Data Breach

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Last summer, New York Governor Andrew Cuomo signed into law the Stop Hacks and Improve Electronic Data Security (SHIELD) Act. The SHIELD Act’s data breach notification requirements are already effective and the law’s data security requirements go into effect on March 21. Any company that does business in New York or has customers in New York needs to understand what the law requires.

New York, like many other states, has a data breach notification law that requires businesses to notify consumers when a breach occurs. The SHIELD Act goes further than New York’s previous law, both in its definition of what type of information is covered and in reaching companies that may not have any connection to New York except for having information about New York residents in their database. The SHIELD Act:

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The Indiana Attorney General recently asserted a novel claim under the Indiana Deceptive Consumer Sales Act that, if successful, opens the door for data breach victims to file class action lawsuits and recover $500 or more per person in statutory damages and attorney’s fees. Damages can add up fast as a data breach involving 2,000 people could result in $1,000,000 in damages, not including attorney’s fees. Data breaches may also result in a lawsuit by the Attorney General for civil penalties, attorney fees, and injunctive relief. Now is the perfect time to consider hardening your company’s cyber security defenses and increasing your cyber insurance policy limits.
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The struggles continue for Facebook. As you hopefully know by now, on Sept. 28, the social media giant announced a security breach affecting 50 million accounts. The breach involved the theft of password tokens that allow a user to stay signed in or to sign into numerous third party applications, such as Spotify, Instagram and Yelp, among thousands of others. We thought to take the opportunity with this most recent breach to remind you about best practices that can help…
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Taft summer associate Jordan Jennings-Moore contributed to this article.

In today’s world, very few people remain completely unscathed by a data breach somewhere. From Target, to Anthem, Wendy’s or Equifax, individuals across the country have grown accustomed to getting breach notification letters. Most recently, Alabama and South Dakota became the last two jurisdictions in the United States to adopt data breach notification laws. This means that any person or entity conducting business in the U.S. must be prepared to protect personal identifying information (PII) belonging to customers, clients, and employees.

Encryption is an easy way to protect PII. It wasn’t always that way, but technologies have made it easier and cheaper to do. And this has legal benefits. A common trend seen amongst all U.S. jurisdictions is an encryption exception to providing notice of a data breach. Why? Well, because encrypted data is not “personal data.” Therefore, loss of encrypted data is often not a “breach” under the law. Encryption saves you time, your reputation and thousands, if not millions, of dollars. That’s huge.

During her time at Taft, our Dayton summer associate Jordan Jennings followed the trends of data breach notification laws and worked with me on updating our materials to reflect the ever changing world of state privacy and security law (i.e. California). I asked her to pitch in on this update and report on some of her findings below. (Spoiler alert: encryption is a pretty big deal.)

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On March 28, 2018, over sixteen years after California passed the nation’s first data breach notification law, Alabama became the fiftieth, and final, state to join the club. As a result, any person or entity conducting business in the United States must be prepared to safeguard personal identifying information belonging to customers, clients, and employees, while also being ready to comply with all applicable state and federal laws and regulations.

What Data?
The Alabama Data Breach Notification Act of 2018 (S.B. 318), goes into effect on June 1, 2018, and largely mirrors the requirements of many notification laws. Specifically, Alabama’s law pertains to “sensitive personally identifying information.” Sensitive personally identifying information includes an Alabama resident’s first name or first initial and last name in combination with any of the following:

  • Non-truncated Social Security or tax-identification number;
  • Non-truncated driver’s license, passport, or other government identification number,
  • Financial account number combined with security/access code, password, PIN, or expiration date necessary to access or enter into a transaction that will “credit or debit” the account;”
  • Username or email addresses in combination with a password or security question and answer that would permit access to an online account likely to contain sensitive personally identifying information; and
  • Health information, such as an individual’s medical condition, patient history, and health insurance identification numbers.

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In a local news interview, I was recently asked to comment on the Facebook-Cambridge Analytica story involving the unauthorized use of Facebook user profile information by Cambridge Analytica for profiling and targeting purposes. The focus of the interview was what consumers can do to better protect themselves. However, there are learning opportunities for businesses too. Here are some quick points to consider for both parties.

Consumers

  1. Your choices matter most. I beat this drum pretty heavily, but it is

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Join Taft and Sikich for an informational session on Feb. 21 as two of our professionals share their experiences before and during a data breach and share their insights in the hopes of helping you better prepare for and survive a data breach. Register here.

Schedule:
3:30 – 4:00pm Registration & Networking
4:00 – 5:00pm Presentation
5:00 – 6:00pm Networking, drinks & hors d’oeuvres

Presenters:

Scot Ganow, Senior Counsel – Taft Stettinius & Hollister LLP
Scot is co-chair of…
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With this year’s high profile breach at a large consumer reporting agency and credit cards ringing up balances during this holiday season, I have been fielding numerous calls from people in both a professional and personal capacity on what they should be doing to “truly” protect their identity and their credit accounts. I often find myself reiterating some of the basics of the laws in place to protect you and to empower you to safeguard your credit information. So, I thought a quick post sharing that information might be timely, helpful and possibly buy you some peace of mind.

  1. No one will care more about your privacy and security than you. Let me begin by reiterating a common mantra of mine: No one will care more about your privacy and security than you. While the law can provide a remedy and some protections, it will never move faster than you, nor will it know as much about your individual situation as you do. In truth, the law is your last remedy when dealing with information security-related issues. That said, there are protections and tools available to you at the federal and state level of which you might be able to avail yourself.
  2. Federal and state law. At the federal level, the privacy and security of your information stored by consumer reporting agencies (“CRAs”) is regulated under the Fair Credit Reporting Act (“FCRA”). The FCRA regulates the use of consumer report information, or any information that might be used to determine your eligibility for something, such as a loan, apartment rental, job, license, etc. As this information includes sensitive details such as your social security number, date of birth, as well as details of your financial and professional history, the FCRA assigns many duties and obligations to CRAs and users of consumer reports. On top of that, many states have their own version of a fair credit reporting act that mirrors the federal law. In some cases, the state act provides more restrictions and protection on the use of personal information than the federal version.

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Taft Business & Finance attorneys Jim Butz and Caroline Thee recently published an article on data breaches becoming increasingly problematic during the due diligence stage of transactions. The article addresses what a buyer (and a seller) should do when investigating a target’s exposure to unauthorized access to data or other proprietary information. Read the article here.
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As we gather at this time of year to express our gratitude for those people and things most important in our lives, perhaps one of the things on that list at work is that you have not suffered through a security incident or breach this past year, or ever. Indeed, this is reason to be thankful! However, when it comes to privacy and security incidents, it is not a matter of IF but WHEN. So be grateful for your good…
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