New York Regulations Heighten Need for Due Diligence and Cyber Insurance Coverage

by Robins Kaplan LLP
Contact

Cybersecurity rules from the New York Department of Financial Services (DFS) went into effect on March 1 and now banks and insurers are faced with an increasing level of potential legal exposure for data breaches.  This development in cybersecurity is leading many financial and non-financial companies alike to purchase new cyber insurance policies.  However, these products do not replace the need for due diligence, and they require a sophisticated understanding of cyber risks to select and adequately safeguard appropriate forms of coverage.

DFS’s cybersecurity rules require enhanced internal protocols for data security, monitoring of third-party vendors, data encryption standards, and breach notification of affected parties within 72 hours.   The proposed rules were revised in December of last year to provide more flexibility and customization of internal policies and risk assessments, but financial institutions must still perform a periodic risk assessment to ensure their cybersecurity policies and protocols comply with the new regulation.  These institutions must also file an annual certification statement verifying compliance with the DFS regulation by February 2018.

With some entities calling for a national data breach notification law, DFS rules present a possible model framework to be implemented in other jurisdictions and the potential for greater regulatory enforcement.  The Federal Trade Commission has also engaged in a number of high profile and successful data security enforcement actions against companies like LabMD for failing to protect sensitive and personal consumer information.

As a result, coverages for regulatory defense and for breaches to third-party vendors have become increasingly essential as part of any cyber insurance policy.  Many policies require that companies engage in internal security risk assessments and reduce or limit the risks of a data breach in some fashion.  There are also potentially applicable exclusions for failing to follow your own privacy policy.

Many companies may not realize the dangerous potential involved when bodily injury or physical damage results from some form of cyber breach or data terrorism. First-party property and third-party liability policies contain cyber exclusions, and cyber insurance policies traditionally exclude bodily injury and property damage.  Disastrous or catastrophic events in this area remain largely uncovered by existing insurance products

Cyber risks are fast changing with the level and nature of risks evolving almost on a daily basis.  As a result, it is important to work with cyber specialists in any attempt to obtain cyber coverage to ensure the appropriate level of safeguards are in place to avoid a regulatory enforcement action and adequately safeguard all available forms of insurance coverage.

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.

© Robins Kaplan LLP | Attorney Advertising

Written by:

Robins Kaplan LLP
Contact
more
less

Robins Kaplan 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.