Recent Credit Card Data Breach Once Again Demonstrates Need for Insurance Coverage

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The recent data breach at Global Payments Inc., which has contracts to handle the processing of credit and debit card transactions, has again focused attention on the significant risk associated with storing or transmitting confidential data. That breach potentially has compromised the accounts of hundreds of thousands of cardholders, and at least one lawsuit regarding the breach already has been filed. Further, between 2005 and 2011, there were over 2,300 data breaches, exposing over 535 million records, at an average cost to the affected firms of $234 per compromised record. The surge in data breaches last year alone caused some commentators to label 2011 “The Year of the Breach.”

Moreover, data security is no longer a concern only of large companies. According to a study released last fall, “[t]he vast majority of risk management professionals believe information security and other cyberrelated exposures pose a threat to their organization.” The problem has become pronounced enough that, in October 2011, the SEC directed publicly-traded companies to disclose the risk of cyber-security breaches if it is reasonably likely that such breaches would have a material financial impact.

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Published In: Civil Remedies Updates, General Business Updates, Finance & Banking Updates, Insurance Updates, Privacy Updates

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.

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