Breach Notification Update: New Mexico becomes the 48th State Requiring Breach Notification and Tennessee Adds a Safe Harbor for Encryption

by Sedgwick LLP
Contact

As the frequency of data breaches continues, so do legislative developments on notification requirements that must be met in the event of a breach of Personally Identifiable Information (PII). Even as of now, not every state has enacted such legislation.  Until April, there were three holdouts.  Now, however, we are down to two:  Alabama and South Dakota are the only remaining states that do not have data breach notification legislation.  New Mexico, previously the third holdout, has recently joined the majority and enacted its own statute.  On April 6, 2017, the Governor of New Mexico signed into law the Data Breach Notification Act (“Act”), 2017.  The Act will become effective on June 16, 2017, with several exemptions and carve outs, and inclusion of data protection requirements, discussed below.

In another recent development, Tennessee has clarified that the new breach notification statute it enacted last year will include a safe harbor for encrypted PII after all, at least in most situations.

New Mexico

While broad in the scope of PII to which it applies and specific in the number of days in which notification of a breach must be provided (45 days), the New Mexico statute has several exemptions and allows for a “risk of harm” analysis in the decision of whether notification is necessary. It also includes data protection requirements, and thus goes beyond just breach notification.  It is also noteworthy in its deference to federal reporting requirements, providing an exemption for persons subject to certain federal statutes.

The statute exempts the State of New Mexico and its political subdivisions from its provision (Section 12). The provisions of the Act do not apply to a person subject to the federal Gramm-Leach Bliley Act or the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) (Section 8).  This provision of the Act reflects deference to the federal reporting requirements under those two statutes.

While the Act contains similar provisions to those of other states, the following Sections are noteworthy:

*  The definition of PII:   The statute defines PII as including “biometric data”.  This is consistent with the growing trend among states to include biometric data, e.g. the Illinois Personal Information Protection Act, which took effect on January 1, 2017 (Section 2)

*     Notification of a Security Breach:  –Section 6 requires that notification be made in the “most expedient time possible,  but not later than forty-five (45) calendar days following the discovery of the security breach, except as provided by Section 9. Section 9, entitled- Delayed Notification, is typical of breach notification statutes in providing that notification may be delayed if a law enforcement agency determines that notification will impede a criminal investigation or is necessary to determine the scope of the security breach and restore the integrity, security and confidentiality of the data system.  Significantly, Section 6 also includes a risk of harm provision, in that it provides that notwithstanding the provisions of that Section, notification to affected New Mexico residents is not required, if after an appropriate investigation, the person determines that the security breach does not give rise to a significant risk of identity theft or fraud.   However, the Act does not define what constitutes an “appropriate investigation” or “a significant risk of identity theft or fraud.”  When notification it is required, it is also to be provided to the office of the attorney general (with additional information required including the number of affected residents) and major consumer reporting agencies (Section 10).

*     Disposal of PII: –As part of its security provisions, the statute requires that persons who own or license records containing PII of a New Mexico resident arrange for “proper disposal” of records when they are no longer reasonably needed for business purposes, which in turn is defined as meaning shredding, erasing or otherwise modifying the personally identifying information to make it unreadable or indecipherable. (Section 3)

*     Security Measures for Storage of Personal Identifying Information:  – The statute requires that  a person that owns or licenses PII of a New Mexico resident “implement and maintain security procedures and practices appropriate to the nature of the information to protect the personally identifying information from unauthorized access, destruction, use, modification or disclosure.”  (Section 4)  While this gives some discretion as to what is appropriate, it remains to be seen what will end up being considered appropriate by the regulator.

*     Service Provider Use of PII – Implementation of Security Measures: The statute mandates that a person that discloses PII of a New Mexico resident pursuant to contract with a service provider require “by contract” that the service provider also implement and maintain reasonable security procedures. (Section 5)

Attorney General Enforcement – Civil Penalty – Section 11 allows for the Attorney General to bring an action on behalf of individuals and in the name of the state of New Mexico for alleged violations of the Act and seek injunctive relief, as well as damages for actual costs or losses, including consequential financial losses. In addition, for knowing or reckless violations of the Act, the court may impose civil penalties up to a maximum of $150,000.

Tennessee

The Tennessee legislature recently amended its data breach notification statute to add back in the encryption safe harbor in the definition of “personal information.” When Tennessee initially amended its data breach notification statute last year, it eliminated the encryption safe harbor provisions from the existing statute.  Without this recent amendment, Tennessee would have required data breach notification even when the personally identifiable information lost was encrypted.  While this was apparently out of concern arising from reports of situations in which hackers were able at times to decrypt files, it gave rise to a counterbalancing concern that it would disincentivize companies from encrypting data.  A reasonable level of encryption is still considered a good safeguard to most hacking, and thus the safe harbor was added, at least where the key to encryption is not also taken.

Keep an Eye on State Legislative Developments

As data breaches of Personally Identifiable Information continue to expand the type of information targeted and the security measures circumvented, state legislatures in an effort to protect their residents are now often reviewing their statutes directed at data security and breach notification to see if they are keeping up with those developments. Definitions of protected personal information are being expanded by many states, and many are also adding data security requirements either by way of safe harbors from breach notification or by express directives as to minimal data security procedures.  Entities that own or hold Personally Identifiable Information need to monitor legislative developments that may impact data breach security and notification requirements and take them into account in their breach preparedness and response plans.  This ongoing monitoring will help ensure compliance with statutory requirements and minimize regulatory and legal liability issues that may arise in the event of a data breach when requirements are not satisfied.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sedgwick LLP | Attorney Advertising

Written by:

Sedgwick LLP
Contact
more
less

Sedgwick LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!