Boston-based Liberty Mutual has told Midwestern supermarket chain Schnucks that it will not be responsible for damages stemming from a March breach resulting in the compromise of 2.4 million credit card numbers.

In court filings, Liberty Mutual argued that the policy, which covers bodily injury and property damage, does not cover electronic data because it is not tangible property.

Readers may recall that Sony is in an ongoing legal battle with its insurer, Zurich, which has disclaimed liability for damages resulting from Sony's 2011 PlayStation network breach.

We are always amazed at how many law firms (and other businesses) have no clue whether they are insured against damages caused by a data breach. This story should prompt a review of your policies and  a discussion with your insurance agent if you haven't already done so.