As we’ve reported, data breach coverage is something quite different than traditional "cyber-risk" coverage which tends to address "hazards such as unauthorized Web site access, online libel, data privacy loss and repairs to company databases after system failures.” According to Ms. Dolan’s article, data breach policies tend to cover the cost of notification and credit monitoring for affected persons, public relations expenses to address reputational harm, breach investigation, legal fees and compensatory damages, judgments and settlements. Of course, as with any type of insurance, businesses should seek appropriate advice concerning the scope of coverage they are purchasing.
Ms. Dolan’s focus on health care providers is well placed given the recent HIPAA breach notification mandate and the sensitive protected health information such businesses handle. This is particularly true for small health care practices which often do not have the resources to adequately respond to a data breach – for those, a data breach policy could be a wise investment. It is also true for those businesses that service the health care industry – many of which are business associates that are also subject to HIPAA and its breach notification requirements.
Beyond HIPAA, breach notification mandates exist in nearly all states in the U.S. and other jurisdictions. So, many businesses can benefit from addressing this risk through insurance as well as adopting policies and procedures to reduce the likelihood of a breach in the first place. In this connection, Ms. Dolan is also wise to report that data breach insurance doesn’t absolve health care practices or any other business for that matter from implementing safeguards to protect personal information or protected health information. Various federal and state laws require to one degree or another businesses to adopt "written information security programs" to safeguard personal information.
This is much like protecting your building/office space from fire damage – you have fire insurance, but you also have a plan to safeguard critical assets and exit the building!