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

Businesses in North Carolina that experience a breach of security must notify all affected residents and the Attorney General's Office. When a breach affects more than 1,000 people, the business must also notify nationwide consumer reporting agencies.

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?

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

  • Social Security number, passport number, or employer taxpayer identification number
  • Driver's license number or state identification number
  • Checking or savings account number, credit card number, debit card number, PIN, biometric data, or any number that provides access to an individual's financial account
  • An individual’s email address, Internet account number, username, or password if it permits access to financial accounts or resources

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 to affected residents without unreasonable delay following discovery of the breach.

What are North Carolina's data breach notification requirements?

North Carolina state law outlines when and how businesses need to respond to a security breach. Breaches of security must be reported when they are believed to have compromised the personal information of residents.

Businesses must report a breach to affected residents without unreasonable delay following discovery of the breach. A delay is only permitted when it would interfere with a law enforcement agency’s criminal investigation.

Breaches must also be reported to the Attorney General's Consumer Protection Division. If a breach affects more than 1,000 individuals, the business must notify nationwide consumer reporting agencies (e.g., Equifax, TransUnion).

Notification of the breach may be sent via written notice, telephone notice, or electronic notice. A substitute notice is allowed when notification costs would exceed $250,000, over 500,000 people were affected, or if the business doesn't have sufficient contact information. The substitute notice should consist of emails, a conspicuous posting of the notice on the business's website, and notification of major statewide media.

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

Data breach notices sent to North Carolina residents must include the following:

  • A description of the incident in general terms
  • The type of personal information involved
  • A general description of efforts taken to avoid further unauthorized access
  • A telephone number residents can call for information and assistance, if one exists
  • Contact information for the major consumer reporting agencies, the Federal Trade Commission (FTC), and the North Carolina Attorney General's Office

The notice must also contain advice for affected individuals, such as guidance to check statements, monitor credit reports, and request a security freeze.

Data breach notices sent to the Attorney General's Office must include the nature of the breach, the number of affected persons, steps taken to investigate the breach, steps taken to prevent a future breach, and the timing, distribution, and content of the notice sent to residents.

When more than 1,000 residents are notified of a breach, the business must also provide nationwide credit reporting agencies with the the timing, distribution, and content of the notice they were sent.

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 NC?

A small business owner calculating their cyber liability costs

Cyber insurance can be an affordable option for small businesses in Charlotte and elsewhere in the state. 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?

Failure to comply with North Carolina's data breach notification laws is considered a violation of the state's Unfair and Deceptive Trade Practices Act, which could result in criminal or civil penalties.

Individuals do not have a private right of action, unless they were injured as a result of the violation.

How can businesses prevent data breaches?

For businesses that store data, it's crucial to take appropriate steps to prevent data breaches and protect customers from identity theft and other harm.

Businesses are advised to safeguard PII through a variety of security measures, such as designating one or more employees to coordinate a security program. It’s a good idea to conduct an audit of the personal information and unique identifiers you store in your data systems.

Strong passwords, security questions, two-step authentication, and access codes can provide reasonable data protection for your business, reducing the chance of an unauthorized acquisition of electronic files.

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 North Carolina'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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