Month: June 2014

Insurance Companies Starting to Balk at Covering Class Action Data Breach Lawsuits

SC Magazine has reported on a petition by Safety National, the issuer of a general liability policy for Michaels Stores, that it not be required to defend Michaels in several data breach class action lawsuits because those lawsuits do not seek damages from bodily injury or property damage that the policy covers. As data breaches grow bigger and more frequent, companies who have not reviewed the risk, and covered themselves appropriately with insurance, will be challenged to a great degree by insurance companies that not only do not see much in the way of effort to prevent and plan for data breaches, but that don’t want to cover the liability, including the defense, in the first place. So, with insurance companies and stores pointing fingers at each other to provide a first line of defense, it is inevitable that both will point to security enhancements which need to be taken by the credit card industry to prevent breaches in the first place, such as use of more sophisticated credit card technology. In fact, notes the SC Magazine article, the SVP of the National Association of Convenience Stores puts some of the blame on “fraud-prone” cards — lacking more secure chip and PIN technology — that financial institutions routinely issue and which directly contradicts a shared interest in improving data security. According to the Ponemon Institute, worldwide, the average cost...

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Another Decision Protecting Web Sites from Defamation Suits

Yesterday, in Jones v. Dirty World Entertainment Recordings LLC (6th Cir. June 16, 2014), the 6th Circuit ruled that 47 U.S.C. § 230, the federal statute that immunizes online sites and companies from liability for what their users submit, shielded a dirt dishing web site from liability. TheDirty.com is a Scottsdale, Arizona-based website that routinely posts photos of women, with derogatory comments, often featuring co-signs from the operator, Nik Richie.  The web site posted an anonymous comment that Cincinnati Bengals cheerleader Sarah Jones had sex with half of the football team’s players and had contracted sexually transmitted diseases.  Jones sued, won in the District Court, but the decision was overturned by the 6th Circuit Court of Appeals, making the law more consistent throughout the Circuits. In a departure from the common law, which allocates liability to publishers or distributors of tortious material written or prepared by others, Section 230 of the Communications Decency Act immunizes providers of interactive computer services – i.e., web sites -against liability arising from content created by third parties. Section 230(c)(1) provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Although § 230(c)(1) does not explicitly mention immunity or a synonym thereof, courts have recognized the provision to protect internet service providers for the display of...

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