Sony’s insurer has taken the electronics giant to court in an effort to avoid liability for the wave of claims which have followed the breach of Sony’s systems earlier this year.
Zurich American Insurance asked a New York court on Wednesday to rule that the company does not have to cover Sony against class action lawsuits or other claims related to the data breaches. In the filing, Zurich argues that the insurance Sony had taken out with it does not cover the sort of damage caused by data theft, saying that it only provided cover for “property damage” and “bodily injury”, as well as “personal injury and advertising injury”.
Gartner analyst John Pescatore warned businesses not to rely on existing insurance policies for data breach protection.
“Don’t automatically assume that your existing liabilities or error and omission policies will apply to these cyber incidents. It sounds like that may have happened here in this Sony, Zurich America incident,” Pescatore said.
Insuring IT systems is inherently difficult, he says, as there is no basis for determining risk. “Fire insurance can look at materials used, fire suppression in place. Auto insurance can look at the track record of the particular car and particular driver to set rates. Not so with software – none of that works.,” Pescatore wrote in a blog on Friday.
“The real issue around cyber insurance is that it’s much like weather forecasting. There are forms of insurance which carriers will give farmers if weather hits their crops, but it’s pretty expensive and it doesn’t pay out a lot, because the insurers cannot predict weather all that well,” Pescatore told Information Age.
He added that, despite the recent wave of cyber security scares, the amount of money going into cyber insurance had not grown that much.
“The column inches going into cyber insurance is definitely taking off, but I don’t think we’ve seen any meaningful growth in expenditure on it, because as people look at these policies, they find out that they’re expensive and the coverage is very limited,” Pescatore said.
The financial cost of hacking and cyber crime is clear. Sony said that it expected its profits to drop by £109 million this year due to hacking.
More than 100m user details were stolen from Sony’s systems in in April and May this year. Sony has promised to reimburse any customers losses that result from the theft, but are still facing a number of lawsuits in relation to the breach.