Data Breach Insurance in Michigan
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What are the data breach notification requirements in Michigan?

According to state law, businesses in Michigan that experience a data breach must notify affected residents. Failure to report a breach can result in civil fines and court action.

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?

Michigan state law defines personal information as an individual's first 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 identification card number
  • Financial account number in combination with a password or other means of access
  • Credit card number or debit card number in combination with a security code or other means of access

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

Businesses must report data breaches "without unreasonable delay" when they are likely to cause identity theft or other losses to affected residents.

What are Michigan's data breach notice requirements?

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

Businesses must report data breaches "without unreasonable delay" when they are likely to cause identity theft or other losses to affected residents. Delays may be permitted only when notification would interfere with a law enforcement agency's criminal investigation.

Michigan businesses that experience a data breach must notify all residents whose personal information was compromised. Permitted methods include written notice, telephonic notice (but not recorded messages), and electronic notice.

A substitute notice is permitted when notification costs would exceed $250,000 or more than 500,000 residents need to be notified. Methods can include email, conspicuous posting on a website, or notification of major statewide media that includes a telephone number or website address for more information or assistance.

If more than 1,000 residents were affected, the business must also notify nationwide consumer reporting agencies (e.g., TransUnion, Equifax).

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

Security breach notifications sent to Michigan residents must be written in a clear and conspicuous manner and include the following:

  • A description of the security breach in general terms
  • The type of personal information involved
  • Any steps the business has taken to protect data from further security breaches
  • A telephone number that residents can call for additional information or assistance
  • A reminder to stay vigilant for instances of fraud or identity theft

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.

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 MI?

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?

Businesses that knowingly fail to provide notice of a security breach may have to pay a civil fine of not more than $250 for each failure to provide notice. The attorney general or a prosecuting attorney may bring an action to recover the fine.

In total, civil fines may not exceed $750,000 for multiple violations related to the same security breach.

How can businesses prevent data breaches?

For businesses that store data, it's crucial to take appropriate steps to prevent access by an unauthorized person.

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 an audit of the various types of personal information, unique identifiers, and other data elements you might have in your data systems.

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 a breach of security.

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 Michigan'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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