The National Association of Insurance Commissioners (NAIC) has approved its draft of the Insurance Data Security Model Law (Model Law) via a meeting of its Executive and Plenary Committees.  This important development follows New York Department of Financial Services (“DFS”) Cybersecurity Requirements for Financial Services Companies regulation that took effect on March 1, 2017 (DFS Cybersecurity Regulation) that we have covered previously.

NAIC likely recognizes that the numerous data breaches that have occurred over the past year have created an opportunity to build upon the momentum created by the DFS Cybersecurity Regulation, and provide an environment of comprehensive compliance requirements to protect Licensees and Consumers.  Indeed, the Model Law even contains Drafting Note stating that:

The drafters of this Act intend that if a Licensee, as defined in Section 3, is in compliance with N.Y. Comp. Codes R. & Regs. tit.23, § 500, Cybersecurity Requirements for Financial Services Companies, effective March 1, 2017, such Licensee is also in compliance with this Act.

In many cases, model laws approved by NAIC, a U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories, are approved within these jurisdictions as binding law.  Below is a high level overview of particularly salient points of the Model Law. Continue Reading Insurance Commissions Approve Data Security Model Law

 

Recently proposed legislation in Ohio could provide businesses with special protection from lawsuits in the event of a hack under certain circumstances. Senate Bill 220 would shelter businesses that have been proactive in instituting defenses to guard against data breaches. The idea is to encourage firms to voluntarily enact privacy protections by promising them the ability to later claim an affirmative defense in court should a hack still occur.

Other states already require businesses to meet specific standards with regard to providing cyber security protections and preventing data breaches. In New York, businesses licensed by the Department of Financial Services (DFS) must meet compliance standards in accordance with DFS cybersecurity regulations. These standards require licensees to have a written cybersecurity program in place, maintain a cybersecurity policy that covers 14 regulation-specific areas, designate a qualified employee as a Chief Information Security Officer, and implement an incident response plan, among additional imperatives. Similarly, states differ with regard to their requirements of businesses in providing data breach notices. For example, in Massachusetts, notices must be provided to the affected resident, the Attorney General’s office, and to the Office of Consumer Affairs and Business Regulation (OCABR).

Ohio’s Senate Bill 220 is interesting in that it does not lay out a minimum set of standards that, if not met, could serve as grounds for litigation in the event of a breach. Businesses will be tasked with instituting their own cybersecurity programs using one of eight industry-specific frameworks developed by the National Institute of Standards and Technology. The legislation provides for an evolving standard, which means lawmakers won’t have to continually revisit the issue to update a minimum set of standards. Whether or not a business qualifies for the safe harbor provision will be up to a judge to determine if such business has met its burden. Ultimately, the key takeaway is that this new legislation will provide for compliance as an affirmative defense for businesses facing a lawsuit as a result of a data breach.

The Mintz Levin team will continue to monitor this pending legislation and update our readers as it develops.

As data breaches dominate national headlines it remains important as ever for businesses to invest in security and to be ready to respond if a breach occurs.  Part of your preparedness program should be staying current on data breach legislation at the state level and we are here to help with a new installment of our “Mintz Matrix,” a detailed survey of U.S. state data breach notification laws.

There have been a few notable developments since we last published an update of the Mintz Matrix and below we have provided a snapshot of these changes.  Before reading on please download a copy of our September 2017 edition of the Mintz Matrix by clicking here. Continue Reading The Mintz Matrix – September 2017

 Uber failed consumers in two key ways: First by misrepresenting the extent to which it monitored its employees’ access to personal information about users and drivers, and second by misrepresenting that it took reasonable steps to secure that data….This case shows that, even if you’re a fast growing company, you can’t leave consumers behind: you must honor your privacy and security promises.”  

–Acting Federal Trade Commission Chair Maureen K. Oldhausen, In the Matter of Uber Technologies, Inc., Consent Order

To read more about this important FTC Consent Order and its implications for all companies with respect to privacy policies and the promises made to users/consumers, check out this Mintz Levin Privacy Alert.

 

 

 

If you are one of the many businesses licensed by the New York Department of Financial Services (DFS), and cannot avail yourself of the (very) limited exemptions, you must be ready for the first compliance transition date for the stringent DFS cybersecurity regulations – August 28, 2017.

Just in case you’d forgotten, the DFS cybersecurity regulations became effective March 1, 2017 and you can refresh your memory here. Continue Reading Are You Ready for the New York August 28th Compliance Deadline?  

The “business compromise email”  is what the FBI calls the “$5 billion scam,” but apparently an insurance company did not agree with an insured company that they had been the victim of a crime.

