According to state law, businesses in New York that experience a breach of private information must notify any affected residents, or face significant fines. They must also report the breach to several New York state offices.
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.
The New York State Information Security Breach and Notification Act defines private information as knowing a specific individual's:
Any business that handles PII should invest in cyber liability insurance to mitigate costs in the event of a data breach.
New York's Security Breach and Notification Act outlines when and how businesses need to respond to a security breach.
New York businesses that experience a data breach must respond when the private information of a state resident was acquired, or believed to have been acquired, by an unauthorized person.
Businesses must report a breach in "the most expedient time possible without unreasonable delay." Notification obligations can be delayed only when they would interfere with a criminal investigation by law enforcement.
New York businesses that experience a data breach must notify any residents whose private information was compromised. Permitted methods include electronic notices, written notices, or notification by telephone.
They must also notify three New York state offices:
If more than 5,000 New York residents were affected, then the business must also notify consumer reporting agencies (TransUnion, Equifax, etc.).
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 New York State Security Breach Reporting 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.
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:
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.
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.
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.
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.
New York's recently enacted Stop Hacks and Improve Electronic Data Security Act (SHIELD Act) outlines penalties for businesses that fail to comply with the state's data breach notification laws.
Businesses that fail to notify residents promptly could face a civil penalty of up to $20 per instance of failed notification, up to $250,000 total in fines. If the business did not safeguard the information appropriately, it could also face a penalty of up to $5,000 per violation.
For businesses that store 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 data protection for your business and any service providers who access this information, reducing the chance of an unauthorized acquisition.
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 New York'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.