Businesses in Tennessee that experience a breach of security must notify all affected individuals no later than 45 days after the discovery of a 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.
Tennessee 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 unencrypted data elements:
Any business that handles PII should invest in cyber liability insurance to mitigate costs in the event of a breach of the security of the system.
Businesses must report a breach to affected residents without unreasonable delay "no later than 45 days from the discovery or notification of the breach of system security."
Tennessee’s data breach notification requirements specify when and how businesses need to respond to a security breach. Breaches of security must be reported when they involve the acquisition of personal information and there is a risk of identity theft or other fraud.
Businesses must report a breach to affected residents without unreasonable delay "no later than 45 days from the discovery or notification of the breach of system security, unless a longer period of time is required due to the legitimate needs of law enforcement." For example, a delay in notification may be permitted if it will interfere with the criminal investigation of a law enforcement agency.
This should be consistent with measures to determine the scope of the breach and to restore the reasonable integrity of the system.
Permitted methods of notifying residents include written notice or electronic notice, such as an email notice, when it's the business's primary method of communication with the resident.
A substitute notice is allowed when the cost of notifying residents would exceed $250,000, over 500,000 people were affected, or if the business doesn't have sufficient contact information. The substitute notice must consist of:
For breaches that affect more than 1,000 residents, the business must also notify the nationwide consumer reporting agencies (e.g., Equifax, TransUnion).
Data breach notices sent to Tennessee residents typically include the name and contact information of the business, the type of personal information compromised, the date of the incident, and a description of the breach event, in general terms.
Notifications sent to nationwide credit bureaus should include the timing, distribution, and content of the notice sent to affected residents.
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:
State data breach laws take precedence over HIPAA's requirement for notification within 60 days of the breach's discovery. Tennessee businesses must provide notification within 45 days of discovery.
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.
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.
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.
Cyber liability 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:
All of these factors will be instrumental in determining how much cyber liability insurance your small business needs.
Failure to comply with Tennessee's data breach notification laws can result in significant fines. Any individual whose personal information was affected by a data breach caused by the "information holder" may file a private lawsuit and institute a civil action to recover actual damages from that information holder for violating the data breach law.
For businesses that store data, it's crucial to take appropriate steps to prevent data breaches.
Businesses are advised to safeguard data privacy 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.
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 Tennessee'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.