Hospitality Industry Information Security Risks: Hotel Management Should Consider "Cyber Liability Policies" With "Vicarious Liability Provisions" To Insure Guest Information Database Breaches

“…clients with robust cyber liability policies will find coverage under the vicarious liability provisions. …”

Data breaches generally represent enormous problems for companies,” said Alan N. Situn, a shareholder with law firm Greenberg Traurig L.L.P. in New York. “Not only can they be very expensive, but equally important to many companies (is) the reputational damage that they perceive from these types of breaches” if information they provide to a third party is somehow breached.

Hackers tend to hold on to such information “usually about a year, and then use it in the hope that folks have become a little bit more relaxed and not as vigilant,” said Mauricio F. Paez, a partner with law firm Jones Day in New York.

For the most part, the companies that are affected are in a damage- or crisis-management mode, said Robert J. Scott, managing partner with law firm Scott & Scott L.L.P. in Dallas. “They’re emailing their customers; they’re apologizing for the inconvenience, trying to clarify and limit the scope of the magnitude of the problem; and they’re hopeful the leakage of the email doesn’t result” in other problems.

Observers noted that the firms were notifying customers of the data breach even though they were not legally required to do so by state laws, except in North Dakota, unless more damaging personal information, such as Social Security or credit card numbers, had been revealed.

Epsilon customers whose data was breached have been “doing everything they should be doing in terms of being up front and honest with the consumers,” Mr. Scott said.

If the breach results in litigation, the question will arise of “how does that fit into the overall risk management program of the company” that hired the outside marketing company, said Kroll Ontrack’s Mr. Brill, who suggested that affected firms review their risk management programs now.

For more:  http://www.businessinsurance.com/article/20110410/ISSUE01/304109976