OF DIGITAL INTEREST
OF DIGITAL INTEREST
Legal news and analysis of all things digital
OF DIGITAL INTEREST
Legal news and analysis of all things digital
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Data Breach Insurance: Does Your Policy Have You Covered?

by | May 26, 2015 | , , , , ,

Recent developments in two closely watched cases suggest that companies that experience data breaches may not be able to get insurance coverage under standard commercial general liability (CGL) policies. CGLs typically provide defense and indemnity coverage for the insured against third-party claims for personal injury, bodily injury or property damage. In the emerging area of insurance coverage for data breaches, court decisions about whether insureds can force their insurance companies to cover costs for data breaches under the broad language of CGLs have been mixed, and little appellate-level authority exists.

On May 18, 2015, the Connecticut Supreme Court unanimously affirmed a state appellate court decision that an IBM contractor was not insured under its CGL for the $6 million in losses it suffered as the result of a data breach of personal identifying information (PII) for over 500,000 IBM employees. The contractor lost computer backup tapes containing the employees’ PII in transit when the tapes fell off of a truck onto the side of the road. After the tapes fell out of the truck, an unknown party took them. There was no evidence that anyone ever accessed the data on the tapes or that the loss of the tapes caused injury to any IBM employee. Nevertheless, IBM took steps to protect its employees from potential identity theft, providing a year of credit monitoring services to the affected employees. IBM sought to recover more than $6 million dollars in costs it incurred for the identity protection services from the contractor, and negotiated a settlement with the contractor for that amount.

The contractor filed a claim under its CGL policy for the $6 million in costs it had reimbursed to IBM. The insurer refused to pay. In subsequent litigation with the contractor, the insurer made two main arguments. First, it argued that it only had the duty to defend against a “suit,” and that the negotiations between the contractor and IBM were not a “suit.” Second, the insurer argued that the loss of the tapes was not an “injury” covered by the policy.

The Connecticut Supreme Court adopted both of the insurer’s arguments, and the decision highlights two key areas for any company considering whether it needs additional insurance coverage for data breaches: what constitutes an “injury” under a CGL, and when an insurer is required to reimburse a company for costs associated with an injury. First, the court held that the loss of the computer tapes was not a “personal injury” under the CGL, because there had been no “publication” of the information stored on the tapes. In other words, because there was no evidence that anyone accessed or used the stolen PII, the court found that the data breach did not constitute a “personal injury” under the policy—even though the contractor spent millions of dollars reimbursing IBM for costs associated with the data breach.

Second, the court found that the CGL policy only required the insurer to reimburse [...]

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Data Broker’s Appeal to U.S. Supreme Court Could Reshape Future of Data Privacy Litigation

by | May 14, 2015 | , , ,

In a case that could shape the future of data privacy litigation, the Supreme Court recently agreed to review the decision by the U. S. Court of Appeals for the Ninth Circuit under the Fair Credit Reporting Act (FCRA) in Robins v. Spokeo, Inc.  At issue is the extent to which Congress may create statutory rights that, when violated, are actionable in court, even if the plaintiff has not otherwise suffered a legally-redressable injury.

Spokeo is a data broker that provides online “people search capabilities” and “business information search” (i.e., business contacts, emails, titles, etc.).   Thomas Robins (Robins) sued Spokeo in federal district court for publishing data about Robins that incorrectly represented him as married and having a graduate degree and more professional experience and money than he actually had.  Robins alleged that Spokeo’s inaccurate data caused him actual harm by (among other alleged harms) damaging his employment prospects.

After some initial indecision, the district court dismissed the case in 2011 on the grounds that Robins had not sufficiently alleged any actual or imminent harm traceable to Spokeo’s data.  Without evidence of actual or imminent harm, Robins did not have standing to bring suit under Article III of the U.S. Constitution.  Robins appealed.

On February 4, 2014, the Court of Appeals for the Ninth Circuit announced its decision to reverse the district court, holding that the FCRA allowed Robins to sue for a statutory violation: “When, as here, the statutory cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages.” The Court of Appeals acknowledged limits on Congress’ ability to create redressable statutory causes of action but held that Congress did not exceed those limits in this case.  The court held that “the interests protected” by the FCRA were “sufficiently concrete and particularized” such that Congress could create a statutory cause of action, even for individuals who could not show actual damages.

