Data Breach Notification

As our readers know we maintain a summary of U.S. state data breach notification laws, which we refer to as the “Mintz Matrix.”   Our latest update is available here, and it should be part of your incident response “toolbox” and part of your planning.

 During 2016, amendments to breach notification laws in five states went into effect (California, Nebraska, Oregon, Rhode Island and Tennessee).  And by the end of last year, well over twenty states had introduced or were considering new regulations or amendments to their existing security breach laws.  We expect there to continue to be significant regulatory activity in the data security space during 2017.  As always, we will keep you abreast of changes and will release updated versions of our Mintz Matrix to keep pace with developments in the states.

We are keeping an eye out for signs of support for a national breach notification law.  So far, there does not appear to be much political motivation for undertaking this effort.  A key sticking point is anxiety among a number of states that a federal law would offer less protection than their existing state law.  This is a valid concern since a national standard will only alleviate the significant burden of complying with the present patchwork of state laws if it has broad pre-emptive effect.  Only time will tell if state and federal lawmakers can work together to develop a comprehensive nationwide regime for security breach notification and remediation.

In the meantime, we must keep tabs on the forty-seven states (along with the District of Columbia, Guam, Puerto Rico and the Virgin Islands) with their own security breach laws.  Here is what’s been happening since our previous update in the Fall:

 California

 California amended its security breach law in order to require disclosure to affected residents (and to the Attorney General if more than 500 Californians are affected) when encrypted personal data is acquired by an unauthorized person together with an encryption key or security credential that could render the personal data readable or useable.

We note also that former Congressman Xavier Becerra recently took over as Attorney General in California, replacing Kamala Harris who aggressively pursued regulation in the privacy arena during her tenure as AG and who now serves California as one of its U.S. Senators.  Given this change in leadership, it will be interesting to see if the state continues to be a leader in pushing for stringent data security and privacy measures at the state and federal level.

 Illinois

Last summer Illinois passed an amendment to its Personal Information Protection Act (“PIPA”) that significantly broadened protections for personal information and the obligations imposed on businesses that handle such data.  The amendment became effective on January 1, 2017 and made several key changes to PIPA:

  • Definition of Personal Information. PIPA’s definition of “personal information” has now been expanded to include medical information, health insurance information, and unique biometric data used for authentication purposes (examples cited in the statute are a fingerprint, retina or iris image, or unique physical representations or digital representations of biometric data). The amended definition also encompasses a user name or email address in combination with a password or security question and answer that would permit access to an online account when either the user name or email address, or password or security question and answer, are not encrypted or redacted.
  • Encryption Safe Harbor. While PIPA already provided a safe harbor for data collectors if data disclosed due to a security breach was fully encrypted or redacted, the amendment clarified that the safe harbor does not apply if the keys to unencrypt or unredact or otherwise read compromised encrypted or redacted data have also been acquired in connection with the security breach.
  • Nature of Notification. For security breaches involving a user name or email address in combination with a password or security question and answer, data collectors may now provide notice in electronic or other form to affected Illinois residents. Such notice must direct individuals to promptly change their user name or password and security question and answer, or to take other appropriate steps to protect all online accounts for which the affected resident uses the same user name or email address/password or security question and answer. The amended statute also provides an additional option for substitute notice when residents affected by a security breach are confined to one geographic area.
  • New Exemptions. The amendment added an exemption for data collectors who meet their obligations under applicable provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) and the Health Information Technology for Economic and Clinical Health Act (“HITECH”). Any data collector that provides notice of a security breach to the Secretary of Health and Human Services pursuant to its obligations under HITECH must also provide this notification to the Illinois Attorney General within five business days of notifying the Secretary. This exemption will primarily apply to certain entities operating in the healthcare space. The amended statute also deems financial institutions subject to applicable provisions of the Gramm-Leach-Bliley Act in compliance with PIPA’s data security requirements.
  • Security Requirements. Beyond addressing breach notification, the amendment requires covered entities to implement and maintain reasonable security measures to protect records containing personal information of Illinois residents and to impose similar requirements on recipient parties when disclosing such personal information pursuant to a contract. The amended statute also requires state agencies to report security breaches affecting more than 250 Illinois residents to the Illinois Attorney General.