A federal court recently found that a crime policy afforded coverage for a $4.8 million wire transfer that an insured company was duped into making.  See Medidata Solutions, Inc. v. Federal Ins. Co., 15-CV-907 (SDNY July 21, 2017).   In this case, the thief took advantage of “real” facts, posing as the insured’s attorney for a corporate transaction.   More specifically, the insured was contemplating an acquisition and, as part of that process, the president instructed the finance department to be prepared, on an urgent basis, to assist with the transaction.  Continue Reading Court Holds Crime Policy Covers Business Email Compromise (BEC) Loss


Decisions you make when founding and/or investing in an insurtech venture can dictate your regulatory obligations, tax liability, operational structure and, ultimately, profitability.

Here are five seemingly simple questions to ask when launching an insurtech venture (and do not miss question #3): Continue Reading Five Questions for Investors in Insurtech

Recently the United States Computer Emergency Readiness Team (US-CERT), an organization within the Department of Homeland Security’s (DHS) National Protection and Programs Directorate (NPPD) and a branch of the Office of Cybersecurity and Communications’ (CS&C) National Cybersecurity and Communications Integration Center (NCCIC), encouraged users and administrators to review a recent article from the Federal Bureau of Investigation (FBI) regarding Building a Digital Defense with an Email Fortress.

Are we have discussed in many posts before, phishing — the fraudulent practice of sending emails purporting to be from a reputable entity to induce an individual to reveal privileged information such as a password — remains a major security threat.  Within the article, the FBI provides several helpful actions for businesses can take to reduce their risk of being phished, including reporting and deleting suspicious e-mails, and making sure that countermeasures such as firewalls, virus software, and spam filters are robust and up-to-date.

We encourage each of our readers to review the FBI’s guidance and consider whether their organization could benefit from any of the methods of protection provided.

Companies with any questions regarding any of these issues should not hesitate to contact the team at Mintz Levin.

Amid the flurry following former FBI Director James Comey’s firing last week, President Trump marked his 111th day in office on Thursday, May 11th by signing an executive order targeting national cybersecurity.

The long-awaited order is the first step in fulfilling Trump’s promise to address national cybersecurity concerns and it arrives as threats of international hacking and cyberattacks reach an all-time high. It establishes three overarching cybersecurity priorities for the United States: (1) protecting federal networks, (2) reinforcing critical IT infrastructure, and (3) protecting the American public in the online space. The full text of the executive order can be found here.

While the order includes few actionable items, it sets strict deadlines for government agencies to produce risk reports and recommendations for improving their data security practices, signifying an important call to action from the executive branch that places risk management at the forefront.

Modernizing & consolidating federal networks

Consolidating to the cloud will likely be the first major step toward overhauling the government’s administration-wide cybersecurity protocol. In a press briefing last Thursday, White House Homeland Security Advisor Tom Bossert addressed what he views as fractured, agency-specific IT security practices across the government, noting that “[if] we don’t move to shared services, we have 190 agencies all trying to develop their own defenses against advanced collection efforts.”

The move to modernize is an extension of similar efforts from the Obama administration to bolster cybersecurity, an area in which Bossert says the administration made “a lot of progress … [but] not enough.” In line with advancing these efforts, the executive order requires federal agencies to use the Framework for Improving Critical Infrastructure Cybersecurity developed in 2014 by the National Institute of Standards and Technology (“NIST”) to manage cybersecurity risk. Coincidentally, the Framework may be revised soon as the NIST recently closed a comment period on an updated draft that it circulated in January 2017, and per the executive order any successor document to the Framework will become the operative version to be used by government agencies. Separately, Rep. Will Hurd (R-TX), Chairman of the House Information Technology Subcommittee, recently reintroduced H.R. 2227, the “Modernizing Government Technology Act,” which secures more efficient funding for the modernization of federal IT infrastructure and is expected to hit the floor of the House of Representatives within the next couple of weeks.

Reinforcing critical infrastructure

The second prong of the executive order requires the Secretary of Homeland Security to prepare an audit of potential vulnerabilities across the country’s infrastructure systems – from financial and telecommunications systems to utilities including water and electricity. Improving transparency about the security gaps in these systems is crucial, especially as traditional data breaches are losing ground to more devastating Distributed Denial of Service (DDoS) botnet attacks made possible by the growing Internet of Things, or “IoT” (see our blog post here for a discussion of the House’s efforts to address growing security concerns around the IoT).

Protecting the public online

Finally, President Trump’s executive order urges policies aimed at protecting U.S. citizens from domestic and foreign online threats. In addition to increasing the number of cybersecurity experts working with the White House, Bossert suggested that following through on such policies will require greater partnerships between the federal government and the private sector. Indeed, the government currently relies on technology from large, long-time vendors, many of which may not be prepared to grapple with the significant and evolving risks becoming apparent across the data security landscape. Independent technology startups are proving to be the heart of progress in new cybersecurity measures, and the government will need to cultivate solid relationships with these players if it wants to stay ahead in the cybersecurity arena.

President Trump’s executive order has received some criticism for its breadth, but overall has been commended by cybersecurity experts as a balanced step in the right direction. Time will tell whether the resulting policies will make a meaningful difference in the country’s ability to fend off attackers in the ever-evolving online battleground.