Category Archives: Privacy

Electronic Health Records, Law Firm, Network Security, Privacy, Risk Management

IW: CIOs See Smartphones As Data Breach Time Bomb

As recently reported by InformationWeek, a study conducted by market researcher Ovum and the European Association for e-Identity and Security found that eight out of 10 CIOs believe using smartphones in the workplace increases their firm’s vulnerability to attack.  Although these CIOs rank data breaches as their top related security concern, half of the organizations acknowledge that they fail to provide some basic security measures for the use of smartphones.

This report should be of major concern to doctors and lawyers — two groups of professionals that rely heavily on the use of smartphones to manage their workloads.    At the very least, an easily applied security precaution for smartphones should be the use of a strong password that is changed every 60 days or sooner.  Two-factor authentication is preferable.   Users should back up data regularly and not have it remain solely on a mobile device – unfortunately, default settings can have the communications emanating from your mobile device remain resident solely on a mobile network.  Make sure your mobile device is equipped with anti-virus protection and if you receive an e-mail from a company or person that you’re not familiar with, do what you do on your work computer – just delete it.   Use your idle timer feature to lock down your smartphone as you would your laptop.  

If you have an IT support team (in-house or outsourced), make sure it keeps your operating system and server patches up to date and strictly enforces what applications can be used and what connections can be accessed.   What OS is even used may impact security.   For example, researchers have recently discovered flaws in the WebOS smartphone platform that could let an attacker build a mobile botnet or execute other remote attacks.  More advanced security features include the use of remote wiping applications, encryption and data loss/leak prevention tools.  

Notwithstanding the fact it can also place a call, the key to improving your security posture is to respect the fact your mobile smartphone is now no different from any other computer you use at work.  Act accordingly.

Law Firm, Middle Market Business, Network Security, Privacy, Risk Management

ABA: Law firms are Likely Targets for Attacks Seeking to Steal Information off Computer Systems

According to a recent ABA Journal article, the global digital infrastructure is under siege and law firms are to some extent on the front lines given the vast amounts of sensitive data they process and maintain.  Bradford A. Bleier, unit chief to the Cyber National Security Section in the FBI’s Cyber Division, is quoted in the article:  “Law firms have tremendous concentrations of really critical private information” and breaking into a firm’s computer system “is a really optimal way to obtain economic and personal security information.”  Philip Reitinger, the director of the National Cybersecurity Center in the Department of Homeland Security, believes this threat is increasing for two different reasons.   First, he said, “the skill level of attackers is growing across the board.” And, secondly, the nation’s networks of computer systems are becoming more connected and complex all the time, “and complexity is the enemy of security.”  Marc Zwillinger, a founding partner of Zwillinger Genetski, recognized another obvious problem for law firms:   “Lawyers haven’t been as diligent with security as some of the institutions that gave them information.”

After sufficiently spreading the FUD (fear, uncertainty, and doubt) throughout, what does the ABA author suggest as a solution.  Well, not much of note.  It is suggested that firms change their culture to be more in tune to security – which will likely need to be done from the top down given most managing partners, according to the author, have little time with sophisticated passwords and things that might otherwise slow them down.   It is also suggested that data be segregated and that encryption be deployed. 

The most relevant bit of information from the article actually was added in the sidebar and builds on Marc Zwillinger’s suggestion that a client’s security is usually more evolved than that of its law firm.    The author’s sidebar comment points out that clients may soon be auditing their law firm’s security.  Given that lawyers have been helping clients with technology due diligence for years now and have also been advising  on the use of audits, it is not much of a stretch to expect one law firm to recommend auditing another firm.  Those law firms in front of this issue will not only keep existing clients – they will also be in great shape to potentially win new ones.   Afterall, what law firm would suggest such an audit if it did not already deploy a sophisticated security infrastructure of its own?