Why Spokeo Matters

If the Supreme Court reverses the Ninth Circuit’s decision, the decision could dramatically redraw the landscape of data privacy protection litigation in favor of businesses by requiring plaintiffs to allege and eventually prove actual damages.  Such a ruling could severely limit lawsuits brought under several privacy-related statutes, in which plaintiffs typically seek statutory damages on behalf of a class without needing to show actual damages suffered by the class members.  Litigation under the FCRA, the Telephone Consumer Protection Act and the Video Privacy Protection Act (among others statutes) all could be affected.



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GPEN Children’s Privacy Sweep Announced

by | May 13, 2015 | , , , , , ,

On 11 May 2015, the UK Information Commissioner’s Office (ICO), the French data protection authority (CNIL) and the Office of the Privacy Commissioner of Canada (OPCC) announced their participation in a new Global Privacy Enforcement Network (GPEN) privacy sweep to examine the data privacy practices of websites and apps aimed at or popular among children. This closely follows the results of GPEN’s latest sweep on mobile applications (apps),which suggested a high proportion of apps collected significant amounts of personal information but did not sufficiently explain how consumers’ personal information would be collected and used. We originally reported the sweep on mobile apps back in September 2014.

According to the CNIL and ICO, the purpose of this sweep is to determine a global picture of the privacy practices of websites and apps aimed at or frequently used by children. The sweep seeks to instigate recommendations or formal sanctions where non-compliance is identified and, more broadly, to provide valuable privacy education to the public and parents as well as promoting best privacy practice in the online space.

Background

GPEN was established in 2010 on the recommendation of the Organisation for Economic Co-operation and Development. GPEN aims to create cooperation between data protection regulators and authorities throughout the world in order to globally strengthen personal privacy. GPEN is currently made up of 51 data protection authorities across some 39 jurisdictions.

According to the ICO, GPEN has identified a growing global trend for websites and apps targeted at (or used by) children. This represents an area that requires special attention and protection. From 12 to 15 May 2015, GPEN’s “sweepers”—comprised of 28 volunteering data protection authorities across the globe, including the ICO, CNIL and the OPCC—will each review 50 popular websites and apps among children (such as online gaming sites, social networks, and sites offering educational services or tutoring). In particular, the sweepers will seek to determine inter alia:

  • The types of information being collected from children;
  • The ways in which privacy information is explained, including whether it is adapted to a younger audience (e.g., through the use of easy to understand language, large print, audio and animations, etc.);
  • Whether protective controls are implemented to limit the collection of childrens’ personal information, such as requiring parental permission prior to use of the relevant services or collection of personal information; and
  • The ease with which one can request for personal information submitted by children to be deleted.

Comment

We will have to wait some time for in-depth analysis of the sweep, as the results are not expected to be published until the Q3 of this year. As with previous sweeps, following publishing of the results, we can expect data protection authorities to issue new guidance, as well as write to those organisations identified as needing to improve or take more formal action where appropriate.



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OCR Transmits Pre-Audit Screening Surveys to Covered Entities for Phase 2 HIPAA Compliance Audits

by , and | May 7, 2015 | , , ,

The U.S. Department of Health and Human Services, Office for Civil Rights (OCR) recently transmitted HIPAA pre-audit screening surveys to covered entities that may be selected for a second phase of HIPAA compliance audits (Phase 2 Audits). OCR is required to conduct compliance audits of covered entities and business associates under the 2009 Health Information Technology for Economic and Clinical Health Act.

Unlike the pilot audits conducted in 2011 and 2012 (Phase 1 Audits), which focused on covered entities, OCR is conducting Phase 2 Audits of both covered entities and business associates. The Phase 2 Audit program will focus on areas of greater risk to the security of protected health information (PHI) and pervasive non-compliance based on OCR’s Phase I Audit findings and observations, rather than a comprehensive review of all of the HIPAA Standards. The Phase 2 Audits are also intended to identify best practices and uncover risks and vulnerabilities that OCR has not identified through other enforcement activities. OCR will use the Phase 2 Audit findings to identify technical assistance that it should develop for covered entities and business associates. In circumstances where an audit reveals a serious compliance concern, OCR may initiate a compliance review of the audited organization that could lead to civil money penalties.

