In late 2013 Cottage Health System, the operator of a network ofhospitals in Southern California, discovered that hackers hadstolen 32,500 patient records. Cottage was sued for $4.1 million,which was paid by the insurer, Columbia Casualty Company, asprovided by the policy.

Now, Columbia is suing Cottage for reimbursement, alleging thatCottage and its third-party vendor, INSYN Computer Solution, Inc.,stored medical records on a system that was fully accessible to theInternet but failed to install encryption or take other securitymeasures to protect patient information as required by thepolicy.

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Rosalie Donlon

Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU You can contact her at [email protected].