Law Firm, Network Security, Privacy, Risk Management

Study: Electronic Theft Costs More Than Physical Theft

In a recently published study conducted by security firm Kroll, findings showed electronic and information theft are at 27.3 percent of total fraud losses while physical theft at 27.2 percent.  Although this is statistically a dead heat, the fact that it is even close is significant for all companies looking to curtail fraud costs.  Interestingly, China had the highest level of fraud, with 98 percent of businesses affected, and Colombia and Brazil came in next, with 94 percent and 90 percent respectively.  

According to Kroll, “information-based industries reported the highest incidence of theft of information and electronic data over the past 12 months. These include financial services (42% in 2010 versus 24% in 2009), professional services (40% in 2010 versus 27% in 2009) and technology, media and telecoms (37% in 2010 versus 29% in 2009).”

There are two common sense takeaways from this recent study — devote the right resources (including training) to avoid electronic theft and fraud and ensure the right security and vetting processes are in place when doing business in emerging markets, especially if your firm holds a good deal of sensitive data.  Although both suggestions may seem obvious it often takes the cumulative impact of these surveys and anecdotal evidence to really push the risk management needle.

Electronic Health Records, Privacy, Risk Management

CA Hospital Appeals Fine of $250,000 for Failure to Report a Laptop Theft

Lucile Packard Children’s Hospital (LPCH) at Stanford is appealing a California Department of Public Health (CDPH) penalty issued on April 23, 2010.  The fine of $250,000 was levied as a result of a late reporting of a security incident.  According to a September 9, 2010 press release issued by the hospital, the incident was related to “the apparent theft earlier in the year of a password-protected desktop computer that contained information about 532 patients.”  The press release further states:

The computer in question was used by an employee whose job required access to patient information. Even though the employee had signed written commitments to keep patient information confidential and secure in accordance with legal requirements and hospital policies, the hospital received reports that the now-former employee allegedly removed the computer from hospital premises and took it home. The hospital immediately began a thorough investigation and also reported the matter to law enforcement in an attempt to recover the computer quickly.
 
As soon as the hospital and law enforcement determined the computer was not recoverable, the hospital voluntarily reported the incident to the California Department of Public Health (CDPH) and federal authorities, as well as the families of potentially-affected patients. The hospital also provided to the families identity theft protection and other support services.   Theft charges have been filed against the former employee.

The LPCH data breach is generally considered the most common form of breach, namely one that involves a stolen or lost laptop.  No matter how much training you provide or how many times you emphasize there is zero tolerance for mishandling laptops, there will always be negligent or reckless conduct involving laptops.    On top of all the hard forensics and notification costs associated with such events, California hospitals also now have to deal with significant regulatory penalties for these mistakes.  Thankfully, incidents have been slightly decreasing due to better practices and there exist low-cost insurance solutions that pick up breach expenses/fines on those occasions when an incident is not avoided.

Electronic Health Records, Network Security, Privacy, Risk Management

HITECH Public Data Breaches: Majority Caused by Theft

Last month, the Health Information Trust Alliance published an analysis of the 108 breaches reported to HHS from Sept. 23, 2009 (when reporting first started under the HITECH Act) to mid-July.  This review illustrates the major impact of theft on healthcare providers.   Of 108 total reported breaches, 68 were the result of theft.  Indeed, the only type of breach experienced by every healthcare industry sector was theft.   The most common thefts involved laptops and removable data drives and devices.   The majority of the data found on these devices remains unencrypted.  This lack of encryption is significant given that, as with the breach notification laws in most states, there is a notification safe harbor under the HITECH Act implementation regulations whenever the stolen data is encrypted. 

This review of HHS reported breaches highlights what risk managers have likely known for some time now, namely that it is important to better train employees regarding the use and maintenance of laptops/memory devices.  Although not nearly as “top of mind” as better training, risk managers are now understanding the value in deploying system-wide encryption solutions.  There is obviously much less likelihood of the breach turning into a major financial incident when there is no notification.  In other words, whether the added expense of encryption — both financial and time-driven — is worth it to a healthcare provider gets answered each day there is another publicly noticed breach.

