Courts side with Consumers in Data Breach
In general, courts don’t tend to side with consumers in data breach incidents. However, a federal court in Florida is the apple among the oranges. It approved a $3 million settlement for victims whose data was on a stolen laptop in December 2009, that contained personal health information.
The laptops belonged to AvMed, a health insurer, and the unencrypted data involved records of tens of thousands of the company’s customers.
Though the consumer-plaintiffs suffered no identity theft or other direct losses, they blamed AvMed of breach of contract and fiduciary duty, negligence and unjust enrichment.
These claims were dismissed by the U.S. District Court for the Southern District of Florida, but the plaintiffs appealed. The U.S. Court of Appeals for the Eleventh Circuit remanded the case.
AvMed’s attempt for another dismissal went down the tubes, prompting the company to enter into settlement talks with the plaintiffs.
The agreement says that each victim will get up to $10 for every year they made an insurance payment to AvMed, with a cap at $30. This is money, say the victims, that AvMed could have spent on better data security. The agreement also requires AvMed to pay damages to anyone who gets stung with identity theft.
AvMed will also employ encryption and new password protocols, plus GPS technology for its laptops.
Apparently, this settlement is the first in which the awarded victims didn’t have to show tangible evidence of loss.
Traditionally, courts nationwide don’t take on such claims, and that a claim lacks merit if it’s based on the possibility of future damages rather than actual concrete losses that have already occurred.
The ruling serves as a precedent for future data breach cases, to support customers’ stance that a segment of their health insurance premiums should fund data security placements.
Robert Siciliano is an Identity Theft Expert to AllClearID. He is the author of 99 Things You Wish You Knew Before Your Identity Was Stolen See him knock’em dead in this identity theft prevention video. Disclosures.