Cybersecurity litigation is currently at a crossroads. Courts have struggled in these cases, coming out in wildly inconsistent ways about whether a data breach causes harm. Although the litigation landscape is uncertain, there are some near certainties about cybersecurity generally: There will be many data breaches, and they will be terrible and costly. We thus have seen the rise of cybersecurity insurance to address this emergent and troublesome risk vector.
I am delighted to be interviewing Kimberly Horn, who is the Global Focus Group Leader for Cyber Claims at Beazley. Kim has significant experience in data privacy and cyber security matters, including guiding insureds through immediate and comprehensive responses to data breaches and network intrusions. She also has extensive experience managing class action litigation, regulatory investigations, and PCI negotiations arising out of privacy breaches.
I hope you enjoy my latest cartoon about data security — a twist on the angel on one shoulder and devil on the other. Humans are the weakest link for data security. Attempts to control people with surveillance or lots of technological restrictions often backfire. I believe that the most effective solution is to train people. It’s not perfect, but if training is done right, it can make a meaningful difference.
I hope you enjoy my latest cartoon about passwords on the Dark Web. These days, it seems, login credentials and other personal data are routinely stocking the shelves of the Dark Web. Last year, a hacker was peddling 117 million LinkedIn user email and passwords. And, late last year, researchers found a file with 1.4 billion passwords for sale on the Dark Web. Hackers will have happy shopping for a long time.
In In re Zappos.com, Inc., Customer Data Security Breach Litigation (9th Cir., Mar. 8, 2018), the U.S. Court of Appeals for the 9th Circuit issued a decision that represents a more expansive way to understand data security harm. The case arises out of a breach where hackers stole personal data on 24 million+ individuals. Although some plaintiffs alleged they suffered identity theft as a result of the breach, other plaintiffs did not. The district court held that the plaintiffs that hadn’t yet suffered an identity theft lacked standing.
Standing is a requirement in federal court that plaintiffs must allege that they have suffered an “injury in fact” — an injury that is concrete, particularized, and actual or imminent. If plaintiffs lack standing, their case is dismissed and can’t proceed. For a long time, most litigation arising out of data breaches was dismissed for lack of standing because courts held that plaintiffs whose data was compromised in a breach didn’t suffer any harm. Clapper v. Amnesty International USA, 568 U.S. 398 (2013). In that case, the Supreme Court held that the plaintiffs couldn’t prove for certain that they were under surveillance. The Court concluded that the plaintiffs were merely speculating about future possible harm.
Early on, most courts rejected standing in data breach cases. A few courts resisted this trend, including the 9th Circuit in Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010). There, the court held that an increased future risk of harm could be sufficient to establish standing.
Recently, South Dakota and Alabama passed data breach notification laws. These were the last two states to pass such laws, and now all 50 states have breach notification laws. There’s also a federal breach notification requirement under HIPAA (passed with the HITECH Act of 2009).
In 2003, California passed the first data breach notification law. The law didn’t get a lot of attention until the ChoicePoint data breach was announced in 2005. That breach attracted national media attention largely because people started receiving notification letters in the mail. Other states started to follow California’s lead, passing their own breach notification laws. Now, just 15 years later, a milestone has been reached with all 50 states having breach notification laws. Washington, DC also has a breach notification law.
There still is no omnibus federal breach notification statute — just the requirement for health data (protected health information) under HIPAA. Other countries have started to jump on the notification bandwagon. Canada will have a breach notification requirement starting on November 1, 2018. In the EU, the GDPR has a breach notification requirement.
I have mixed feelings about breach notification laws. On the pro side, they have shed a lot of light on data breaches, which used to remain hushed up. The bright light has shown us just how woeful the state of data security is. Individuals have learned a lot from the process as well, including how often their data is affected.
But on the con side, breach notification laws are a great expense to comply with, amounting to a de facto strict liability fine on organizations that suffer a breach. The expense is the same no matter whether a company was careful, negligent, or even reckless with regard to its data security. But the most problematic thing about breach notification laws is that they have put so much focus on breach response when so many other dimensions of data security are being neglected. Many policymakers have looked to breach notification as the primary policy response to the problem of data security, but breach notification alone is far from a solution.
Professor Woodrow Hartzog and I are currently working on a book that will explore these issues, so please stay tuned.
