Data Breach Insurance in Massachusetts
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What are Massachusetts’ data breach notification laws?

In the state of Massachusetts, even data breaches that affect only one resident must be disclosed to the affected individual and state offices.

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 an online account. 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?

Massachusetts state law defines personal information as an individual's first name and last name, or first initial and last name, in combination with one or more of the following:

  • Social Security number
  • Driver's license number or state-issued identification card number
  • Financial account number, credit card number, or debit card number with or without a password or other means of access

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

Massachusetts reports a much higher number of breaches than most other states, due to the fact that even breaches that affect a single resident must be disclosed.

When is notification of a breach required?

Massachusetts businesses that experience a data breach must respond when the personal information of Massachusetts residents was acquired, or believed to have been acquired, by an unauthorized person.

The breach must be reported "within a reasonable amount of time after either the discovery of a breach or knowledge that personal information was obtained."

What are Massachusetts' data breach notification requirements?

Massachusetts businesses that experience a data breach must notify any residents whose personal information was compromised. They must also notify the Office of Consumer Affairs and Business Regulation and the Massachusetts Attorney General’s Office.

If a resident's Social Security number was compromised, then the business must provide them with at least 18 months of free credit monitoring services.

Massachusetts reports a much higher number of breaches than most other states, due to the fact that even breaches that affect a single resident must be disclosed.

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

Notifications to affected Massachusetts residents must include:

  • How a resident may request a free security freeze, credit monitoring services, and mitigation services
  • The resident's right to obtain a police report

The notice should not include the nature of the breach or the number of residents who were affected.

Notifications submitted to the Office of Consumer Affairs and Business Regulation and the Attorney General’s Office must include:

  • A sample copy of the notice sent to affected residents
  • A detailed description of the breach
  • The total number of residents affected
  • The type of personal information that was exposed
  • The name and address of the business and the person reporting the breach
  • Steps taken or planned to be taken regarding the breach
  • Whether or not the business has a comprehensive written information security program [PDF] (WISP)
  • Information about law enforcement investigations

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 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 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 insurance cost in MA?

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?

Massachusetts businesses that fail to comply with the state's Standards for the Protection of Personal Information of Residents of the Commonwealth could face a penalty of $5,000 for each violation.

How can businesses prevent data breaches?

It's crucial to take appropriate steps to prevent data breaches. In fact, Massachusetts law requires security precautions for businesses that handle residents' personal information.

Businesses are advised to safeguard private information through a variety of methods, such as designating one or more employees to coordinate an information 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 Massachusetts' 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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