Sony and Zurich Reach Settlement in PSN Hacking Case

Sony Corp. of America and Zurich American Insurance Co. have reached a settlement in a commercial general liability (CGL) policy coverage case stemming from the notorious April 2011 hacking of Sony’s Play Station Network (PSN), according to court documents filed in New York recently.

The New York trial court had recently ruled in favor of Zurich American last year and the case was subsequently appealed to the intermediate appellate court in New York before a settlement was reached. In Feb 2014, the Court said in a bench ruling that Zuirch America was not obligated to cover Sony for litigation related to the much-publicized hacking of Sony’s PlayStation Network in 2011.

The lawsuit

Zurich America and Zurich Insurance Co. Ltd. Had filed suit against New York-based Sony in New York State Supreme Court in Manhattan in 2011, stating they were not obligated to “defend and potentially indemnify” Sony from class action lawsuits, miscellaneous and possible investigations by state attorneys general related to the hacking attacks on its networks.

“The case was argued to the intermediate appellate court in New York after the trial court had ruled for the insurance company’s position that there was no coverage,” said law firm Anderson Kill’s Cyber Insurance Recovery Group Chair Joshua Gold, who was not involved in the Sony case.

Court documents showed that since the 2011 incident, more than 50 class-action complaints have been filed in the U.S. against Sony. The data breach had famously exposed personal information of tens of millions of users.

The settlement

Zurich’s lawyers argued that the insurer isn’t obligated to defend Sony because Sony’s primary commercial general liability policy and its excess policy do not qualify for such coverage.

“Sony appealed that decision to the intermediate appellate court and even though that argument was briefed and argued before the appellate division, obviously one or more parties decided it was time to settle the case,” said Gold. “So it appears no decision will come from the appellate court now that there is this final settlement.”

Spokesmen for Zurich America and Sony could not immediately be reached for comment.

Also commenting on the news of the settlement, Linda Kornfeld, partner with law firm Kasowitz, Benson, Torres & Friedman’s Insurance Recovery Group, said Judge Oing’s decision in the New York trial court last year should now remain as an outlier decision.

“The issue of whether Judge Oing’s decision was correct has now been taken away from the appellate court,” said Kornfeld, who was not involved in the Sony case. “As a result, insurer arguments regarding the precedential value of the opinion will be diminished, as it should remain an outlier trial court decision.”