My new article was just published: Risk and Anxiety: A Theory of Data Breach Harms, 96 Texas Law Review 737 (2018). I co-authored the piece with Professor Danielle Keats Citron. We argue that the issue of harm needs a serious rethinking. Courts are too quick to conclude that data breaches don’t create harm. There are two key dimensions to data breach harm — risk and anxiety — both of which have been an area of struggle for courts.
Many courts find that anything involving risk is too difficult to measure and not concrete enough to constitute actual injury. Yet, outside of the world of the judiciary, other fields and industries have recognized risk as something concrete. Today, risk is readily quantified, addressed, and factored into countless decisions of great importance. As we note in the article: “Ironically, the very companies being sued for data breaches make high-stakes decisions about cyber security based upon an analysis of risk.” Despite the challenges of addressing risk, courts in other areas of law have done just that. These bodies of law are oddly ignored in data breach cases.
When it comes to anxiety — the emotional distress people might feel based upon a breach — courts often quickly dismiss it by noting that emotional distress alone is too vague and unsupportable in proof to be recognized as harm. Yet in other areas of law, emotional distress alone is sufficient to establish harm. In many cases, this fact is so well-settled that harm is rarely an issue in dispute.
We aim to provide greater coherence to this troubled body of law. We work our way through a series of examples — various types of data breach — and discuss whether harm should be recognized. We don’t think harm should be recognized in all instances, but there are many situations where we would find harm where the majority of courts today would not.
The article can be downloaded for free on SSRN.
Here’s the abstract:
It’s time for another installment of the funniest hacker stock photos. Because I create information security awareness training (and HIPAA security training too), I’m always in the hunt for hacker photos.
For this round, I focus on the future of hacking, so I looked closely for hacker stock photos that depicted the most state-of-the-art hacking techniques as well as a glimpse into the future.
If you’re interested in the previous posts in this series see:
The Funniest Hacker Stock Photos 3.0
The Funniest Hacker Stock Photos 2.0
The Funniest Hacker Stock Photos 1.0
Here are this year’s pictures. Enjoy!
Hacker Stock Photo #1
This guy might be one of the creepiest hackers I’ve ever seen.
And, he’s part of a new Las Vegas musical act called “Hacker Man Group”
Hacker Stock Photo #2
I am quite confused about why this hacker needs a magnifying glass if he’s wearing a virtual reality headset. How does he even see the magnifying glass? I guess this is a twist on The Matrix, as he appears to have the powers to warp time and space.
Every year, we hear about how climate change is worsening. It seems the same story is happening with data security. Last year was the worst year in recorded data breach history. More than 5,200 breaches were reported in 2017, with more than 7.8 billion records compromised. By comparison, there are 7.6 billion people on Earth, so 2017 saw the number of records compromised surpass the total world population. Previously, 2016 was the record-holder with 6.3 billion records compromised. Are there any records left that haven’t been compromised?
Major breaches and security incidents included the enormous Equifax breach of 145 million records, the Uber breach, and the NSA leaked tools, which spawned WannaCry and other niceties. Click here for a collection of summaries of some of the more notable breaches of 2017.
Recently, HBO suffered a massive data breach. The hackers stole unreleased episodes of Game of Thrones and have been leaking them before they are broadcast. Episodes of other shows were also stolen. The hackers grabbed 1.5 terabytes of data including sensitive internal documents.
According to a recent Ponemon Institute study, the odds of an organization having a data breach are 1 in 4. The study also found that the average cost of a data breach is $3.62 million in 2017. That’s a drop of 10%, but the size of data breaches has increased.
The Human Problem
The vast majority of information security incidents and data breaches occur because of human mistakes. Information security is only in small part a technology problem; it is largely a human problem. The biggest risks to security are human errors — people putting data where it doesn’t belong, people not following policies, people losing portable electronic devices with data on them, people falling for phishing and social engineering schemes.
Having a robust technical cybersecurity infrastructure is very important, but it alone isn’t enough. A recent Harvard Business Review article by Dante Disparte and Chris Furlow reinforces this point quite well. “Firms can be lulled into a dangerous state of complacency by their defensive technologies, firewalls, and assurances of perfect cyber hygiene. The danger is in thinking that these risks can be perfectly ‘managed’ through some sort of comprehensive defense system. It’s better to assume your defenses will be breached and to train your people in what to do when that happens.”
The Human Answer
In addition to technology, effectively preventing and dealing with data breaches involves humans. The problem is the humans, but so is the answer.
According to the Ponemon study, there were significant data breach cost reductions for having an incident response team, extensively using encryption, and engaging in workforce training.