OCR had previously planned to issue the pre-audit screening surveys in the summer of 2014, but postponed their release until it completed its implementation of a new web portal that will be used for the submission of audit-related materials.

We will publish a fuller On the Subject regarding the Phase 2 Audits in the coming days.



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Italian Data Privacy Authority’s Public Consultation on the Internet of Things

by and | May 6, 2015 | , ,

On April 28, 2015, the Italian Data Privacy Authority (the Authority) launched a public consultation on the Internet of Things aimed at collecting contributions from stakeholders and assessing its potential impact on consumers’ privacy. This public consultation in Italy follows the opinion of the EU Article 29 Working Party of September 2014 and a more recent report of the U.S. Federal Trade Commission of January 2015, which had identified a number of issues and challenges in relation to the Internet of Things. Interested parties can submit their comments to the Authority by e-mail within 180 days of the publication in the Official Journal of the decision to launch the consultation (expected in the next few days).

This is an outstanding opportunity for stakeholders to provide their contribution on issues such as users’ profiling, data anonymization, the applicability of the data protection by design principles and the use of certification and authentication tools, in order to identify a set of best practices to ensure that compliance with data privacy rules does not constitute a limit to the development of Internet of Things technologies. The consultation might hopefully result in the adoption of specific guidance by the Authority on the application of data privacy rules to businesses active in the Internet of Things market, which currently face significant compliance issues.



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Recent Decisions Narrow Scope of Liability under Video Privacy Protection Act

by | Apr 27, 2015 | , ,

Two significant decisions under the Video Privacy Protection Act (VPPA) in recent weeks have provided new defenses to companies alleged to have run afoul of the statute.  Bringing the long-running litigation against Hulu to a close–at least pending appeal–the court in In re: Hulu Privacy Litigation granted summary judgment in favor of Hulu, holding that the plaintiffs could not prove that Hulu knowingly violated the VPPA.  A week later in a more recently filed case, Austin-Spearman v. AMC Network Entertainment, LLC, the court dismissed the complaint on the basis that the plaintiff was not a “consumer” protected by the VPPA.  Both rulings provide comfort to online content providers, while also raising new questions as to the scope of liability under the VPPA.

In re: Hulu Privacy Litigation

In a decision with wide-ranging implications, the Hulu court granted summary judgment against the plaintiffs, holding that they had not shown that Hulu knowingly shared their video selections in violation of the VPPA.  The plaintiffs’ allegations were based on Hulu’s integration of a Facebook “Like” button into its website.  Specifically, the plaintiffs alleged that when the “Like” button loaded on a user’s browser, Hulu would automatically send Facebook a “c_user” cookie containing the user’s Facebook user ID.  At the same time, Hulu would also send Facebook a “watch page” that identified the video requested by the user.  The plaintiffs argued that Hulu’s transmission of the c_user cookie and the watch page allowed Facebook to identify both the Hulu user and that user’s video selection and therefore violated the VPPA.

The plaintiffs’ case foundered, however, on their inability to demonstrate that Hulu knew that Facebook’s linking of those two pieces of information was a possibility.  According to the court, “there is no evidence that Hulu knew that Facebook might combine a Facebook user’s identity (contained in the c_user cookie) with the watch page address to yield ‘personally identifiable information’ under the VPPA.”  Without showing that Hulu had knowingly disclosed a connection between the user’s identity and the user’s video selection, there could be no VPPA liability.

The court’s decision, if upheld on appeal, is likely to provide a significant defense to online content providers sued under the VPPA.  Under the decision, plaintiffs must now be able to show not only that the defendant company knew that the identity and video selections of the user were disclosed to a third party, but also that the company knew that that information was disclosed in manner that would allow the third party to combine those pieces of information to determine which user had watched which content.  While Hulu prevailed only at the summary judgment stage after four years of litigation, other companies could likely make use of this same rationale at the pleadings stage, insisting that plaintiffs set out a plausible case in their complaint that the defendant had the requisite level of knowledge.

Austin Spearman v. AMC Network Entertainment

The AMC decision turned on the VPPA’s definition of the term “consumer” and illustrated how that seemingly [...]

