Insurer for Sony files lawsuit; doesn't want to pay for cyber attack claims

While the Playstation Network has been back online for a couple of months following the cyber attack that brought the PSN's servers down on April 20, Sony is still dealing with the after effects of the attack. This week, one of Sony's insurers filed a lawsuit against the company, claiming that it shouldn't have to pay to help Sony deal with the many different lawsuits that have been filed against Sony in the wake of the cyber attacks.

Reuters reports that the insurer in question, Zurich American Insurance, claims that Sony has so far received 55 class-action lawsuits in relation to the cyber attacks that exposed the personal info of tens of millions of Sony's Playstation Network users. Zurich American also says Sony has sent over claims based on these lawsuits to the insurer. However Zurich American claims that its policy with Sony doesn't cover this particular situation, saying it only covers "bodily injury, property damage or personal and advertising injury." So far Sony has yet to comment on Zurich American's lawsuit.

Sony has already taken a number of moves on its own to both compensate Playstation Network users for the downtime along with protecting them from possible cyber attacks. Sony recently had an offer that gave away two free downloadable games each for the Playstation 3 and PSP game console along with other free bonuses and offers. In addition Sony has offered to give its customers a way to sign up for a free one year identity theft protection service that includes a $1 million insurance offer.

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There are currently 55 class action suits in the US, three in Canada, and investigations from multiple state attorneys general, the FTC and a Congressional committee, against Sony.

Surely the hacking falls under criminal damages though. Which should be covered but I guess since it isn't physical that may be a loop hole and being the kinda company they are, its something sony should have invested in.

rippleman said,
None of us has seen the insurance contract so none of us can say whether or not insurance should cover it or not.

This should be a fairly standard insurance court case on what the contract covers

rippleman said,
None of us has seen the insurance contract so none of us can say whether or not insurance should cover it or not.
Indeed.

Sraf said,
This should be a fairly standard insurance court case on what the contract covers
Are you agreeing with him? I wouldn't think this would be 'fairly standard', since it involves a massive corporation and a massive insurance claim on a fairly new insurance type.

Exactly, insurance is a contract and governed under contract law. The obligations of the insurer are specifically spelled out in the contract, including the terms under which they have to pay. Anything outside those terms is handled at the insurer's discretion. And obviously they find the whole situation a little too hot for their liking to pay when they don't absolutely have to.

krasch said,
Exactly, insurance is a contract and governed under contract law. The obligations of the insurer are specifically spelled out in the contract, including the terms under which they have to pay. Anything outside those terms is handled at the insurer's discretion. And obviously they find the whole situation a little too hot for their liking to pay when they don't absolutely have to.

The only sane user in here apparently...

LordBattleBeard said,
This.

That has nothing to do with it. I've studied Financial Planning, and Insurance and Contract Law are a BIG part of it. (Contract Law also covers pre-nuptial agreements, divorce settlements, etc.)

The insurance company spells out exactly what they cover in the policy, and more coverage means higher premiums because you have to add various riders to provide the extra coverage.

For example, a lot of home insurance DOESN'T cover flood by default. And in many cases you can add flood coverage, but it will definitely cost more, especially if you live in a flood-prone area like New Orleans...

Think of it this way. You have a life insurance policy that only covers you for Accidental Death/Dismemberment and Sickness but you die of natural causes. The life insurance company doesn't have to pay because your natural causes weren't an accident. Same situation but in a much broader scale. Just because they are insured doesn't mean they are covered for everything under the sun.

mattygdot said,
Think of it this way. You have a life insurance policy that only covers you for Accidental Death/Dismemberment and Sickness but you die of natural causes. The life insurance company doesn't have to pay because your natural causes weren't an accident. Same situation but in a much broader scale. Just because they are insured doesn't mean they are covered for everything under the sun.

Um.. hello?!?! That's what LIFE insurance is FOR! Natural causes *IS* the primary reason it would pay, you got it backwards. If you died as a result of negligence or too high of a risk such as sky diving, they DON'T have to pay UNLESS your policy specifically states you are covered for high risk injury.. LOOK IT UP!!!

Natural causes, doesn't matter WHAT Life insurance you buy you are covered, period. It's accidental death or other stuff that you have to specifically be covered for, that's why the premiums go up each time you add something else to the list.. that's why people DON'T want to be covered, too cheap to pay the premium

What does Sony's mismanagement and total lack of understanding of computers or computer security have to do with insurance.

Sony stuffed up (AGAIN!) It's not the job of insurers to pay for Sony stuff-ups.

It's like an arsonist setting fire to their house and expecting to claim an insurance payout. Too bad Sony - your fault - you pay!

dvb2000 said,

Sony stuffed up (AGAIN!) It's not the job of insurers to pay for Sony stuff-ups.

You are quite wrong. That is exactly what insurance is for

dvb2000 said,
What does Sony's mismanagement and total lack of understanding of computers or computer security have to do with insurance.

Sony stuffed up (AGAIN!) It's not the job of insurers to pay for Sony stuff-ups.


