No organization can eliminate data breach risks altogether, regardless of industry, size, or even if the organization has taken significant steps to safeguard their systems and train employees to avoid phishing attacks. Perhaps the most significant reason these risks remain: third-party service providers or vendors.

For most businesses, particularly small to medium-sized businesses, service providers play a critical role helping to manage and grow their customers’ businesses.

Consider vacation rental and property management businesses. Whether operating an active website, maintaining online reservation and property management platforms, or recruiting and managing a growing workforce, these businesses wind up collecting, processing, and storing large amounts of personal information.

With a national occupancy rate of approximately 56%, a vacation rental company with 100 units for weekly rental might expect to collect personal information from about 5,000 individuals annually (25 weeks rented X2 persons per rental X100 properties). My crude math leaves out website visitors, cancellations, employees (and their family members), and other factors. After three years in business, the company might easily be storing personal information of up to 15-20,000 individuals in their systems.

There are lots of good resources online helping to protect VR businesses from online scams, including those that could lead to a data breach. “Vacation Rental Scams: 20 Red Flags for Spotting Hoax Guests” and “How to Protect Your Vacation Rental from Phishing Attacks” by Lodgify are good examples.

But what happens when the VR business’ guest and/or employee data is breached while in the possession of a vendor?

Last year, as reported on the Maine Attorney General’s Office website, Resort Data Processing (RDP) experienced a data breach affecting over 60,000 individuals caused by a “SQL injection vulnerability which allowed an unauthorized third party to redirect payment card information from in-process transactions on our RDP’s clients’ on-premises Internet Reservation Module (“IRM”) server.” Affected individuals likely included consumers who stayed at properties owned by RDP’s business customers. At least, that is what one plaintiffs law firm advertised about the incident.

Addressing this risk can be daunting, especially for small businesses that may feel as though they have insufficient bargaining power to influence contract terms with their vendors. But there are several strategies these organizations might consider to strengthen their position and minimize compliance and litigation risks.

  • Identify all third parties that collect, access, or maintain personal information on behalf of the business.
  • Investigate what personal information they access, collect, and maintain and assess how to minimize that information.
  • Make cybersecurity a part of the procurement process. Don’t be afraid ask pointed questions and seek evidence of the vendor’s privacy and cybersecurity policies and procedures. This should be part of value proposition the vendor brings to the table.
  • Review service agreements to see what changes might be possible to protect the company.
  • A vendor still may have a breach, so plan for it. Remember, the affected data may be owned by the business and not the vendor, making the business responsible for notification and related obligations. The business may be able to assign those obligations to the vendor, but it likely will be the business’ responsibility to ensure the incident response steps taken by the vendor are compliant.

Experienced and effective counsel can be instrumental here, both with negotiating stronger terms in service agreements and improving preparedness in the event of a data breach.

Tags: cybersecurity, data breach, guests, incident response, preparedness, property management, short term rental, small business, SMB, supply chain, third party service provider, vacation rental, vendor, Vendor Management
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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.

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