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Argentina Adopts New Data Protection Regulations for the Use of Do Not Call Registry and CCTV

by | Apr 24, 2015 | , ,

The Argentinian Data Protection Authority (DPA) beefs up penalties to fight robocalls and unconsented-to video surveillance by enacting Do Not Call and CCTV regulations.

Because robocalls are cheap and efficient, they have become a quite popular form of advertising in Argentina. In order to curb the variety of abuses that can come from robocalling–such as deceptive and abusive marketing–Argentina is injecting into their regulatory regime penalty-driven regulations that will address the problems presented by robocalls. This will preserve their beneficial use while still complying with Argentina’s privacy law requirements. Specifically, the February 2015 sanctions regulation addresses the recently adopted national Do Not Call registry that was implemented at the start of this year.

To comply with the Do Not Call regulations, companies need to register and download the database of individuals who do not want to be called. If companies fail to do so, they can be subject to various serious fines of up to USD $12,000. Examples of serious breaches include the processing of personal data without the DPA registration or breach of the Do Not Call regulation in marketing campaigns (even if the caller is located abroad). Any international transfers in breach of the Data Protection Act and its regulations would be considered a more serious breach. Indeed, the DPA has already issued 60 enforcement notices based on this new sanctions regulation.

In February, the DPA also enacted a law regulating the use of closed-circuit television (CCTV) cameras for video surveillance in the private and public sphere. The new CCTV regulation requires data controllers to apply, if possible, notice and consent provisions to CCTV-related data processing. It also requires that a conspicuous sign be included for the purpose of informing the data subject of the name and domicile of the data controller, as well as where to exercise the data protection rights. Additionally, CCTV databases must be registered and the personal data collected shall not be used for any purpose incompatible with that which gives rise to their collection. It is important to note that some CCTV processing is exempted from consent, such as public government databases and processing data within private property for private purposes.

These regulations were enacted in an effort to round out and complete Argentina’s privacy legal framework.



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Junk Fax Act Compliance: One Week Left to Request a Waiver for Non-Compliance

by | Apr 23, 2015 | , ,

Thursday, April 30, 2015, marks the last day a business can request a retroactive waiver for failing to comply with certain fax advertising requirements promulgated by the Federal Communications Commission (FCC). The scope of these requirements was clarified on October 30, 2014, when the FCC issued an Order (2014 Order) under the Junk Fax Prevention Act of 2005 (Junk Fax Act). The 2014 Order confirms that senders of all advertising faxes must include information that allows recipients to opt out of receiving future faxes from that sender.

The 2014 Order clarifies certain aspects of the FCC’s 2006 Order under the Junk Fax Act (the Junk Fax Order). Among other requirements, the Junk Fax Order established the requirement that the sender of an advertising fax provide notice and contact information that allows a recipient to “opt out” of any future fax advertising transmissions.

Following the FCC’s publication of the Junk Fax Order, some businesses interpreted the opt-out requirements as not applying to advertising faxes sent with the recipient’s prior express permission (based on footnote 154 in the Junk Fax Order). The 2014 Order provided a six-month period for senders to comply with the opt-out requirements of the Junk Fax Order for faxes sent with the recipient’s prior express permission and to request retroactive relief for failing to comply. The six-month period ends on April 30, 2015. Without a waiver, the FCC noted that “any past or future failure to comply could subject entities to enforcement sanctions, including potential fines and forfeitures, and to private litigation.”

For more information about the Junk Fax Act in general, or the waiver request process in particular, please contact Julia Jacobson or Matt Turnell.



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National Roadmap for Health Data Sharing: FTC Advocates Preservation of Privacy and Competition

by and | Apr 17, 2015 | , , , , , ,

On April 1, 2015, the Office of the National Coordinator for Health Information Technology (ONC), which assists with the coordination of federal policy on data sharing objectives and standards, issued its Shared Nationwide Interoperability Roadmap and requested comments.  The Roadmap seeks to lay out a framework for developing and implementing interoperable health information systems that will allow for the freer flow of health-related data by and among providers and patients.  The use of technology to capture and understand health-related information and the strategic sharing of information between health industry stakeholders and its use is widely recognized as critical to support patient engagement, improve quality outcomes and lower health care costs.

