Statutory damages for alleged breaches of privacy statutes can be covered by insurance

Don't be misled, recent court decisions have gone against insurer arguments that statute damages are not insured under public policy.

The protection of consumer privacy interests is at the forefront of public awareness and state and federal regulation, causing the potential for increased exposure to companies for alleged breaches of privacy statutes. With the ever-evolving risk that advances in technology will lead to interferences with consumer privacy interests, governmental entities seem poised to not only enact more laws and regulations to protect consumer privacy, but encourage strict enforcement of the laws already in existence. For example, on Sept. 23, 2013, modifications to the Health Insurance Portability and Accountability Act will become effective that expand the protections afforded to private patient information and increase liabilities associated with claimed breaches. Additionally, statutes such as the Song Beverly Act in California and cases interpreting them have led to upticks in class action litigation by consumers claiming improprieties by retailers with respect to the collection and use of customer zip code information. And a number of state's attorney generals are increasing regulation to address these privacy concerns.

While not all privacy statutes permit a private right of action, many do and often impose a specific damage amount, per violation, which, under certain statutes, can be trebled under certain circumstances. As a result, if the conduct in question involved thousands if not hundreds of thousands of claimed violations, the potential statutory exposure can be significant. In that circumstance, insurance can be a critical resource to help a company respond to claims against it and the risk of substantial "per violation" liability.

Contributing Author

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Linda D. Kornfeld

Linda D. Kornfeld is a partner with Kasowitz’s Insurance Recovery Litigation practice and managing partner of the firm’s Los Angeles office. With more than...

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Contributing Author

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Julia K. Holt

Julia K. Holt is an associate with Kasowitz’s Insurance Recovery Litigation practice in Los Angeles. She represents corporate insureds and reinsureds in complex insurance...

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