 Massachusetts

 For those information junkies out there!  The Office of Consumer Affairs and Business Regulation (the “OCABR”) in Massachusetts has created a public web-based archive of data breaches reported to the OCABR and the Massachusetts Attorney General since 2007.  The data breach notification archive is available at www.mass.gov/ocabr and includes information about which entity was breached, how many Massachusetts residents were affected, if the breach was electronic or involved paper, and the nature of remediation services offered to affected residents.

 It is always a good time to review your incident response plan and data privacy policies to bring everything in line with changes happening on the state level. 

 And now for the disclaimer: The Mintz Matrix is for informational purposes only and does not constitute legal advice or opinions regarding any specific facts relating to specific data breach incidents. You should seek the advice of the Mintz Levin privacy team or other experienced legal counsel when reviewing options and obligations in responding to a particular data security breach.

Make sure to get your February 2017 Mintz Matrix!  Available here for downloading and always linked through the blog’s right-hand navigation bar.

The Securities and Exchange Commission (SEC) is investigating whether Yahoo! should have reported the two massive data breaches it experienced earlier to investors, according to individuals with knowledge.  The SEC will probably question Yahoo as to why it took two years, until September of 2016, to disclose a 2014 data breach that Yahoo has said affected at least 500 million users.  The September 2016 disclosure came to light while Verizon Communications was in the process of acquiring Yahoo.  As of now, Yahoo has not confirmed publically the reason for the two year gap.  In December of 2016, Yahoo also disclosed that it had recently discovered a breach of around 1 billion Yahoo user accounts.  As Yahoo appears to have disclosed that breach near in time to discovery, commentators believe that it is less likely that the SEC will be less concerned with it.

After a company discovers that it has experienced an adverse cyber incidents, it faces a potentially Faustian choice: attempt to remediate the issue quietly and avoid reputational harm, or disclose it publically in a way that complies with SEC guidance, knowing that public knowledge could reduce public confidence in the company’s business and could even prove to be the impetus for additional litigation.

Part of the issue may be that while the SEC has various different mechanisms to compel publically traded companies to disclose relevant adverse cyber events, including its 2011 guidance, exactly what and when companies are required to disclose has been seen as vague.  Commentators have argued that companies may have a legitimate interest in delaying disclosure of significant adverse cyber incidents to give law enforcement and cyber security personnel a chance to investigate, and that disclosing too soon would hamper those efforts, putting affected individuals at more risk.

Even so, many see the two year gap period between Yahoo’s 2014 breach and its September 2016 disclosure as a potential vehicle for the SEC to clarify its guidance, due to the unusually long time period and large number of compromised accounts. As a result of its investigation, it is possible that the SEC could release further direction for companies as to what constitutes justifiable reasons for delaying disclosure, as well as acceptable periods of delay.  As cybersecurity is one of the SEC’s 2017 Examination Priorities, at a minimum, companies should expect the SEC to increase enforcement of its existing cybersecurity guidance and corresponding mechanisms.  Whatever the SEC decides during its investigation of Yahoo, implementing a comprehensive Cybersecurity Risk Management program will help keep companies out of this quagmire to begin with.

If you have any questions regarding compliance with SEC cyber incident guidance, please do not hesitate to contact the team at Mintz Levin.

 

 

As we previewed last week, the Federal Communications Commission (FCC) has adopted new privacy rules that govern Internet service providers’ (ISPs) handling of broadband customer information.  Though the Wireline Competition Bureau stated that it expects it will be at least several days before the final Order is released to the public, the FCC released a fact sheet describing the rules as adopted.

These rules are the culmination of a process that began in 2015 with the reclassification of Broadband Internet Access Service (BIAS) as a common carrier telecommunications service regulated under Title II of the Communications Act.  As a consequence of reclassification, the obligations established under the privacy framework adopted by the Federal Trade Commission (FTC) no longer applied to ISPs due to the common carrier exception in Section 5 of the FTC Act.  Accordingly, the FCC determined that the privacy protections governing telephone customer proprietary network information (CPNI) set forth in Section 222 of the Communications Act would now apply to ISPs’ provision of BIAS.