Electronic Health Records, Network Security, Privacy, Risk Management

AON Disclosure Impacts 22,000 Retirees

According to a story published today in the News Journal, Aon Consulting is mailing letters to approximately 22,000 State of Delaware retirees after it inadvertently posted social security numbers, gender information and dates of birth in a Request for Proposal (RFP) the company prepared for the State.  The RFP information was posted by AON to the procurement section of the Delaware website for five days before it was discovered and removed.  This is not the first data breach for Aon Consulting.  In May 2008, an AON laptop containing the names and Social Security numbers of 57,160 people related to a Verizon engagement was stolen from a New York City restaurant. The laptop was never recovered.

Moreover, it is not the first time a global broker has compromised client data.  On May 9, 2006, a Marsh subsidiary lost a personal computer containing records of more than a half million New Yorkers.  The lost data includes social security numbers and dates of birth.   And, in 2008, Willis lost a data tape in India that contained data belonging to numerous clients who, in turn, had to report to their clients. 

These events are a stark reminder that no one is 100% immune — even those who are in the risk management business are vulnerable to a data breach.  Indeed, Marsh, AON and Willis are the three largest brokers in the world and have built over the years very sophisticated risk management practices to assist clients address their exposures.   Accordingly, the message here is not to think any less of these brokers but rather to recognize the magnitude of the challenges faced by all firms when  managing data risk.  In other words, if a breach can hit these folks, it can hit just about anyone.

Law Firm, Litigation Management, PCI Compliance, Privacy, Risk Management

BigLaw Warning: Law Firms Face Increasing Risks When Handling Personal Information

In a pair of articles sent out by CNA to its law firm insureds, two large law firms showcase (by way of their privacy and risk management departments) the rising data loss exposures faced by all law firms.  An article written by seasoned privacy attorneys from Hunton & Williams provides “an overview of key privacy and information security issues impacting the practice of law.”   And, in an article written by Ann Ostrander, the Senior Director of Loss Prevention at Kirkland & Ellis, we learn of how Kirkland addresses part of its data confidentiality problem by deploying a sophisticated web-based solution. 

Ms. Ostrander provides some good common sense advice when she writes:

With new rules, new precedents and new information technologies continuing to complicate and inflate the ways in which information is created and communicated, the risk of unexpected incidents, breaches or gaps is increasing. Thankfully, educational resources, technology and services exist which can enable organizations to enhance their capabilities and reduce risk. As more firms adopt more rigorous approaches to managing confidentiality and compliance, they’re creating stricter de-facto standards and expectations for the legal industry as a whole.  In this context, every firm should carefully consider the state of confidentiality management in their environment, as this is an issue whose profile will only continue to grow.

Because the Hunton attorneys are very process driven in their approach, they advocate law firms build out new security processes such as those found in a vendor management program.  As with Ms. Ostrander, Hunton’s privacy group, however, ends by providing a baseline of what every law firm should be doing:

For law firms, it is difficult to overemphasize the importance of (i) understanding how the firm collects, uses and otherwise processes personal information, (ii) thoroughly analyzing the firm’s relevant legal obligations, and (iii) implementing a comprehensive privacy and information management strategy to address these obligations. 

Although diminishing billable hours may tear into a firm’s ability to implement the firm-wide technology initiatives found at BigLaw firms such as Kirkland, the rewards found in adequately addressing data loss exposures will pay long-term dividends for any sized law firm.   As chronicled in the Hunton article, there are many regulatory landmines on the horizon.  It may be hard for a client to justify staying with its law firm after the firm is hit with a public rebuke regarding its data security – especially when there are so many other competitors in the water.  

Moreover, all law firms can, and should, be known as stalwarts of data privacy “future” best practices – and not just what is considered a current best practice.   In fact, it can be argued that the smaller the law firm, the easier it is to run such an office.  Although  attorney-client privileged material is already sacrosanct within all law firms, as counsel to banks, retailers, healthcare providers, and other users of sensitive data, law firms should live and breathe data protection on behalf of their clients.  There is a financial silver lining to any upgrade expense given that  new  implementations immediately become marketing fodder for rainmakers.  In other words, as some clients point to their use of sophisticated data management procedures when marketing their services, so should law firms when marketing their own services.

