MediaTech Law

Why is liability for data loss typically carved out or tightly limited in cloud service and IT outsourcing contracts?  A common disclaimer in contracts for cloud services (and sometimes plain old IT outsourcing) runs like this:

You agree to take full responsibility for files and data transferred, and to maintain all appropriate backup of files and data stored on our servers. We will not be responsible for any data loss from your account.  (From http://techtips.salon.com/liability-loss-data-under-hosting-agreement-2065.html (emphasis added))

What is the Liability from Data Loss?

First, what exactly is the liability – from data loss – that is being disclaimed?  What is the risk?  For that, we turn to Dan Eash writing in Salon’s “Tech Tips”:

1. Your site might be corrupted by hackers and spammers because your host didn’t properly secure the servers.
2. Your host might do weekly backups, but something goes wrong and you lose days of work.
3. You might have customers in a hosting reseller account who lose data because the host you bought the account from didn’t do regular backups.
4. You might even have an e-commerce site where new customers make daily purchases.  If something goes wrong, how do you restore lost orders and customer details without a current backup?

I would add a 5th scenario: You just don’t know.