Alabama Becomes the Final State to Enact a Data Breach Notification Law
On March 28th, Alabama Governor Kay Ivey (R) signed into law the Alabama Data Breach Notification Act, Act No. 2018-396, making Alabama the final state to enact a data breach notification law. South Dakota Governor Dennis Daugaard signed into a law a similar statute one-week prior. The Alabama law will take effect May 1, 2018. Being the last state to enact a breach notification law, Alabama had the benefit of examining the approach in just about all of the other states and apparently drew provisions from many other state laws, including relatively detailed requirements for covered entities (as defined within the statute) and their third-party service providers to maintain reasonable requirements to protect “sensitive personally identifying information.”
Breach Notification Requirements
The Alabama Data Breach Notification Act requires covered entities to notify any Alabama resident whose sensitive personally identifying information was, or the covered entity “reasonably believes,” to have been acquired by an unauthorized person as a result of a data breach that is reasonably likely to cause substantial harm to the individual to whom the information relates.
Similar to South Dakota and recent amendments to other state data breach notification laws, the Alabama law includes an expansive definition of personal information. Notably, however, “biometric information” is not included in Alabama’s definition of personal information, as has been a typical inclusion for other states of late.
Personal information or “sensitive personally identifying information” as it is called by the Alabama law, is defined as an Alabama resident’s first name or first initial and last name in combination with one or more of the following with respect to the same Alabama resident:
- A non-truncated social security number or tax identification number;
- A non-truncated driver’s license number, state-issued identification card number, passport number, military identification number, or other unique identification number issued on a government document used to verify the identity of a specific individual;
- A financial account number, including a bank account number, credit card number, or debit card number, in combination with any security code, access code, password, expiration date, or PIN, that is necessary to access the financial account or to conduct a transaction that will credit or debit the financial account;
- Any information regarding an individual’s medical history, mental or physical condition, or medical treatment diagnosis by a health care professional;
- An individual’s health insurance policy number or subscriber identification number and any unique identifier used by a health insurer to identify the individual;
- A user name or email address, in combination with a password or security question and answer that would permit access to an online account affiliated with the covered entity that is reasonably likely to contain or is used to obtain sensitive personally identifying information.
The law requires a covered entity that experiences a data breach to notify affected Alabama residents “as expeditiously as possible and without unreasonable delay,” taking into account a reasonable time to conduct an appropriate investigation, but not later than 45 days from the determination that a breach has occurred and is reasonably likely to cause substantial harm, with certain exceptions. Notably, if a covered entity’s third party agent experiences a breach of security in the agent’s system, the agent shall notify the covered entity as expeditiously as possible and without unreasonable delay, but no later than 10 days following the determination of the breach or reason to believe the breach occurred. Covered entities should be reviewing their services agreements with third party vendors to ensure they are consistent with these requirements.
In addition, if more than 1,000 state residents are impacted by the breach, the state attorney general and consumer reporting agencies must be notified. Following a number of other states, the Alabama law also sets forth specific content requirements for the notices to individuals and the Attorney General. For example, if notification to the Attorney General is required, it must include (i) a summary of events surrounding the breach, (ii) the approximate number of individuals in the Alabama affected by the breach, (iii) information about any services, such as ID theft prevention or monitoring services, being offered or scheduled to be offered, without charge, to individuals and instructions on how to use the services, and (iv) contact information for the covered entity or its agent.
Reasonable Safeguard Requirements
The Alabama law also imposes a reasonable security requirement for covered entities and their third party vendors. Under the law covered entities and third parties are required implement and maintain reasonable security measures to protect sensitive personally identifying information (see definition above) against a breach of security. This provision is significant not only because it reaches third party agents as well as covered entities, but also because of the scope of the information to which it applies. For example, the similar requirement under often cited Massachusetts regulations currently does not apply to medical information; the Alabama reasonable safeguard requirement appears to reach this category of personal information.
Security measures include:
- Designation of an employee(s) to coordinate the reasonable security measures;
- Identification of internal and external risks of a breach of security;
- Adoption of appropriate information safeguards to address identified risks of a breach of security and assess the effectiveness of such safeguards;
- Retention of service providers, if any, that are contractually required to maintain appropriate safeguards;
- Keeping management of a covered entity, including its board of directors, appropriately informed of the overall status of its security measures;
Notably, the law also requires covered entities to conduct an assessment of its security based upon the entity’s security measures as a whole and placing an emphasis on data security failures that are multiple or systemic, including consideration of all the following:
- The size of the covered entity.
- The amount of sensitive personally identifying information and the type of activities for which the sensitive personally identifying information is accessed, acquired, maintained, stored, utilized, or communicated by, or on behalf of, the covered entity.
- The covered entity’s cost to implement and maintain the security measures to protect against a breach of security relative to its resources.
A violation of the Alabama Data Breach Notification Act is also considered a violation of the Alabama Deceptive Trade Practices Act, however criminal penalties are not available. The Office of the Attorney General maintains the exclusive authority to bring an action for civil penalties – there is no private right of action. Failure to comply with the Alabama law could result in fines of up to $5,000 per day, with a cap of $500,000 per breach. Of note, such penalties are reserved for failure to comply with the law’s notification requirements, and it is not clear to what extent such penalties would apply for failure to comply with the law’s reasonable security requirements.
As each state now has a data breach notification law, and many states continue to amend those laws, it is imperative for companies operating in multiple states and/or maintain personal information about residents of multiple states to be aware of the requirements across several jurisdictions. Companies should regularly review and update the measures they are taking to better secure the data they hold and appropriately response to any potential data incident.