Insurance Law

Is that Covered? Data Breach

By Michael Kelley

With all of the data breach issues in the news, we thought that this decision might be of interest to you.  The Connecticut Supreme Court, [subscribers can access an enhanced version of this opinion: | Lexis Advance], has affirmed a lower court ruling denying coverage to IBM for more than $6 million in losses stemming from data lost in a highway incident.  The Court ruled that two insurers had no obligation to cover IBM's losses when tapes containing employee social security numbers, birth dates and contact information slipped out of the back of a truck operated by an IBM contractor.  IBM sought coverage under its commercial general liability policy, arguing that the losses arose from violations of a person's right to privacy.  The court found no coverage under that section of the policy.

We have recommended for some time that those businesses concerned about covering data losses not depend on their commercial liability policies for protection.  Instead, they should seek coverage under cyber liability or data breach policies.  The situation involved here is so unusual that there is a question as to whether even cyber liability/data breach coverage would have protected IBM.

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