Data Breach Insurance in New Jersey
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What are New Jersey’s data breach notification laws?

According to state law, businesses in New Jersey that experience a breach of personal information must notify affected residents, or face significant fines. They must also report the breach to New Jersey 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 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?

The New Jersey Identity Theft Prevention Act's definition of personal information is knowing a specific individual's first name or first initial and last name along with any one or all of the following data elements:

  • Social Security number
  • Driver's license number or state identification card number
  • Account number, credit card number, or debit card number in combination with any required security code, access code, or password that would permit access to an individual's financial account
  • User name, email address, or any other account holder identifying information, in combination with any password or security question and answer that would access to an online account

Any business 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 "the most expedient time possible without unreasonable delay."

When are security breach notifications required?

New Jersey's Identity Theft Prevention Act outlines when and how businesses need to respond to a breach of security.

New Jersey businesses that experience a data breach must respond when the personal information of a state resident was accessed, or believed to have been accessed, by an unauthorized person.

Businesses must report a breach in "the most expedient time possible without unreasonable delay." Delays are permitted only in the event that a notification would interfere with a criminal or civil investigation.

What are New Jersey's data breach notification requirements?

New Jersey businesses that experience a data breach must notify any residents whose personal information was compromised. Permitted methods include electronic notices, written notices, or notification by telephone.

Prior to disclosure, businesses must notify the New Jersey Division of State Police in the Department of Law and Public Safety for investigation, which may include referral to other law enforcement entities. If more than 1,000 New Jersey residents were affected, 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 residents must include a description of the information that was compromised, along with the business's contact information.

Businesses must use the State of New Jersey Data Breach Report Form to report the breach event to the state offices. The form includes the name and address of the business, the number of people affected, the date and description of the breach, the information that was exposed, how residents were informed, and other relevant details.

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 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 NJ?

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?

Under the state's Consumer Fraud Act, New Jersey has outlined its own penalties for businesses that do not comply with the state's data breach notification laws.

Businesses that fail to notify residents promptly could face penalties that includes civil action suits, which can result in paying threefold the actual damages that an affected party endured, plus legal fees and costs.

In addition, businesses may be asked to destroy data, pay large fines to the state of New Jersey, and implement Corrective Action Plans, including cybersecurity reforms.

How can businesses prevent data breaches?

When your business stores data, it's crucial to take appropriate steps to prevent data breaches. 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 protection for your business and any service providers who access this information, thereby reducing the chance of an unauthorized acquisition of data.

Get quotes from trusted carriers with Insureon

Complete Insureon’s easy online application today to compare quotes from top-rated insurance carriers for cyber policies. Our licensed agents will help you find coverage that fulfills New Jersey'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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