On April 1, 2016, the Commission released a Notice of Proposed Rulemaking setting forth proposed privacy and data security rules that would govern ISPs’ provision of BIAS.  The rules originally proposed by the FCC would have subjected ISPs to significantly greater constraints on their ability to use customer data for advertising, marketing, and offering customized services and features than the FTC’s privacy framework, which continues to apply to websites, apps, and all other entities in the Internet ecosystem other than ISPs.  For example, while the FTC framework applies differing choice mechanisms (i.e., opt-in, opt-out, or implied consent) depending on the sensitivity of the data being collected and the context of its use, the FCC initially proposed to apply a default opt-in regime to virtually all data – rejecting any distinctions based on data sensitivity.

In response to comments from the FTC and others in the proceeding, the final rules adopted by the FCC align more closely with the FTC framework, though some important differences remain.  Continue reading for key elements of the proposed rules. Continue Reading What You Need to Know about the New Broadband Privacy Regulations

You may not realize how much personal information your insurance company has about you. Scarier still is that much of this data is sensitive and valuable to hackers – such as your Social Security number, financial information, medical history, even itemized schedules of your most expensive personal property.  As data breaches affecting insurers have piled up in the past couple of years (Anthem, Premera Blue Cross and Blue Shield, Excellus Health Plan, UCLA Health System just to name a few), so too have calls for stronger data security protections applicable to insurance data.  In response, the CyberSecurity Task Force of the National Association of Insurance Commissioners (“NAIC”), the standard-setting organization in the U.S. insurance industry created and governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories (“Task Force”) is racing to finish its Insurance Data Security Model Law (“Model Law” or “Law”) by the end of this year so that states can begin the adoption process as early as 2017.  Continue Reading Insurance Regulators Fine Tuning Cybersecurity Guidance

As has become typical in the data security space, there was quite a bit of activity in state legislatures over the previous year concerning data breach notification statutes.  Lawmakers are keenly aware of the high profile data breaches making headlines and the increasing concerns of constituents around identity theft and pervasive cybercrime.  In response, states are beefing up their data security statutes in order to provide greater protection for a broader range of data, to require notification to Attorneys General, and to speed up the timeline companies have to advise residents when their personal information has been compromised, to name a few steps. Please review our updated Mintz Matrix to make sure you understand the latest rules applicable to your business!

According to a recent summary published by the National Conference of State Legislatures, more than 25 states in 2016 have introduced or are currently considering security breach notification bills or resolutions.  While much legislation remains pending in statehouses across the country, statutory amendments passed in four states took effect over this past summer alone.  Here is a brief summary of significant amendments to data breach notification rules in Nebraska, Nevada, Rhode Island and Tennessee. Continue Reading Summer Round-Up: Four States Bolster Data Breach Notification Laws and More Changes on the Way

 

Two recent data breach incidents in the healthcare industry prove what readers of this blog have heard all too often:  KNOW THY VENDORS.

Last week, Phoenix-based Banner Health reported one of the year’s largest data breaches.  Banner reported that it had suffered a massive cyberattack potentially affecting the information of 3.7 million patients, health plan members and beneficiaries, providers.   This attack is notable for all companies and not just healthcare providers covered by HIPAA.   Reportedly, the attack occurred through the computer systems that process food and beverage purchases in the Banner system.  In the incident, according to reports, the hackers gained access to the larger systems through the point-of-sale computer system that processes food and beverage purchases.  The attack was discovered on July 13, and Banner believes hackers originally gained access on June 17. Continue Reading To Protect Data: Keep Your Network Access Close, and Your Vendors Closer

Sophisticated phishing scams and muscular hacking efforts continue to compromise personal and sensitive information held by insurers, hospital systems, and businesses large and small. In response, many states have strengthened their data breach notification and have enacted data security laws to enhance data protection obligations imposed on data collectors and to ensure that residents and state regulators receive prompt and adequate notice of security breaches when they do occur.  By mid-summer, a range of new measures will be going into effect in Nebraska, Nevada, Rhode Island and Tennessee. Be sure to review the latest edition of the Mintz Matrix for these new measures.  Continue Reading Illinois Joins the Fray: Strengthens its Laws Around Data Breach Notification and Data Security

If you have had to provide data breach notices across any number of states (and who hasn’t….), you would know that they vary widely in how those notices must be provided to state regulators.   In some states (for example, California, North Carolina, Indiana, and New York), the Attorney General’s office has established an online portal that must be used for breach notices.    In still other states, notice letters must be sent to one or multiple regulators.