Middle Market Business, Network Security, Privacy, Risk Management

Network World: Do You Need Network Security and Privacy Insurance?

Two recent articles have come up with differing viewpoints regarding the merits of buying network security and privacy (NSAP) insurance.  On the one hand, an article in Network World has taken the position that it is almost foolish not to have NSAP insurance given the potential damages, increasing threats and the inability to safeguard against all such threats.  The author reasons:  “Just because you have fire extinguishers and sprinklers in your business doesn’t mean you don’t also buy fire insurance – the potential risk is too high. It’s time many companies considered security insurance too.”

An article in the Monitor titled College Officials Wary of ‘Cyber Insurance’ for Private Data suggests that purchasing NSAP insurance should actually be avoided given it does nothing to solve the ultimate problem, namely safeguarding  data.    Specifically, representatives from the University of Texas-Pan American and South Texas College said they were confident in their information security systems and saw little value in NSAP policies — despite the fact “higher education institutions across the nation have purchased [NSAP insurance] to offset large expenses following a data breach.”  According to Bob Lim, UTPA vice president of information technology, “Rather than spending money at the back end, use your resources to prevent (risk).  There’s better use in working to fight intrusion than being scared of it.”

The thrust of UTPA’s argument runs something like this: 

We need to adequately protect sensitive data in order to safeguard our reputation.  If we sustain a breach, there is something greater at stake than just the cost of the breach – it’s the hit to our reputation, which is very difficult to monetize.  Accordingly, we are better served by spending our resources and money on prevention rather than on the backend for a solution that may not even properly cover us. 

Ironically, this is the very same argument that large financial institutions made years ago when they opted not to buy NSAP insurance.  They believed that their reputations were sacrosanct so they needed to avoid a breach at all costs – buying the insurance was evidence a breach was even possible.  If you asked around today, most of these institutions currently have NSAP insurance – with towers that well exceed $100 million.   Why the change in position?

There are three factors that caused large financial institutions to change their collective tunes.  First, because so many organizations have been hit with very public breaches, the reputational hit became less and less of a reputational concern.  After all, if everyone is being hit, the “before” is not as important as the “after”, i.e., how you treat your customers post-breach.  And, that is the second reason why the insurance option became more attractive.  NSAP insurance quickly funds and allocates resources after a breach.  Sort of like an experienced swat team entering the picture.   Financial institutions started to realize the benefits in having risk professionals assist in the post-breach aftermath.  Finally, the IT departments began to realize insurance was not an indictment on their capabilities but actually a way to fund the costs of a breach without touching their own IT budgets.  In other words, rather than being opponents of the coverage, CTOs and CIOs became champions of it when they saw the direct benefits in obtaining the coverage.  

All of this begs the question.  Are financial insitutions smarter or are the folks from UTPA?  When does NSAP insurance begin to make sense?   As with most questions related to the purchase of insurance, it depends on your risk appetite, exposures, controls, and ability to financially withstand an incident.   Taking such factors into consideration, it is clear that the answer will vary widely.  It is suggested that management at least start the process of determining whether NSAP insurance makes – especially since the options are getting better by the day.   Who knows.  Maybe UTPA will ultimately change its position as more and more breaches of colleges and universities are reported.

Electronic Health Records, Middle Market Business, Network Security, Privacy, Risk Management

Hospital Data Continues to be at Serious Risk with Third-Party Vendors

According to the 2010 HIMSS Analytics Report: Security of Patient Data, even though providers continue to update their security infrastructure, patient data remains at serious risk.  And, despite new statutory requirements for healthcare privacy and security, these critical gaps remain.  The study’s conclusion is not that surprising given new healthcare breaches are being reported on a daily basis.

