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Insurer’s Broad Interpretation of Data Breach Exclusion Rejected by Court

Many non-cyber policies include data breach exclusions, but few cases have addressed their scope. In a recent case, a federal district court rejected an insurer’s broad interpretation of the term “data” as it was used in data breach exclusions in a multimedia liability policy. In Ellicott City Cable, the insurer contended that satellite television programming was “data” within the meaning of the exclusions. The court found the term ambiguous, construed the ambiguity against the insurer, and ruled that the underlying lawsuit triggered the insurer’s duty to defend. While the case did not involve a data breach, the decision demonstrates that data breach exclusions should be narrowly construed and also offers helpful guidance about interpreting the term “data” if it is undefined in a policy.

The underlying case involved a distribution arrangement between Ellicott City Cable and DirecTV, whereby Ellicott City Cable distributed satellite television programming to its customers. Apparently Ellicott City Cable was overzealous in serving its customers and allegedly distributed DirecTV’s programming beyond the scope of the contracts. DirecTV sued Ellicott City Cable, alleging that Ellicott City Cable fraudulently obtained and distributed DirecTV’s programming.

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