Insurance Company Tries to Dodge Sony's PSN Legal Costs

[Andy Chalk]

Insurance Company Tries to Dodge Sony's PSN Legal Costs

Insurance company Zurich American is seeking a court ruling that it does not have to pay for any of Sony's legal defenses against lawsuits filed over the breach and outage of the PlayStation Network.

The PSN outage [http://www.escapistmagazine.com/news/tag/psn%20down?from_search=1] that took place over April and May was a full-scale debacle for Sony and, as is the way with things these days, led to all kinds of legal headaches for the company, with possibly more to come. There's an awful lot of money involved, not just in potential payouts to aggrieved customers but also in legal costs associated with defending against the claims. Those are costs that Zurich American, one of Sony's insurers, has no interest in paying.

The company filed papers in a New York court on Wednesday seeking a declaration that it does not have to defend Sony against any claims "asserted in the class-action lawsuits, miscellaneous claims, or potential future actions instituted by any state attorney general." Zurich's argument is that Sony's general liability policy covers only "bodily injury, property damage or personal and advertising injury," none of which have been claimed in any of the PSN lawsuits. Even if such claims had been made, the company said, exclusions in the policy would deny coverage for the claims.

Zurich, which wrote the policy for Sony Computer Entertainment of America back in April, also asserted that its policy covers only that specific unit and does not apply to other Sony branches, such as the new Sony Network Entertainment America, which is now responsible for Sony's online operations.

At the same time, Zurich also filed lawsuits against fellow Sony insurers Mitsui Sumimoto Insurance AIG and ACE Ltd., asking the court to nail down their obligations based on the insurance policies they'd written for the company. "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," attorney Richard Bortnick, who is not involved in the case, told Reuters [http://www.reuters.com/article/2011/07/21/insurance-sony-idUSN1E76K0V920110721]. Or, to put it somewhat more succinctly, if Zurich's going down for this, it's not going down alone.

Sony is currently facing 55 class-action lawsuits in the U.S. and is also the subject of various state and federal investigations which could lead to other costs. The company currently estimates that the PSN mess will knock $178 million off its operating profit for the fiscal year.

via: Gamasutra [http://www.gamasutra.com/view/news/36012/Sony_Insurer_Sues_Over_Data_Breach_Defense_Payouts.php]


Permalink

 

[Femaref]

yes, I think you did. If they want to dodge the cost, it might be because they don't have enough money. Then why did they insure sony in the first place?

 

[z121231211]

So... one insurance company doesn't want to pay so its going for a court ruling, but wants other insurance companies to pay so its going for a court ruling on that...

Did I read that right?

Zurich doesn't cover what Sony has gone through, but wants to point out to Sony that their other insurance does...through lawsuits.

 

[Sniper Team 4]

And this is why insurance is the biggest scam ever thought up. Pay and pay and pay, then when you need the services you've been paying for, they say, "Oh, you haven't been paying for this EXACT situation."

 

[ssManae]

So... one insurance company doesn't want to pay so its going for a court ruling, but wants other insurance companies to pay so its going for a court ruling on that...

Did I read that right?

I think it's more that the first lawsuit is claiming they don't have to pay, and the second is "but if you reject the first one, these other insurers should have to pay, too!"

 

[Jibblejab]

Breaking news, Insurance company isnt paying out for something that wasnt covered in the first place...

Sony's policy didnt cover the "outrage", a policy which Sony agreed to. Now they decide that actually they fancy some money from it and expect the insurers to cover it out of the kindness of their heart. And the insurers are crooks?

 

[RonHiler]

Typical. Insurance companies are happy to TAKE your money, but god forbid you try to use the service you are supposedly paying for.

 

[BgRdMchne]

Not quite.
Based on my reading of the article, it sounds like they are pleading for the other companies to be partial responsible for the defense cost in the alternative to being released from having to pay to defend Sony.

