Data Breach Costs: Beware Vendor Contract Fine Print

Organizations often end up paying the consequential costs of data breaches when third-party vendor contracts aren't scrutinized.

Whether it's from a vendor improperly securing database information it's hosting for a customer or a storage company that leaves backup information unlocked in a truck, data breaches caused by third parties happen all the time. If organizations are not careful in the way they construct their contracts with those vendors, the organization itself could end up being on the hook for far more of the breach liability than it expected. But if they do it right, they could use that contract as a tool to mitigate risk to their organization.

"As it currently stands, the focus of risk mitigation with respect to security are technical controls and other security measures, and the importance of the contract as a risk mitigating tool is overlooked," said David Navetta, founding partner of the Information Law Group. "As litigation increases in this area, for risk-conscious organizations, the protections in the service provider contracts are going to become very important."

Litigation in these cases of third-party breaches is a common occurrence, frequently with the third-party organization ducking under the radar as their customer gets hammered by class action suits. For example, when a breach that exposed data for 4.9 million active and retired U.S. military personnel was caused by the theft of backup tapes from the car of an employee at Science Applications International Corp. (SAIC), working on behalf of Tricare, in September, the $4.9 billion lawsuit by affected individuals filed last week was lodged against TRICARE and the Department of Defense, not SAIC.

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Source: informationweek.com
By: Ericka Chickowski