What Businesses Need to Know About Data Breaches and Liability

What Businesses Need to Know About Data Breaches and Liability

Data breaches can have costly consequences that may affect multiple parties. Businesses need to familiarize themselves with some of the liability concerns that a data breach scenario could raise.

The Ramifications of Compromising Customers’ Information

A data loss that reveals customers’ personal information could create thousands of identity theft victims. Compromising customers’ credit information can also precipitate considerable financial harm.

Allowing unauthorized access of sensitive personal information such as medical records could cause additional concerns for businesses involving professional liability violations. When businesses fail to take adequate measures to protect data, legal repercussions could come in the form of statutory penalties or even class action lawsuits.

The Role of Data Service Providers

Businesses commonly delegate some or all of their data management service providers that offer IT management and security solutions. The fact that a third party is responsible for managing cyber security does not exculpate a business from liability in the event of a breach.

Well-established IT services providers should have insurance coverage for these types of scenarios. However, businesses’ cannot exercise reasonable reliance on a third party’s insurance carrier to fully redress their damages.

Businesses must take decisive measures to prevent breaches. They also need contingencies to handle the repercussions if a breach should occur.

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