It's like an arsonist setting fire to their house and expecting to claim an insurance payout. Too bad Sony - your fault - you pay!


Except in this case Sony did not "take an axe to their own servers" someone else did it to them. If somwhere in the clause that they had with the insurance company there is anything stating they have to pay for intrusion, the insurance company will loose the lawsuit. I have flood insurance and live in an area with very little rainfall, the insurance company told me it was useless for me to buy, but guess what. I got flooded out and they had to pay for everything. I didnt take a waterhose to my stuff and make them do it.
And just for the record, if an arsonist is provin guilty, then the insurance company will cover it.

FireTalon said,


Except in this case Sony did not "take an axe to their own servers" someone else did it to them. If somwhere in the clause that they had with the insurance company there is anything stating they have to pay for intrusion, the insurance company will loose the lawsuit. I have flood insurance and live in an area with very little rainfall, the insurance company told me it was useless for me to buy, but guess what. I got flooded out and they had to pay for everything. I didnt take a waterhose to my stuff and make them do it.
And just for the record, if an arsonist is provin guilty, then the insurance company will cover it.

Well I hate insurance companies but Sony is not the helpless victim here. We have heard LOTS of accounts of how Sony's security was so bad that it was pretty much a clear case of negligence. Not only that but even after the PSN hack Sony owned websites were getting hacked almost on a daily basis.

If the insurance company can prove that Sony's negligence and complete lack of following best practice security protocols was the reason they were hacked then they really should not have to pay Sony. Sony is at fault for not having industry standard security, and after the fact it is pretty obvious they were woefully under secured against any type of outside threat.

I mean Sony did not even have a Chief Security officer in place, most companies that are much much smaller have CSO's and full security departments with written security protocols.

So because of Sony's negligence they pretty much did "take an AXE to their own servers".

[quote=FireTalon said,]


Except in this case Sony did not "take an axe to their own servers" someone else did it to them./quote]

Not true. Sony ALLOWED it to happen because they weren't prepared. If you leave your door open and you get robbed, are you covered? They didn't do it them selves.. but that homeowner DID leave themselves vulnerable.. insurance company wont pay for that, because YOU forget to lock the door.

Let's try another example. You drive a car, you leave it in neutral (let's say its a stick), it rolls down the hill and crashes.. Now lets say your car WOULD have been fine but another car hit your car, but because your car was not properly secured, YOU were negligent along with the other driver. but THEY don't have to pay for damages to your car because YOU left it in neutral which is an extenuating circumstance.

Now Sony's car plunged into a lake, letting everything get waterlogged.. because someone pushed it, but you couldn't push it if it was properly set in park with the emergency brake.

Don't laugh this is a REAL insurance story, Statefarm didn't have to pay (for the car that went into the lake) because the owner was at fault not the 2nd driver that hit the car... So the driver (of the 2nd car) was sued for damages (by the owner), but the plaintiff lost because Statefarm defended their insured and ALL they had to do was put the car in park. Investigators proved the owner was negligent. Sony WAS and IS negligent, PERIOD.

Very simply.

All Sony had to do was standard security techniques. They didn't follow proper security principles and procedures, they didn't secure their network as the network auditors TOLD them before this happened, because those changes would have cost a few hundred thousand dollars, now Sony ASSUMES they can have the Insurance company bail them out, but it's not so, SONY was stupid for not listening and they MUST pay for it, not Insurance..

Edited by rijp, Jul 22 2011, 1:44pm :

I would blame Sony as much as I blame the owner of a house which have an alarm and did not turn it on.


Yes, it is silly. But, an attack/burglary is a still what it is.

Eddo89 said,
I would blame Sony as much as I blame the owner of a house which have an alarm and did not turn it on.


Yes, it is silly. But, an attack/burglary is a still what it is.

The criminality of the event is not a determination made in cases of insurance, most insurances wouldn't cover if you left your windows/doors open or didn't use your alarm either. That doesn't mean that the burglary isn't criminal, it just means the insurance won't cover your loss.

FISKER_Q said,

The criminality of the event is not a determination made in cases of insurance, most insurances wouldn't cover if you left your windows/doors open or didn't use your alarm either. That doesn't mean that the burglary isn't criminal, it just means the insurance won't cover your loss.

Actually they will cover your loss, but because you failed to use what security you had available, you will pay higher premiums

rijp said,

Sorry mr. ignorant, but that is NOT how it works. You know the risk, you took a chance, it didn't work out.. YOU have to pay the price no the insurance company.

Please go back to your insurance office, turn up the AC, take a valium and relax. This is not a law forum and exactly 0 people on this board have all the facts.

However Zurich American claims that its policy with Sony doesn't cover this particular situation, saying it only covers "bodily injury, property damage or personal and advertising injury."
So unless someone takes an axe to their servers, the insurer feels that they shouldn't have to help Sony?

Intrinsica said,
So unless someone takes an axe to their servers, the insurer feels that they shouldn't have to help Sony?

Depends what kind of insurance policy Sony had in place.

Perhaps their insurance only covered physical damage (such as a water leak).