On April 3, 2015, the Federal Trade Commission issued coordinated comments from its Office of Policy Planning, Bureau of Competition, Bureau of Consumer Protection and Bureau of Economics.  The FTC has a broad, dual mission to protect consumers and promote competition, in part, by preventing business practices that are anticompetitive or deceptive or unfair to consumers.  This includes business practices that relate to consumer privacy and data security.  Notably, the FTC’s comments on the Roadmap draw from both its pro-competitive experience and its privacy and security protection perspective, and therefore offer insights into the FTC’s assessment of interoperability from a variety of consumer protection vantage points.

The FTC agreed that ONC’s Roadmap has the potential to benefit both patients and providers by “facilitating innovation and fostering competition in health IT and health care services markets” – lowering health care costs, improving population health management and empowering consumers through easier access to their personal information.  The concepts advanced in the Roadmap, however, if not carefully implemented, can also have a negative effect on competition for health care technology services.  The FTC comments are intended to guide ONC’s implementation with respect to: (1) creating a business and regulatory environment that encourages interoperability, (2) shared governance mechanisms that enable interoperability, and (3) advancing technical standards.

Taking each of these aspects in turn, creating a business and regulatory environment that encourages interoperability is important because, if left unattended, the marketplace may be resistant to interoperability.  For example, health care providers may resist interoperability because it would make switching providers easier and IT vendors may see interoperability as a threat to customer-allegiance.  The FTC suggests that the federal government, as a major payer, work to align economic incentives to create greater demand among providers for interoperability.

With respect to shared governance mechanisms, the FTC notes that coordinated efforts among competitors may have the effect of suppressing competition.  The FTC identifies several examples of anticompetitive conduct in standard setting efforts for ONC’s consideration as it considers how to implement the Roadmap.

Finally, in advancing core technical standards, the FTC advised ONC to consider how standardization could affect competition by (1) limiting competition between technologies, (2) facilitating customer lock-in, (3) reducing competition between standards, and (4) impacting the method for selecting standards.

As part of its mission to protect consumers, the FTC focuses its privacy and security [...]

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Update on State Breach Notification Laws

by | Apr 14, 2015 | , ,

In the first few months of 2015, a number of states have introduced data breach notification bills and proposed legislative amendments designed to enhance consumer protection in response to increasingly high profile data breaches reported in the media.  This activity at the state level seems to indicate  that protecting consumers from data breaches is one area where democrats and republicans can find common ground.

From the text of these bills, some of which have already become law, we see two emerging trends:  (1) an expansion of the definition of personal information to include more categories of data that, if compromised, would trigger a notification requirement, and (2) the addition of a requirement to notify state agencies (such as attorneys general and state insurance commissioners) where none previously existed.

Here are developments in three states reflecting these emerging trends:

Wyoming

In late February, Wyoming passed two bills that amend its existing data breach notification law by specifying the content required in notices to Wyoming residents, modifying the definition of personal information, and providing for covered entities or business associates that comply with HIPAA to be deemed in compliance with the state individual notice requirements.

In particular, Wyoming’s definition of personal information will now include the following:

  • Shared secrets or security tokens that are known to be used for data-based authentication;
  • A username or email address, in combination with a password or security question and answer that would permit access to an online account;
  • A birth or marriage certificate;
  • Medical information (a person’s medical history, mental or physical condition, or medical treatment or diagnosis by a health care professional);
  • Health insurance information (a person’s health insurance policy number or subscriber identification number, any unique identifier used by a health insurer to identify the person or information related to a person’s application and claims history);
  • Unique biometric data (data generated from measurements or analysis of human body characteristics for authentication purposes); and
  • An individual taxpayer identification number.

These changes to Wyoming law will become effective July 1, 2015.

Montana

Beginning October 1, 2015, amendments to Montana’s breach notification law will require entities that experience a data breach affecting Montana residents to notify the Montana Attorney General and, if applicable, the Commissioner of Insurance.  Notification must include an electronic copy of the notice to affected individuals, a statement providing the date and method of distribution of the notification, and an indication of the number of individuals in the state impacted by the breach.  Entities must provide notice to state regulators simultaneously with consumer notices.

The recent amendments to the Montana law also expand the definition of personal information to include medical record information, taxpayer identification numbers and any “identity protection personal identification number” issued by the IRS.  The law specifies that medical information is that which relates to an individual’s physical or mental condition, medical history, medical claims history or medical treatment, and is obtained from [...]

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