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

According to state law, businesses in Texas that experience a breach of personal information must notify any affected residents, or face significant fines. They must also report the breach to the Texas Attorney General.

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 Texas Identity Theft Enforcement and Protection Act defines sensitive personal information as knowing information that alone or in conjunction with other information identifies an individua's non-encrypted first name or first initial and last name in combination with any of the following:

  • Social Security number
  • Driver's license number or government-issued identification number
  • Account number or credit 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

Texas further defines sensitive personal information as any information that identifies an individual and relates to:

  • Their physical or mental health condition
  • The provision of health care to the individual
  • Payment for the provision of health care to the individual

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 "without unreasonable delay and not later than the 60th day after the date on which the person determines that the breach occurred."

When is notification of a breach required?

The Texas Identity Theft Enforcement and Protection Act outlines when and how businesses need to respond to a security breach.

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

Businesses must report a breach "without unreasonable delay and not later than the 60th day after the date on which the person determines that the breach occurred." Notification obligations can be delayed only when they would interfere with a criminal investigation by law enforcement.

What are the data breach notification requirements in Texas?

Texas businesses that experience a data breach must notify any residents whose private information was compromised. Permitted methods include written notices or electronic notices, so long as they are consistent with the provisions regarding electronic records and signatures as set by E-SIGN.

If more than 250 state residents are notified, they must also notify the Texas State Attorney General (AG). If more than 10,000 Texas residents were affected, then the business must also notify the nationwide 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 Texas Data Security Breach Report form to report the breach event to the Texas Attorney General. The form includes the name, address, and contact information for the business, the number of people affected, the date and description of the breach, the information that was exposed, whether the information was encrypted, 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 liability insurance

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.

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 liability insurance cost in TX?

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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:

  • 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?

The Texas Identity Theft Enforcement and Protection 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 civil penalties from $2,000 - $50,000 per violation. Additionally, every day that passes in which no reasonable action for notifying affected individuals occurs could result in a civil penalty of $100 per day for each pending notification, up to $250,000 total per pending notification.

Depending on the violation, the Texas Attorney General also has the authority to issues a restraining order or injunction on the business in the violation, which could include recovering court fees, costs, civil penalties, and more.

How can businesses prevent data breaches?

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.

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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 Texas'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: June 15, 2022
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