Sony insurer sues to deny data breach coverage

NEW YORK/TOKYO Fri Jul 22, 2011 2:34am EDT

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NEW YORK/TOKYO (Reuters) - 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 comes as demand soars for "cyberinsurance," with companies seeking to protect themselves against customer claims and associated costs for data and identity theft.

How to write such policies has become a huge subject of debate in the insurance industry.

Zurich American Insurance Co asked a New York state court in documents filed late on Wednesday 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."

A Sony spokesman in Tokyo said his company does not comment on pending litigation.

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.

"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," said Richard Bortnick, an attorney at Cozen O'Connor and publisher of the digital law blog CyberInquirer.

Bortnick, who is not involved in the case, 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.

AIG declined to comment, and Mitsui Sumitomo could not immediately be reached.

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 14 billion yen ($178 million) in the current financial year, including costs for boosting security measures. The company said the figure does not include potential compensation.

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