Court Rulings Shape Subrogation Rights in Cybersecurity Breaches: Key Cases Define Vendor Liability Two recent court decisions Axis Insurance Company v. Barracuda Networks, Inc. (2025) and Travelers Casualty and Surety Company of America v. Blackbaud, Inc. (2026) have clarified the limits of insurers’ subrogation rights against vendors following data breaches, with outcomes hinging on contractual relationships and legal standing. ### Axis v. Barracuda: No Privity, No Subrogation In Axis v. Barracuda, the U.S. First Circuit Court of Appeals ruled on November 20, 2025, that insurer Axis could not pursue subrogation against Barracuda Networks after a breach exposed Zoll Medical Corporation’s customer data. The case stemmed from a 2023 incident where Barracuda’s email archiving service, used by Zoll’s vendor Fusion LLC, was compromised. Zoll settled a class-action lawsuit from affected customers and sought recovery from Fusion and Barracuda. The court rejected Axis’s equitable indemnification claim, finding no direct or vicarious contractual relationship between Zoll and Barracuda only a chain of independent contracts (Zoll-Fusion, Fusion-Barracuda). Without privity, the court ruled that equitable indemnification, a narrow remedy, could not reallocate risk post-breach. The First Circuit also dismissed Axis’s breach-of-contract claim, affirming that Fusion failed to meet a contractual condition precedent (a liability-limiting provision) and that Barracuda’s lack of audit obligations did not waive this defense. Similarly, Axis’s claim for breach of the covenant of good faith failed, as Fusion had not negotiated protections for breach scenarios. ### Travelers v. Blackbaud: Direct Contracts Enable Subrogation In contrast, the Delaware Supreme Court ruled on February 13, 2026, in Travelers v. Blackbaud that insurers could proceed with subrogation claims against the software provider. Blackbaud, which provided donor management services to nonprofits, suffered a 2020 ransomware attack but offered clients only a self-remediation "toolkit" instead of direct support. Insurers, including Travelers, covered their policyholders’ incident response costs (legal fees, notifications, credit monitoring) and sued Blackbaud for recovery. The lower court dismissed the case, citing insufficiently pleaded aggregate claims under New York law. However, the Delaware Supreme Court overturned the decision, finding that the insurers had adequately alleged breach of contract. Unlike Axis, the insureds had direct contracts with Blackbaud, giving insurers standing to pursue subrogation. The court emphasized that Blackbaud could address individual claims through discovery, and that foreseeable breach-related costs (e.g., remediation expenses) constituted recoverable damages. ### Key Takeaways: Contracts Determine Liability The rulings underscore a critical distinction: subrogation claims against vendors require a direct contractual relationship between the insured and the breached party. In Axis, the lack of privity doomed the claim, while Travelers succeeded because the insureds’ contracts with Blackbaud established clear liability pathways. Both decisions reinforce that: - Equitable indemnification is unavailable without a direct or derivative contractual link. - Breach-of-contract claims hinge on compliance with contractual terms, including conditions precedent. - Aggregate subrogation may proceed if insurers plead sufficient facts, as seen in Travelers. The cases signal that cyber insurers and policyholders must scrutinize vendor contracts for liability clauses, indemnification rights, and subrogation waivers to mitigate exposure in breach scenarios.

On December 18, 2023, the Vermont Office of the Attorney General reported a data breach at ZOLL Medical Corporation due to a phishing attack that potentially affected personal information of individuals, including names, addresses, and Social Security numbers. The incident was discovered on or about November 1, 2023, but the number of individuals affected is not specified.

The California Office of the Attorney General reported on December 18, 2023, that ZOLL Medical Corporation experienced a phishing attack on August 2, 2023, potentially affecting personal information of individuals, including names, addresses, and Social Security numbers. The exact number of individuals affected is unknown, and no misuse of information has been indicated.

The Maine Office of the Attorney General reported that ZOLL Medical Corporation experienced a data breach involving an external system hack, disclosed on March 10, 2023. The breach occurred between January 28, 2023, and January 29, 2023, potentially affecting the personal information of 1,004,443 individuals, including Social Security numbers.

ZOLL discovered that some emails archived by an unnamed third-party service provider had been exposed during a server migration. At this point, the company is not aware of any fraud or identity theft to any individual as a result of this exposure. The compromised information includes patient names, addresses, dates of birth, and limited medical information. A small percentage of patients also had Social Security numbers exposed. ZOLL offered free credit and identity monitoring services for one year to impacted patients where available.

The California Office of the Attorney General reported that ZOLL Services LLC experienced a data security incident potentially exposing personal information from November 8, 2018, to December 28, 2018. The breach involved an external third-party vendor and may have included names, addresses, dates of birth, limited medical information, and Social Security numbers of individuals. Approximately UNKN individuals are impacted.