Data Breach Laws in Alabama
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What are the data breach notification laws in Alabama?

According to state law, businesses in Alabama that experience a breach of personal information must notify affected residents within 45 days of its discovery. Failure to report a breach can result in expensive fines.

What is a data breach?

A data breach is the unauthorize access or release of someone's personally identifiable information (PII), which is any data that could reveal an individual's identity.

Data breaches can happen if an employee clicks on a link in a phishing email, if a laptop or thumb drive is stolen, or if hackers break into an online account. Accidental security breaches can also lead to the unauthorized acquisition of data, such as misconfigured software that leaves data unprotected.

Every small business that handles credit cards or stores customer information is vulnerable to data breaches. IT consultants, healthcare providers, and financial institutions are among the industries with the highest risk.

What is personally identifiable information?

The Alabama Data Breach Notification Act of 2018 defines sensitive personally identifying information as knowing a specific individual's first name or first initial and last name in combination with their:

  • Social Security number or tax identification number
  • Driver's license number, state identification card number, passport number, military identification number, or other unique identification number issued on a government document used to verify the identity of a specific individual
  • Financial account number, credit card number, or debit card number in combination with any security code, access code, password, expiration date, or PIN that is necessary to access the account or to conduct a transaction
  • Medical history, mental or physical condition, medical treatment, or diagnosis by a healthcare professional
  • Health insurance policy number, subscriber identification number, or unique identifier used by a health insurer to identify the individual
  • User name or email address, in combination with a password or security question and answer that would permit access to an online account that is reasonably likely to contain or is used to obtain sensitive PII

Any business that handles PII should invest in cyber liability insurance to mitigate costs in the event of a breach.

Businesses must report a breach "as expeditiously as possible and without unreasonable delay."

When is notification of a breach required?

All fifty states in the U.S. have unique laws requiring businesses to notify individuals of a security breach. In Alabama, businesses that experience a data breach must respond when the sensitive personally identifying information of a state resident was acquired, or believed to have been acquired, by an unauthorized person, and is reasonably likely to cause substantial harm to the resident.

Under the Alabama Data Breach Notification Act, businesses must report a breach "as expeditiously as possible and without unreasonable delay... and within 45 days once it is determined that a breach has occurred."

State data breach notification laws allow delayed notice only when law enforcement requests more time for a criminal investigation.

What are Alabama's data breach notification requirements?

Alabama businesses that experience a data breach must notify any residents whose private information was compromised. Both written notices and emailed notices are permitted. If the scope of the breach affects a large number of individuals, additional actions are necessary.

For data breaches that affect more than 1,000 Alabama residents, businesses must also inform the Alabama Office of the Attorney General, as well as national consumer reporting agencies (TransUnion, Equifax, etc.).

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What do business owners need to include in a data breach notice?

In accordance with Alabama law, notices to residents affected by a data breach must include:

  • The date or estimated date of the breach
  • The personal information that was exposed
  • Actions taken to restore the security of personal information involved in the breach
  • Steps that residents can take to protect against identity theft
  • The business's contact information, for any questions from residents

Notice requirements for the Alabama Attorney General include:

  • A synopsis of the event
  • Number of affected residents
  • Services offered to affected residents
  • The business's contact information, for any additional questions

Breaches of health information are regulated on the federal level

Data breaches that impact healthcare facilities and healthcare professionals are regulated by federal laws. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) includes a Breach Notification Rule that requires notification after a breach of unsecured protected health information. Businesses must notify:

  • Affected individuals
  • The Secretary of Health and Human Services
  • The media, if over 500 residents of a state or jurisdiction were affected

Individuals must be notified by first-class mail, or by email if they've agreed to electronic communication, within 60 days of the discovery of a breach.

Protect your business with cyber liability insurance

The cost of a data breach can be significant, which is why cyber liability insurance is so important for businesses that handle personal data.

Notifying those affected and paying for credit monitoring can be expensive. You’ll have to investigate and fix your security weaknesses while suffering a possible loss of income, and government fines can also be costly. You might even face a ransomware attack, where hackers shut down your computer systems and demand payment.

Small businesses most often need first-party cyber liability insurance. Also called data breach insurance, this policy provides financial protection for the covered entity against data breaches.

You can often add this coverage to your general liability insurance or business owner’s policy (BOP), which combines general liability coverage with commercial property insurance at a discount.

Businesses that recommend software need additional protection

If you're responsible for another company's data privacy or security, then you may need third-party cyber liability insurance. This policy covers legal expenses when a client blames your business for failing to prevent a data breach at their company.

Because most tech businesses need this coverage, it's usually included with their errors and omissions insurance (E&O) in a bundle called tech E&O.

E&O insurance, also called professional liability insurance, covers your legal costs in the event that a client sues you for making a mistake or failing to deliver on a contract. Tech E&O extends that coverage to include lawsuits related to data breaches and cyberattacks.

While any business could be at risk of a lawsuit after a breach of security, this coverage is especially important for information technology businesses, especially IT consultants, network security companies, and cybersecurity businesses that recommend software or are responsible for information security.

How much does cyber liability insurance cost?

Businessperson calculating the cost of cyber liability insurance.

Cyber liability insurance can be an affordable option for small businesses looking for data breach protection. Several factors affect the cost of a cyber liability policy, including:

  • Amount of sensitive data handled
  • Your industry
  • Coverage limits
  • Number of employees

All of these factors will be instrumental in determining how much cyber liability insurance your small business needs.

What are the penalties for not giving notice of a data breach?

Violations of the Alabama Data Breach Notification Act are deemed an unlawful practice under the state's Deceptive Trade Practices Act.

Businesses that fail to notify affected residents or the Attorney General could face a civil penalty of $5,000 for every day that the data breach went undisclosed. The maximum fine is $500,000.

How can businesses prevent data breaches?

For businesses that store data, it's crucial to take appropriate steps to prevent data breaches. In fact, the Alabama Data Breach Notification Act requires businesses to take "reasonable security measures" to protect sensitive PII.

Businesses are advised to safeguard private information through a variety of methods, such as designating one or more employees to coordinate a security program. It’s a good idea to conduct a security audit of the various types of personal information, unique identifiers, and other data elements you might have in your data systems.

Requiring strong passwords, security questions, two-step authentication, and access codes can provide reasonable data protection for your business and any service providers who access this information, reducing the chance of an unauthorized acquisition.

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Complete Insureon’s easy online application today to compare insurance quotes from top-rated insurance carriers for cyber policies. Our licensed agents will help you find coverage that fulfills Alabama's insurance requirements and protects your business. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.

Updated: June 24, 2022
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