DukeEsquire said,
Perhaps their insurance only covered physical damage (such as a water leak).
True. It just frustrates me how the insurer always seems to try and weasel out of paying up. I've had it happen to me in the past, so I can understand the annoyance of being told, "oh didn't we tell you? Yeah, we don't cover that."

Intrinsica said,
True. It just frustrates me how the insurer always seems to try and weasel out of paying up. I've had it happen to me in the past, so I can understand the annoyance of being told, "oh didn't we tell you? Yeah, we don't cover that."

Agreed. This is why I will not work for the insurance industry. I honestly feel that they are, well, evil greedy pigs.

Intrinsica said,
True. It just frustrates me how the insurer always seems to try and weasel out of paying up. I've had it happen to me in the past, so I can understand the annoyance of being told, "oh didn't we tell you? Yeah, we don't cover that."

I'ts not a matter of "weasel out". Insurance companies are VERY specific. do you WANT to pay the difference each time a company files a claim? I sure as hell don't. If Sony has to get help from insurance and it's not covered guess who is stuck with the bill, eh? That's right TAX PAYERS! So Sony shouldn't get help if they aren't specifically COVERED by the insurance.

Not to mention Sony didn't do enough to protect the network from the start.. who's damn fault is that?!?!?!?!?! SONY! Security team should be fired, probably the CEO, along with anyone else that doesn't know how to protect a network. Insurance doesn't cover stupidity, sorry.

Sony sits down (the same way ANY consumer does) and discusses EVERY possible scenario and claim. Sony CHOSE to take a risk (and they got burned --oops--), that should not be the insurance company's fault to pay up, Sony wasn't prepared, too bad for them.. they can take it out of their profits.. A lack of preparation on their part does not constitute an emergency on the Insurance company fault. it's not Sony is hurting either, so the HAVE the money, they just WANT to take advantage of the Insurance company.

That insurance company is doing the right thing, if Sony didn't PAY for covrage, they aren't covered.. PERIOD. What is the problem with that?!??!?

How is this ANY WAY the insurance companies fault? Yeah this "big company doesn't want to pay, they always avoid paying, ..." BS needs to STOP!

you don't know what you are talking about when you make generalizations about "weasel out" of paying, LOOK at the whole story BEFORE you ASSUME any information.

rijp said,

I'ts not a matter of "weasel out". Insurance companies are VERY specific. do you WANT to pay the difference each time a company files a claim? I sure as hell don't. If Sony has to get help from insurance and it's not covered guess who is stuck with the bill, eh? That's right TAX PAYERS! So Sony shouldn't get help if they aren't specifically COVERED by the insurance.

Not to mention Sony didn't do enough to protect the network from the start.. who's damn fault is that?!?!?!?!?! SONY! Security team should be fired, probably the CEO, along with anyone else that doesn't know how to protect a network. Insurance doesn't cover stupidity, sorry.

Sony sits down (the same way ANY consumer does) and discusses EVERY possible scenario and claim. Sony CHOSE to take a risk (and they got burned --oops--), that should not be the insurance company's fault to pay up, Sony wasn't prepared, too bad for them.. they can take it out of their profits.. A lack of preparation on their part does not constitute an emergency on the Insurance company fault. it's not Sony is hurting either, so the HAVE the money, they just WANT to take advantage of the Insurance company.

That insurance company is doing the right thing, if Sony didn't PAY for covrage, they aren't covered.. PERIOD. What is the problem with that?!??!?

How is this ANY WAY the insurance companies fault? Yeah this "big company doesn't want to pay, they always avoid paying, ..." BS needs to STOP!

you don't know what you are talking about when you make generalizations about "weasel out" of paying, LOOK at the whole story BEFORE you ASSUME any information.

Tax payers won't pay squat on this for Sony, they are a corporation and would have to pay the bill themselves. Also "personal injury" has come to be a very broad term, and it may be crafted in such a way as to fit in the policy.

rijp said,
you don't know what you are talking about when you make generalizations about "weasel out" of paying, LOOK at the whole story BEFORE you ASSUME any information.
I'll give you credit on the fact that we don't know the whole story, and I already agreed with DukeEsquire that it boils down to the terms. Maybe according to the terms that Sony agreed to they were covered and the insurance company are trying to back out given the price of paying out, maybe they are genuine in their response of "we don't cover that."

As I said, my only agreement with Sony on this issue comes from my own personal disaster with insurance companies. I've found them to be one of the most difficult aspects of society to deal with when it comes to providing a service.

rijp said,

I'ts not a matter of "weasel out". Insurance companies are VERY specific. do you WANT to pay the difference each time a company files a claim? I sure as hell don't. If Sony has to get help from insurance and it's not covered guess who is stuck with the bill, eh? That's right TAX PAYERS! So Sony shouldn't get help if they aren't specifically COVERED by the insurance.

You seem to be confused as to the difference between a corporation and a government / government department.

Either that, or you think Obama is going to bail out the very Japanese Sony, when they are more than capable of paying for their own stuff up. Either way, you're not quite right. Your tax money is safe from Sony.