Data Breaches Aren't Just for For-Profits

Data BreachWhat does the data breach that happened at Target last year have to do with your nonprofit?  You may remember that the breach enabled access to the credit and debit accounts of 40 million Target shoppers. This reportedly caused Target to incur $61 million in expenses. But Target’s insurance is expected to cover $44 million of those costs.

Based on this and other similar breach events, insurers are trying to exclude these types of breaches from coverage. Specifically, insurers will attempt to preclude coverage for damages arising out of any access to or disclosure of any person or organization’s confidential or personal information and the loss of or damage to a company’s electronic data.

Some insurers have already started including similar language in their policies and many others will start on May 1, 2014. This means that nonprofits should expect that insurers will aggressively resist these types of claims, including HIPAA-related disclosures.

Any nonprofit that has a computer network, handles confidential information, or collects and transacts with personally identifiable information is at risk of a data breach. These data breach exclusions are just another step by insurers to limit damages for cyber and privacy-related losses under traditional insurance policies. It is more important now than ever before that nonprofits consider obtaining some form of cyber insurance.

Cyber insurance can protect against damages to computers and computer systems caused by human error or as a result of malicious attacks and crimes, including fraud, unauthorized access, theft of customer information, and Website sabotage. It can cover loss of income from interruption of day-to-day activities, damage to data, and potential lawsuits.

It’s not just computers and computer systems to be worried about. As Adam D.H. Grant, a partner with Alpert, Barr & Grant, Chief Legal Contributor to App Developer Magazine, and national speaker on the topic of Mobile App and Online Privacy Law, reminds us, “Given the prolific use of apps and the emerging trend of connectivity via the ‘internet of things,’ breaches which disclose the immense amount of data generated by this trend will be at the forefront of the legal field during 2014.” Read more about the potential consequences of data breaches here.

Talk to your nonprofit’s insurance broker now to make sure your nonprofit is properly protected.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

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