Cyber Liability Insurance Counseling and Breach Response

@Lonestar_Lawyer @shawnetuma @TexasBarCLE #TBCLE
Cyber Liability Insurance Counseling and Breach Response
Elizabeth Rogers
Greenberg Traurig, LLP
rogersel@gtlaw.com
@Lonestar_Lawyer
Shawn Tuma
Scheef & Stone, LLP
Shawn.tuma@solidcounsel.com
@shawnetuma

Breach! Immediate Priorities
• Leadership!
• Assess the situation
• Be a counselor
• Instill confidence
• Bring peace
• Facilitate rational thought &
rational behavior

Data Breach Foundations
Is the cyber event an incident or a breach?
▪ Event: any occurrence.
▪ Incident: an event that actually or potentially jeopardizes
the confidentiality, integrity, or availability of the system,
data, policies, or practices.
▪ Breach: actual loss of control, compromise, unauthorized
disclosure, acquisition or access of data.
▪ Ransomware? Encryption safe harbor?

Is the cyber event caused by criminal or negligent actions?
▪ Hacker stealing IP from network.
▪ Employee misplaces unencrypted USB drive with PII.
▪ Focus on the action – why was it done?
▪ Report criminal events to law enforcement, not usually
with negligent.

The difference between reporting, disclosing, notifying?
▪ Used interchangeably, not official – just used for clarity.
▪ Reporting: to report a crime to law enforcement.
▪ Disclosing: to disclose (notify) to a state or federal
regulator of a data breach.
▪ Notification: to notify the data subjects of a data breach.

Disclosure to Government Regulators
▪ Remember our fiction: reporting / notifying / disclosing
▪ What type of data was breached? (PII, PHI, Fin. Data, PCI)
▪ Which laws apply?
▪ Regulated industry? (HHS, SEC, FDIC, FINRA)
▪ i.e., Health → HHS, then
≥ 500 = 60 days to report
< 500 = annual report
▪ State jurisdictions?

Data Breach Response
The difference between reporting, disclosing, notifying?
▪ Used interchangeably, not official – just used for clarity.
▪ Reporting: to report a crime to law enforcement.
OPTIONAL, MAYBE.
▪ Disclosing: to disclose (notify) to a state or federal
regulator of a data breach. NOT OPTIONAL.
▪ Notification: to notify the data subjects of a data breach.
NOT OPTIONAL.

Breach Notification Laws
▪ No national breach notification law
▪ 47 States w/ laws + DC, PR, VI (≠ AL, NM, SD)
▪ Data subjects’ residence determines + state doing bus.
▪ Some consistency but some not (e.g., MA & CA)
▪ Review each time – constantly changing.

▪ Is it a triggering “breach” under each relevant states’ laws?
▪ Which states’ laws require disclosure to their AG?
▪ Most, under certain circumstances (not TX).
▪ Which require pre-notice of a breach notification?
▪ CA, CT, NH, NJ, NY, NC, PR, WA
▪ When must disclosures be made? (w/ notif. 30/45/reas.)
▪ How must disclosure be made? (template / portal)

Texas Breach Notification Law
Notification Required Following Breach of Security of
Computerized Data, Tex. Bus. Comm. Code § 521.053
▪ “A person who conducts business in this state and owns or
licenses computerized data that includes sensitive personal
information shall disclose any breach of system security, after
discovering or receiving notification of the breach, to any
individual whose sensitive personal information was, or is
reasonably believed to have been, acquired by an unauthorized
person.” (See Appendix B)

Texas Breach Notification Law
▪ Breach of System Security: “unauthorized acquisition ...
compromises the security, confidentiality, or integrity of” SPI.
 Employee leaving with customer data?
▪ Applies to anyone doing business in Texas.
▪ Notify any individual whose SPI “was, or is reasonably believed to
have been, acquired by an unauthorized person.”
▪ When: “as quickly as possible” but allows for LE delay
▪ Penalty: $100 per individual per day for delayed time, not to
exceed $250,000 for a single breach (AG / no civil remedy)

first
name or
first
initial
last
name
SSN
DLN or
GovtID
data
breach
first
name or
first
initial
last
name
Acct or
Card #
Access or
Security
Code
data
breach
Info that
IDs
Individ.
Health-
care,
provided,
or pay
data
breach
Duty to notify when “unauthorized acquisition of computerized data that compromises the security, confidentiality, or
integrity of sensitive personal information …” Tx. Bus. Comm. Code § 521.053
CIVIL PENALTY $100.00 per individual
per day for notification delay, not to
exceed $250,000 for single breach §
521.151

Reporting to Law Enforcement
▪ Role of law enforcement.
▪ When to report to law enforcement?
▪ Federal, state, or local law enforcement?
▪ When will law enforcement not get involved (usually)?

