What are the data breach notification laws in Kentucky?

A data breach is the unauthorized access or release of someone's personally identifiable information (PII), which is any data that could reveal an individual's identity.

Data breaches can happen if an employee clicks on a link in a phishing email, if a laptop or thumb drive is stolen, or if hackers break into a computer network. Accidental security breaches are another cause, such as misconfigured software that leaves data unprotected.

Every small business that handles credit cards or stores customer information is vulnerable to data breaches. IT consultants, healthcare providers, and financial institutions are among the industries with the highest risk.

Kentucky state law defines personal information as knowing an individual's first name or first initial and last name in combination with one or more of the following:

• Social Security number
• Driver's license number
• The individual's financial account number, credit card number, or debit card number in combination with a password or other means of access

Any business that handles PII should invest in cyber liability insurance to mitigate costs in the event of a data breach.

State law outlines when and how businesses need to respond to a security breach. Breaches of security must be reported when they are believed to have compromised the personal information of Kentucky residents.

Businesses must report a breach "in the most expedient time possible and without unreasonable delay." Delays may be permitted only when notification would interfere with a law enforcement agency's criminal investigation.

Kentucky businesses that experience a data breach must notify any residents whose personal information was compromised. Permitted methods include written notices and electronic notices. In certain cases, businesses can use a substitute notice that includes email, a conspicuous posting on a website, and the notification of major statewide media.

For breaches that affect more than 1,000 residents, the business must also notify nationwide consumer reporting agencies and credit bureaus (Equifax, TransUnion, etc.).

Kentucky law does not specify what information must be included in data breach notices sent to residents. Notices typically include the business’s name and contact information, the type of information that was compromised, and a general description of the security breach.

Some businesses decide to offer free credit monitoring and identity theft protection services to affected customers, which can help rebuild your reputation.

Data breaches that impact healthcare facilities and healthcare professionals are regulated by federal laws. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) includes a Breach Notification Rule that requires notification after a breach of unsecured protected health information. Businesses must notify:

• Affected individuals
• The Secretary of Health and Human Services
• The media, if over 500 residents of a state or jurisdiction were affected

Under HIPAA, individuals must be notified by first-class mail, or by email if they've agreed to electronic communication, within 60 days of the discovery of a breach.

The cost of a data breach can be significant, which is why cyber insurance is so important for businesses that handle personal data.

Notifying those affected and paying for credit monitoring can be expensive. You’ll have to investigate and fix your security weaknesses while suffering a possible loss of income, and government fines can also be costly. You might even face a ransomware attack, where hackers shut down your computer systems and demand payment.

Small businesses most often need first-party cyber liability insurance. Also called data breach insurance, this policy provides financial protection against data breaches at your business.

You can often add this coverage to your general liability insurance or business owner’s policy (BOP), which combines general liability coverage with commercial property insurance at a discount.

If you're responsible for another company's data security, then you may need third-party cyber liability insurance. This policy covers legal expenses when a client blames your business for failing to prevent a data breach at their company.

Because most tech businesses need this coverage, it's usually included with their errors and omissions insurance (E&O) in a bundle called tech E&O.

E&O insurance, also called professional liability insurance, covers your legal costs in the event that a client sues you for making a mistake or failing to deliver on a contract. Tech E&O extends that coverage to include lawsuits related to data breaches and cyberattacks.

While any business could be at risk of a lawsuit after a data breach, this coverage is especially important for information technology businesses, especially IT consultants, network security companies, and cybersecurity businesses that recommend software or are responsible for information security.

The Commonwealth of Kentucky does not outline specific penalties for failing to notify residents of a data breach. However, businesses could face costly lawsuits and settlements related to data breaches.

As an example, the Attorney General reported a recent settlement of about $189,000 with Home Depot for a data breach involving Kentucky customers' payment information. The business also had to agree to strengthen its data privacy and security practices.

For any business that stores personal information, it's crucial to implement and maintain security procedures and practices to prevent data breaches.

Businesses are advised to safeguard PII through a variety of methods, such as designating one or more employees to coordinate a security program. It’s a good idea to conduct a security audit of the various types of personal information, unique identifiers, and other data elements you might have in your data systems.

Strong passwords, security questions, two-step authentication, and access codes can provide reasonable data protection for your business and any service providers who access this information, reducing the chance of an unauthorized acquisition.

Complete Insureon’s easy online application today to compare insurance quotes from top-rated insurance carriers for cyber policies. Our licensed agents will help you find coverage that fulfills Kentucky's insurance requirements and protects your business. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.