Zurich American Insurance Co. asked the New York State Supreme Court last week to absolve it of any responsibility for defending or indemnifying Sony against claims arising from the recent data breaches at the company.
The data breaches at Sony's PlayStation Network, Sony Entertainment Online and Sony Pictures resulted in account data on close to 100 million individuals becoming exposed and over 12 million credit and debit cards being compromised.
The breaches have so far resulted in at least 55 putative class-action lawsuits being filed against Sony in the U.S and another three lawsuits filed against it in Canada. Sony expects to spend close to $180 million in the next year alone on breach-related costs.
But the company's attempts to get Zurich to defend it against the claims have run into a roadblock.
According to Zurich Insurance, the commercial general liability insurance policy it has with Sony Computer Entertainment America does not cover damages arising from cyber incidents. The policy only covers "bodily injury" and "property damage" caused by occurrences other than the kind of cyberattacks Sony experienced.
Though Sony's initial reaction to the enormous PlayStation Network breach earlier this year may have been less than stellar, the company responded in force as time went on, even vowing to hire a "Chief Information Security Officer" eventually. This morning, the company named the person filling that position: former director of the US National Cyber Security Center Philip Reitinger. Serious business!
Reitinger is actually filling two roles, as he's been hired on as senior vice president as well as chief information security officer, reporting to executive VP and general counsel Nicole Seligman.
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Sony this week revised the terms of service and user agreement for its online services, inserting a new section that states users cannot enter into a class action lawsuit against Sony unless Sony agrees to the initiation.
The move comes months after Sony's online services, including PlayStation Network, were compromised by a cyber attack that left millions of accounts compromised. The first class action over the breach was filed in April this year.
The new section of the terms, titled "Binding Individual Arbitration," explains that users must waive the option to open a class action lawsuit against the company regarding its online services.
Although as one point in the T&C states, they don't actually know if such a move is legal!
Businesses may use standard-form contracts to forbid consumers claiming fraud from banding together in a single arbitration, the Supreme Court ruled on Wednesday in a 5-to-4 decision that split along ideological lines.
Though the decision concerned arbitrations, it appeared to provide businesses with a way to avoid class-action lawsuits in court. All they need do, the decision suggested, is use standard-form contracts that require two things: that disputes be raised only through the informal mechanism of arbitration and that claims be brought one by one.
“The decision basically lets companies escape class actions, so long as they do so by means of arbitration agreements,” Brian T. Fitzpatrick, a law professor at Vanderbilt University, said. “This is a game-changer for businesses. It’s one of the most important and favorable cases for businesses in a very long time.”
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PlayStation 3 owners are eagerly awaiting the release of Naughty Dog's Uncharted 3 this holiday, and interestingly, the game will be shipping with a feature that would never have been included if Sony and its studios hadn't suffered through the PSN hack.
In speaking with IndustryGamers recently, Uncharted 3 game director Justin Richmond noted that Naughty Dog had to create a LAN feature out of necessity during the PSN downtime, and now gamers will be the lucky recipients of this feature when the game finally hits stores on November 1.
"As a developer, one of the things is, you want to keep playing the game. And so, actually, one of the positive outshoots from [the PSN hack] was that we got LAN. So our programmers sat down and said, "OK, how can we continue to work?" And so they hooked up the LAN gameplay mode and now we're shipping with that. So lemons to lemonade," he said.
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Speaking of the Great PSN Outage, here's a strange side effect:
http://www.industrygamers.com/news/playstation-network-outage-led-to-lan-gameplay-in-uncharted-3/
All that means to me is if Sony cock up, they could have a million lawsuits instead of one. Although I guess individuals can't afford to fight Sony individually, hence they've priced themselves out of 'justice' except for those who afford personal justice. Although as one point in the T&C states, they don't actually know if such a move is legal!
I think you're very right about that, as the T&C clearly moves resolution to independent arbritration (which is actually what the law courts should be about ).It may be related to the recent Supreme Court decision about class action:
http://www.nytimes.com/2011/04/28/business/28bizcourt.html
I think you're very right about that, as the T&C clearly moves resolution to independent arbritration (which is actually what the law courts should be about ).