The bad just got worse for the popular website Hulu. Hulu has been defending against a class action lawsuit filed by Hulu users who claim the popular website has been tracking its users’ online activity with cookies and other identifiers that are placed on users’ computers.

These cookies are sometimes called “zombie cookies” because they reappear even when Hulu users clear the data files of their internet browsers. In other words, these cookies are permanent and Hulu users cannot simply clear their internet browsing files as they would for any other cookie.

Although Hulu ceased using this tracking technology last year, Hulu users are seeking damages for the entire class of users who visited Hulu’s website for approximately a six month window last year during which Hulu utilized the zombie cookies.

To make matters worse, Hulu has been trying to get its insurer Hartford Casualty Insurance Company to provide coverage for these claims and defend Hulu in the class action lawsuit. However, Hulu’s insurance policy purchased in 2009 only provides general liability coverage up to $2Million and an umbrella coverage up to $10Million. The policies cover Hulu against “bodily injury and property damage” and “personal and advertising injury,” which Hartford claims does not apply to the class action lawsuit. Hartford also claims that Hulu’s insurance policy does not provide coverage for litigation expenses, criminal acts, injunctive relief, and statutory damages.

Hulu’s insurance company Hartford Casualty Insurance is taking a strong stance in refusing coverage for Hulu’s class action legal woes. If Hartford gets its way, the class action lawsuit could get very pricey very quickly for Hulu.

In the class action lawsuit, the Hulu users are now asserting that to fix the computers affected by Hulu’s zombie cookies would cost an estimated $500 to $1,000 per computer. Given the fact that Hulu is quickly becoming a household name and is used by millions of users each month, the damages awarded to the Hulu users could be enormous.