They are basically asking the Court to read the policy and determine if they have a duty to defend. If the Court rules that they do, then they are asking that others with a similar policy be required to fulfill there own duties under their own policies.

Unless someone does a fine-tooth comb reading of the policy, we won't know the extent of Zurich's rights and obligations to Sony.

 

[Kuala BangoDango]

I agree with Sniper team 4. Insurance is the biggest legalized scam I know of.

 

[Marudas]

Insurance is such a joke. I'd like to see some numbers that show how often an Insurance company pays out more than it gets in from customers. You pay regularly no matter what, or they cut you off, but at least one time out of every ten someone files a claim, they back out of it. I'd wager the number is much higher than that still.

 

[Baresark]

I'm not surprised they don't want to pay. They don't make money on paying out claims, that is why most insurances do their absolute best not to cover someone. I'm also not surprised that Sony thinks they aren't fiscally responsible for their crappy security, and what comes of that.

I agree with Sniper team 4. Insurance is the biggest legalized scam I know of.

The worst part is that governments subsidize these insurance companies by mandating companies to have them. Sony couldn't operate without that insurance, so they pay and pay, but when it comes time for the insurance companies to do it's half, it doesn't want to. That also applies to individuals.

 

[THE_NAMSU]

Screw insurance corporations, good thing there is the NHS in UK, for now anyway...

[small] go away David Cameron!.... [/small]

 

[BabyRaptor]

"We don't care what it says.....We're not paying it. Please cover our greed and laziness."

Real Classy...

 

[sunpop]

Insurance companies always try to avoid doing their job, it makes me wonder why there are strict laws involving insurance companies.

 

[vxicepickxv]

Insurance is such a joke. I'd like to see some numbers that show how often an Insurance company pays out more than it gets in from customers. You pay regularly no matter what, or they cut you off, but at least one time out of every ten someone files a claim, they back out of it. I'd wager the number is much higher than that still.

It varies from company to company, and state to state.

There was a point in California where 69% of all medical insurance claims to one company were rejected.


I guess it's time for Sony to get new insurance, and tell everybody else to go elsewhere for it too.

 

[MrGuy]

Several previous commenters misunderstand "property damage" in the context of liability insurance. Property damage means insurance for the damage you (Sony) does to the property of others. By writing a liability policy, Zurich is financially on the hook for the results of Sony's actions, not for any damage done by others to Sony.

Whether Sony's servers were or were not damaged is completely irrelevant. The question is whether Sony has caused "property damage" to PSN users. If they have, then Zurich is responsible to help Sony defend claims and Zurich would be financially liable for damages.

And that's the rub, and why this is far from a technicality. As a PS3 owner, your PS3 wasn't physically damaged. You weren't physically injured. Those would be things that (if Sony were responsible, which isn't established yet) that Sony would claim from Zurich as "property damage" and "bodily injury."

What PS3 owners actually faced was loss of use of a service, and potential exposure of their identity. Assuming Sony is found liable, IMO Zurich has a very legitimate point that neither is necessarily covered by a liability policy. I don't know what policy provisions Sony's policy included, and neither do you. Claiming this is "weasling out on a technicality" is fairly premature.

And, no, I don't work for Zurich (or any other insurance company). But I know enough to know that's it's premature to pick a side and say they're right or wrong in this dispute.

 

[RelexCryo]

So... one insurance company doesn't want to pay so its going for a court ruling, but wants other insurance companies to pay so its going for a court ruling on that...

Did I read that right?

Zurich doesn't cover what Sony has gone through, but wants to point out to Sony that their other insurance does...through lawsuits.

This pretty much. When an insuance company dodges claims it has promised to pay, it is committing a crime and should be punished, but apparently that is not what is happening here. Excellent summary.

 

[Swifteye]

Ya know something similar happened when new Orleans flooded. All those insurance companies decided they weren't going to pay for all the houses that were actually insured. Makes sense though if they did they would go bankrupt. Still though there should be some crime for making a security blanket that only keeps you warm when your not using it.