When California changed its law to require Attorney General (AG) notification in the event of a data breach, Attorney General Kamala D. Harris’ office began analyzing the data it was receiving. A report issued by her office made a number of findings summarized below. However, key among them is the impact encryption would have on data at risk. Based on this finding, the Attorney General announced an enforcement priority to investigate breaches involving unencrypted personal information.

Attorney General Harris stated in the report:

Particularly striking is the impact of the failure to encrypt sensitive personal information. It has been ten years since we realized the vulnerability of personal information on stolen laptops, lost data tapes, and misdirected emails. If encryption had been used, over 1.4 million Californians would not have had their information put at risk in 2012. That number represents more than half of the 2 5 million people affected by the 131 breaches covered in this report. It is my strong recommendation that companies and agencies implement encryption as a basic protection and reasonable security measure to help them meet their obligation to safeguard personal information entrusted to them.

The report contains some interesting findings:

  • In 2012, 131 breaches, each affecting more than 500 California residents, were reported to the Attorney General’s Office.
  • The average breach involved information of 22,500 individuals, with the median breach size being 2,500 affected individuals.
  • More than 2.5 million Californians were put at risk by data breaches in 2012.
  • The retail industry reported the most data breaches in 2012: 34 (26 percent of the total reported breaches.
  • More than half of the breaches (56 percent) involved Social Security numbers.
  • While more than half of the breaches (55 percent) were the result of intentional intrusions by outsiders or by unauthorized insiders, the other 45 percent resulted from failures to adopt or carry out appropriate security measures.
  • The average reading level of breach notices submitted in 2012 was 14th grade.
  • In 50% of the breached considered, the breaching entity offered credit monitoring services.

Based on these findings, the report makes a number of recommendations, including calling for legislation requiring encryption of data in transit:

Companies should encrypt digital personal information when moving or sending it out of their secure network. The Attorney General’s Office will make it an enforcement priority to investigate breaches involving unencrypted personal information, and encourage our allied law enforcement agencies to similarly prioritize these investigations. The Legislature may also want to consider requiring the use of encryption to protect personal information in transit.

Similar requirements already exist in Massachusetts and Nevada. Other recommendations include:

  • Train employees and contractors.
  • Improve readability of breach notices.
  • Offer mitigation products and/or provide information of security freezes.
  • To the legislature, expand the definition of personal information in the State’s breach notification law to include online credentials such as username and password.

Companies, particularly those that maintain personal information about California residents, should read this report and carefully review the steps they take to mitigate their "information risk." Remember that in 2003 California was the first state to enact a data breach notification law, and 45 state followed shortly thereafter. Other states’ AGs have and may take similar steps to respond to the continuing risks data breaches raise for their state’s residents.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.