What are the data breach notification laws in Maryland?

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.

Maryland's Personal Information Protection Act (PIPA) defines personal information as an individual's first name or first initial and last name in combination with one or more of the following:

• Social Security number, taxpayer identification number, passport number, or other government-issued ID number
• Driver's license number or state identification card number
• Financial account number, credit card number, or debit card number in combination with a password or other means of access
• Health information, including mental health information
• Health insurance policy or certificate number or subscriber identification number
• Biometric data, such as fingerprints
• Username or email address 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.

Maryland state law outlines when and how businesses need to respond to a security breach. Breaches of security must be reported when the personal information of Maryland residents has been or likely will be misused.

Maryland businesses must report a breach to affected residents "as soon as reasonably practicable, but not later than 45 days after the business discovers the breach of the security of a system." They must also notify the Maryland Attorney General before sending notices to residents. Delays may be permitted only when notification would interfere with a law enforcement agency's criminal investigation.

Permitted methods of notifying residents include written notice, email notice, and by telephone. The Attorney General can be notified via mail, email, or fax.

A substitute notice for residents is permitted when notification costs would exceed $100,000 or more than 175,000 residents must be notified. The substitute notice should include emails to residents, a conspicuous posting on the business's website, and notification of statewide media.

Data breach notices sent to Maryland residents must include the following:

• A description of the information that was compromised
• The business's address, phone number, and toll–free telephone number if available
• The toll–free telephone numbers and addresses for the major consumer reporting agencies (e.g., TransUnion, Equifax)
• The toll–free telephone numbers, addresses, and websites for the Federal Trade Commission (FTC) and the Office of the Attorney General (OAG)
• A statement that the FTC and OAG can provide information about steps residents can take to avoid identity theft

For data breaches that affect email accounts, the business must direct residents how to protect their account by changing their password or taking other security measures.

Notices sent to the Attorney General must include a description of the security breach and the information that was involved, the number of residents affected, a sample copy of the notice sent to residents, and any steps the business has taken to restore the integrity of the system.

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. However, state law takes precedence, which means that Maryland residents must be notified within 45 days.

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.

Failure to provide notice of a security breach is a violation of Maryland's Consumer Protection Act. Residents can bring legal action against a business that did not notify them when their personal information was exposed.

For businesses that store data, it's crucial to take appropriate steps to prevent data breaches. In fact, Maryland's Personal Information Protection Act requires businesses to implement and maintain reasonable security procedures and practices to protect personal information.

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 Maryland'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.