Pursuant to the Massachusetts data breach notification statute, M.G.L. 93H, notices must be provided to the affected resident, the Attorney General’s office and to the Office of Consumer Affairs and Business Regulation (OCABR).    It is not enough that Massachusetts has a sui generis breach notice content statutory requirement (you must tell affected residents of the breach, but you can’t tell them about the breach), now the OCABR has created its own notice submission portal that is a separate form and not just a place to upload a copy of the AG notice.  A letter sent out earlier this month also says “It is important to note that this electronic submission form only satisfies the notification requirement for OCABR.  The submission does not relieve businesses of their legal obligation to separately notify the AGO and the affected Massachusetts residents.”

Make sure you update your incident response plan to account for this additional notice requirement.

As we reported last month, the FCC was preparing a proposed rulemaking (NPRM) to establish privacy and data security requirements for broadband internet access service (BIAS) providers.  The FCC has now released that proposal with comments and reply comments due May 27th and June 27th respectively.

The brief background to this proposal is that in 2015, the FCC adopted net neutrality rules in Open Internet Order, which reclassified BIAS as a common carrier telecommunications service subject to regulation under Title II of the Communications Act.  The Commission determined that, as a consequence of reclassification, Section 222 of the Communications Act, which is part of Title II, would now apply to BIAS providers. Section 222 regulates a telecommunications carrier’s use and disclosure of Customer Proprietary Network Information (“CPNI”) – which includes information related to the quantity, location, and amount of use of a telecommunications service.  The FCC concluded in its Open Internet Order that the rules implementing Section 222 were telephone-centric and ill-suited to BIAS, and so chose to forbear from applying those rules to ISPs.  With this latest release, the FCC is proposing a new set of rules implementing Section 222 that would apply to BIAS providers. Continue Reading FCC Broadband Privacy and Security Proposed Rulemaking Underway

In 2004, Mintz Levin created a compendium of state data breach notification laws and has been updating it on a regular basis ever since.imitated

Our latest update is available here, and it should be part of your incident response “toolbox” and part of your planning.

Some changes of note

Tennessee is our most recent state to amend its existing state data breach notification law.  Last week, the Governor signed an amendment into law that takes effect on July 1, 2016:

  • Joins several other states in tightening the notice period to “no later than 45 days from the discovery or notification of the breach…”
  • Eliminates the “encryption safe harbor,” i.e., notification obligations are triggered even where the accessed or acquired data elements are encrypted.
  • Specifically defines “unauthorized person” to include an employee “who is discovered … to have obtained personal information and intentionally used it for an unlawful purpose.”

California, Connecticut, Montana, Nevada, North Dakota, Oregon, Rhode Island, Washington and Wyoming all amended data breach laws in 2015.  Some amendments signed into law in 2015 do not take effect until later this year, so make sure to note the effective dates on  the Mintz Matrix when consulting various states.

What should you do now?

Spring cleaning.   Given the number of changes at the state level (and no prospect for federal legislation easing this pain….), spring is a good time to review your incident response plan and data privacy policies to bring everything in line.    In particular:

  • Note tightened response deadlines (Rhode Island, Tennessee)
  • Add identity theft prevention or identity theft mitigation services (Connecticut, California)
  • Review data classification to take into account expanded definitions of personal information (Montana, Wyoming)
  • Revise notice templates to comply with the new California format

As always, the Mintz Matrix is for informational purposes only and does not constitute legal advice or opinions regarding any specific facts relating to specific data breach incidents. You should seek the advice of experienced legal counsel (e.g., the Mintz Levin privacy team) when reviewing options and obligations in responding to a particular data security breach.

Hat tip to the newest member of the Mintz Levin Privacy team, Michael Katz, for great work on this update!