FTC Data Breach Action Raises Insurance Issue

Add another item to the list of  problems can follow a data breach. A district court in New Jersey has upheld the right of the Federal Trade Commission to bring an enforcement action against a company whose customers are impacted by a significant data breach at the company. The decision upheld the right of the FTC to take action against the Wyndham Worldwide Corp., following its failure to protect customer data, which was compromised on three separate occasions. The data loss was alleged by the FCC to have resulted in a $10.6 million fraud loss. Kevin LaCroix looks at the decision and its implications, a potential coverage gap: D&O insurance can’t be expected to cover liability based on this kind of administrative action.