Data Breach Insurance in Colorado
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What are the data breach notification laws in Colorado?

According to state law, businesses in Colorado that experience a data breach must notify affected residents within 30 days of its discovery.

What is a data breach?

A data breach is the unauthorized 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 a computer network. Accidental security breaches are another cause, 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?

Colorado’s Consumer Data Protection Laws define personal information as knowing a resident's first name or first initial and last name in combination with one of the following:

  • Social Security number
  • Driver's license number or identification card number
  • Student, military, or passport identification number
  • Medical information or health insurance identification number
  • Biometric data, such as fingerprints or retinal scans

It also includes a resident's:

  • Account number, credit card number, or debit card number in combination with a password or other means of access to a financial account
  • Username or email address in combination with a password or other means of access to an online account

Any business, from Denver to Colorado Springs to Aurora, that handles PII should invest in cyber liability insurance to mitigate costs in the event of a data breach.

Businesses must report a breach in "in the most expedient time possible, without unreasonable delay, and within 30 days after the date of determination that a security breach has occurred."

When is notification of a breach required?

Colorado state law outlines when and how businesses need to respond to a security breach.

Businesses that experience a data breach must promptly investigate the likelihood that personal information will be misused. Residents must be notified as soon as possible if misuse occurred, or is reasonably likely to occur.

Businesses must report a breach in "in the most expedient time possible, without unreasonable delay, and within 30 days after the date of determination that a security breach has occurred." Notification obligations can be delayed only when they would interfere with a criminal investigation by law enforcement.

What are Colorado's data breach notification requirements?

Colorado businesses that experience a data breach must notify any residents whose personal information was compromised. Permitted methods include written notices, notification by telephone, and notification by email.

For data breaches that affect 500 or more residents, the business must also notify the Office of the Attorney General.

If the breach affected more than 1,000 Colorado residents, then the business must also notify consumer reporting agencies (TransUnion, Equifax, etc.).

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

Notices to affected Colorado residents must include:

  • The date or estimated date of the security breach
  • A description of the personal information that was acquired
  • The business's contact information, for any questions from residents
  • A statement that the resident can obtain information from the Federal Trade Commission (FTC) and the credit reporting agencies about fraud alerts and security freezes
  • The toll-free numbers, addresses, and websites for consumer reporting agencies
  • The toll-free number, address, and website for the FTC

For data breaches that affect online accounts, the business must also direct residents how to protect their account by changing their password or taking other security measures.

To notify the Colorado Attorney General, businesses must use the online Data Breach Notification Form. The form includes the name and address of the business, the number of people affected, the date of the breach, the scope of the breach, how residents were informed, and other relevant details.

When reporting to credit reporting agencies, businesses must provide the date that residents were notified and the number of affected residents.

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

Under HIPAA, 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. However, for Colorado residents, the law with the shorter timeframe applies, which means that residents must be informed within 30 days to comply with state law.

Protect your business with cyber insurance

The cost of a data breach can be significant, which is why cyber 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 against data breaches at your business.

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 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 data breach, 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 insurance cost in CO?

A small business owner calculating their cyber liability costs

Cyber 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?

The Attorney General may impose civil penalties for failure to provide security breach notifications.

Violations of the Colorado Consumer Protection Act can result in a fine of up to $20,000 per violation.

How can businesses prevent data breaches?

For businesses that store data, it's crucial to take appropriate steps to prevent data breaches. In fact, Colorado's Consumer Data Protection Laws require businesses to implement and maintain reasonable security procedures and practices to protect personal information.

Businesses are advised to safeguard PII 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.

Get quotes from trusted carriers with Insureon

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 Colorado'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: March 5, 2024
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