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NJ Businesses Liable for Healthcare Data Breach Regardless of Misuse


February 2, 2017
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New Jersey businesses can be held liable for data breaches involving sensitive healthcare data, even if the information wasn’t misused.

Healthcare Data

The Third Circuit Court of Appeals recently held that Horizon Blue Cross Blue Shield of New Jersey may be held liable for a data breach under the Fair Credit Reporting Act (FCRA), despite the lack of evidence that any of the stolen data was used to the plaintiffs’ detriment. 

Healthcare Data Breaches
The Court’s decision in In Re: Horizon Healthcare Services Inc. Data Breach Litigation serves as an important reminder of the significant liability New Jersey businesses can face in the wake of patient data breach. According to several studies, the healthcare companies are more susceptible to data breaches when compared to other industries. In fact, the Ponemon Institute found that almost 90 percent of all healthcare organizations it studied suffered at least one data breach in the past two years. On average, those cyberattacks cost $2.2 million per incident.

Risk Mitigation Steps
Because of the significant risk of exposure faced by healthcare companies, it is important that they take appropriate steps to address those risks.  For example:

  • Review IT infrastructure with those that maintain the company’s servers, hardware, software and cloud-based systems to ensure proper security systems are in place. As companies may be held liable for a data breach despite a lack of evidence of misuse or breach, ensuring that the proper standard of care is taken to protect patient data is essential to mitigating risk.
  • Review policies, handbooks, and security procedures applicable to company personnel and personnel of key business associates. Employees are the first line of defense against purposeful third party intrusion and accidental misuse. 
  • Review agreements with vendors and suppliers to ensure that they are committing to a proper standard of care and are properly responsible for any data breach they cause affecting company’s patients’ data.
  • Ensuring proper disclosure is made to patients regarding the company’s use, sharing, storage and transmittal of company’s patients’ data and obtaining a proper acknowledgment of any such disclosure.

Potential Resources
This is a growing area of potential risk and liability.  New Jersey businesses that handle personal health information or other patient data should take steps to minimize the risk of data breaches.  Those steps should include consulting with attorneys specializing in cybersecurity risk analysis and mitigation to help navigate these steps.