Its not often that worlds collide or that interests converge into one amorphous epiphany. But that’s exactly what happened to me recently, when the Division of Corporate Finance (DCF) of the U.S. Securities and Exchange Commission (SEC) issued a Disclosure Guidance identifying the types of information public companies should consider disclosing about cyber risks and events that could impact their financial statements. Now, the DCF has cautioned that the Disclosure Guidance only represents its own views and “is not a rule, regulation, or statement of the Securities and Exchange Commission.” The DCF also emphasizes right up front that ”the Commission has neither approved nor disapproved its content.” Yeah, right. YOU be an officer or director or officer of a company that does not “comply” with the DCF’s  ”recommendations.”

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Businesses that necessarily require their customers to disclose credit card and personal information, beware.   Just five days ago, the United States Court of Appeals for the First Circuit held that claims by class action plaintiffs for ”mitigation damages” arising from alleged negligence and breach of contract were viable.  Anderson v. Hannaford Brothers Co., Nos. 10–2384, 10–2450, 2011 U.S. App. LEXIS 21239 (1st Cir. Oct. 20, 2011). 

In Anderson, the electronic payment processing  system of a national grocery chain, Hannaford Brothers Co., was breached by hackers in 2007. This resulted in the dissemination of as many as 4.2 million credit card and debit card numbers, expiration dates, and security codes.  Hannaford Brothers was not notified of the breach until February 27, 2008 and subsequently contained the breach on March 10, 2008.  A week later, Hannaford released a statement regarding the breach and announced that over 1,800 cases of fraud resulting from the theft already had been reported. 

Following Hannaford’s announcement, several financial institutions immediately cancelled customers’ debit and credit cards.  Some financial institutions, which refrained from immediately canceling the credit card, monitored the accounts for unusual activity, cancelling the cards, in many cases, without notifying the customer.  Customers who asked that their cards be cancelled incurred fees from issuing banks for the replacement cards. 

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On October 17, 2011, the U.S. Court of Appeals for the Tenth Circuit issued a much-anticipated decision addressing the scope of “Advertising Injury” (“AI”) coverage for patent infringement claims.  Dish Network Corp. v. Arch Specialty Ins. Co., No. 10-1445, __ F.3d __ , 2011 U.S. App. LEXIS 20955 (10th Cir. 2011), rev’g, 734 F. Supp. 2d 1173 (D. Colo. 2010).  The court, applying Colorado law, reversed a decision from the District of Colorado in which that court granted summary judgment to the insurers.  In the underlying action, the plaintiff alleged that Dish Network Corp. (“Dish”) had infringed one or more of twenty-three patents by “making, using, offering to sell, and/or selling . . . automated telephone systems, including . . . the Dish Network customer service telephone system, that allow[s] Dish’s customers to perform pay-per-view ordering and customer service functions over the telephone.”  The Tenth Circuit concluded that the record was unclear about how Dish actually used the technologies at issue, but that some of the patent-holder’s most well-known innovations involved interactive call processing. 

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I recently attended a CLE that had a panel of social media experts who were discussing the role of Facebook, Twitter and MySpace in litigation. During a lull in the question and answer session, the Facebook attorney quipped: “you know, Facebook has already given you everything that you’ve ask for…” Immediately, the audience lifted their heads from their Blackberries and newspapers and started paying attention after this cryptic remark.

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I. Overview

Canada’s privacy regime can be described as a web of legislation at both the federal and provincial/territorial level. Some commentators express concern that this web has become tangled, lacks uniformity and actually undermines the predictability and consistency that, in their view, would exist under a single (federal) privacy regime. Canada has two primary privacy statutes: the Privacy Act and the Personal Information Protection and Electronic Documents Act (“PIPEDA”). The Privacy Act, R.S.C. 1985, c. P-21 (Can.), took effect on July 1, 1983, and imposed certain privacy rights obligations on approximately 250 federal government departments and agencies by limiting the use and disclosure of personal information. The Privacy Act also gives individuals the right to access and, if necessary, correct personal information held by governmental organizations subject to the Act.

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I.                    Introduction

The Internet facilitates the widespread and instantaneous flow of information across international borders.  While the advent of this method of transnational communication has truly created a “global economy,” at the same time, it has engendered problems for companies and their insurers which seek to assess risk and implement information safeguards, particularly in the face of divergent data privacy laws which vary from region to region or may not even exist in certain jurisdictions.  The Asia-Pacific region typifies such a lack of uniformity.  At the same time, the emerging economies in this rapidly growing part of the world have generated promising targets for computer hackers. 

75% of Asia-Pacific enterprises have experienced cyber attacks in the past 12 months.  Perhaps not surprisingly, a 2010 study by Symantec reported that almost half of all Asia-Pacific-based businesses (and 67% in Singapore) ranked cyber risk and information security as their top concern—more so than natural disasters, terrorism, and traditional crime combined.  Cyber attacks and data breaches are on the radar of CEOs and risk managers for good reason: the average cost for a large company to remediate a data breach in Australia increased to nearly $2 million in 2010, which is slightly up from 2009.  See Ponemon Institute/Symantec 2010 Annual Study: Australian Cost of a Data Breach (May 2011).  Notwithstanding the prevalence of such attacks, it is far more likely that a cyber security program is managed as a part of a company’s traditional business risks, with traditional coverages being contorted to cover various components of cyber risk (i.e. property loss, liability to third-parties, business interruption, etc.), rather than by way of a dedicated cyber-specific insurance program.  Still, in light of recent developments, it is virtually certain that companies soon will begin looking to transfer such risk via more efficient and targeted technology insurance forms and policies.   

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