One improvement that can be immediately implemented with little cost outlay is the initiation of a vendor risk management program.  Recent changes to how HHS views business associates and new data security laws in states such as Massachusetts  actually now make it imperative that hospitals affirmatively manage the risks inherent in having third-party companies handle sensitive data.  There are certainly enough incidents to justify the attention.  For example, a company hired by South Shore Hospital to dispose of patient records simply outsourced the work to a second company.  It was this second company – a company that did not directly contract with the hospital – that lost 800,000 patients’ files.

Lost or stolen laptops used by the contractors of business associates litter the data breach landscape.  Incidents such as the one that impacted New Mexico’s Medicaid Salud! Plan is fairly common.  The Plan members were hit with a breach not arising out of the direct negligence of DentaQuest, a company that processes claims and provides dental benefits for the Plan; but instead, from the negligence of an employee of West Monroe Partners – a company hired by DentaQuest.  A West Monroe employee had an unencrypted laptop with protected information in the trunk of a car when the vehicle was stolen.  Although it may not always be convenient, most employees should know by now not to leave a laptop in a car – especially if it is unencrypted.  It’s not easy, however, for a hospital to enforce a policy on a company it does not even know exists.

There are two basic risk management suggestions to be gleaned from these incidents.   Not only should the obvious indemnifications be negotiated in all business associate agreements, hospitals need to require business associates vet  subcontractors to ensure they also have proper security controls in place.   In fact, this is actually dictated by the recent statutory changes referenced above.  And, if a hospital purchases insurance to cover the costs of a breach, it should confirm that the insuring agreement broadly covers third-party incidents.  Given that network security and privacy insurance remains a nascent market – albeit one that is now rapidly growing – not all insurance contracts are the same when it comes to how far the third-party coverage net reaches.   NSAP insurance should also be included in every insurance clause requirement – with a provision requiring that subcontractors also procure the necessary minimum coverages.

Hospitals should never forget that their data security is only as strong as their weakest link – which given cost-cutting measures undertaken by business associates may sometimes be an unknown company with weak security controls.

Electronic Health Records, Litigation Management, Network Security, Privacy, Risk Management

NSAP Insurance Full Policy Limits Must Cover First Party Data Breach Costs

A recently disclosed $10 million data breach expense bill raises an issue that has been percolating the network security and privacy (NSAP) insurance marketplace for several years now.  The publicly disclosed expenses involve BlueCross BlueShield of Tennesee (BCBST).

According to BCBST, in October 2009, “57 hard drives containing audio and video files related to coordination of care and eligibility telephone calls from providers and members were stolen from a leased facility in Chattanooga that formerly housed a [BCBST] call center.”  And, as of June 11, 2010, the total number of current and former compromised BCBST members is 998,936.  Although there has been no documented incident of identity theft or credit fraud of BCBST members as a result of this theft, BCBST has incurred to date $10 million in costs.  These expenses are driven by its retention of Kroll to investigate the theft, e.g., determine which members were impacted, Equifax credit monitoring, LifeLock services, notification costs, and call center expense. 

The key takeaway from incidents such as this one turns on the fact there is no lawsuit to defend – and no NSAP liability policy trigger to set in motion.  The only trigger is first-party driven, namely the internal expenses incurred to deal with a data breach incident. 

As with most NSAP insurance buyers, the growing number of Blues who have actually purchased NSAP insurance have agreed to sub-limits on their first-party expenses that are usually a fraction of the full liability limit.   This is unacceptable given victims such as BCBST are often forced to expend millions of dollars without seeing a single lawsuit or regulatory complaint.  In fact, the goal of spending so much on the front end is to avoid litigation. 

The good news is that there are a few NSAP insurers who are willing to offer full limits for first-party expenses incurred as a result of a data breach.   These insurers should be evaluated when looking at NSAP insurance for the first time.  And, upon renewal, if your current insurer does not provide the limits you need for the expenses you are most likely to incur, either have your current broker evaluate other insurers or turn to a new broker who can help locate better options.