▪ Is it mandatory to report to law enforcement?
▪ State breach notification presume reporting.
▪ DOJ, NIST, FTC (“we’d view that company more
favorably than a company that hasn’t”)
▪ US Senate (Yahoo) – when did you report to law
enforcement or other government authorities?
▪ Credibility – the “state sponsored” “unprecedented”
game.

Benefits of reporting to law enforcement.
▪ Agencies can compel info from 3rd parties.
▪ Can work with foreign counterparts.
▪ Viewed favorably by regulators, shareholders, public.
▪ Can request delay of reporting.
▪ Result in successful prosecution.
▪ Resources, expertise, institutional knowledge, your $$$

Dispelling myths of reporting to law enforcement.
▪ Reporting to law enforcement is not same as disclosing
to regulators.
▪ Doesn’t “take over” your operations, not like regulatory
enforcement action.
▪ Law enforcement uses discretion, doesn’t tattle on you.
▪ Company is still viewed as the victim.
▪ Use hypotheticals, if needed.

Cyber Insurance – Key Questions
• Even know if you have it?
• What period does the policy cover?
• Are Officers & Directors Covered?
• Cover 3rd Party Caused Events?
• Social Engineering coverage?
• Cover insiders intentional acts (vs.
negligent)
• Contractual liability?
• What is the triggering event?
• What types of data are covered?
• What kind of incidents are covered?
• Acts of war?
• Required carrier list for attorneys &
experts?
• Other similar risks?

10 Key Issues in Cybersecurity Insurance Policies

1.What period does the policy cover?

2.Will Officers & Directors fall into the gap?

3. Does policy exclude liability for injuries arising
from breach of contract?

4. Does policy cover actions caused by your
vendors and contractors?

5. Does policy provide excess coverage
with a drop-down provision?

6. Does policy provide coverage for insiders’
intentional acts – as opposed to negligent acts?

7.What is the triggering event for coverage?

Data
Sources
Company
Data
Workforce
Data
Customer /
Client Data
Other
Parties’
Data
3rd Party
Business
Associates’
Data
Outsiders’
Data
8.What types of data are covered?

Threat
Vectors
Network
Website
Email
BYOD
USBGSM
Internet
Surfing
Business
Associates
People
9.What kinds of breach events are covered?

10. How are exclusions for “cyber acts of war” and “cyber
terrorism” treated?

Additional Cybersecurity Insurance Considerations

Contracts
• 3rd party liability
• Healthcare (BA)
• Software license audit
• Permissible access & use
in policies, BYOD
• EULA / TOS
Marketing
• FTC Act § 5
• SPAM laws
• NLRB rules
• CDA § 230
• Website audits
• IP issues
• Acct ownership
Privacy
• Privacy policies
• Privacy & data practices
• Destruction policies
• Monitoring workforce
• Business intelligence
Industry
Regulation
• PCI (Payment Card Industry)
• FFIEC (Federal Financial
Institution Examination Council)
• FINRA (Financial Industry
Regulatory Authority)
• SIFMA (Securities Industry and
Financial Markets Association)
What other cyber risks events are covered?

What coverage do you need, and how much?

Should you agree to using the carrier’s list of attorneys and
experts?

QUESTIONS?

Shawn Tuma
Scheef & Stone, LLP
Frisco, Texas
214.472.2135
shawn.tuma@solidcounsel.com
www.solidcounsel.com
www.shawnetuma.com (blog)
@shawnetuma
Elizabeth Rogers
Greenberg Traurig, LLP
Austin, Texas
512.320.7256
rogersel@gtlaw.com
www.gtlaw.com
@Lonestar_Lawyer

Cyber Liability Insurance Counseling and Breach Response

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