BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2010-2011 Regular Session
SB 24 (Simitian)
As Introduced
Hearing Date: March 22, 2011
Fiscal: Yes
Urgency: No
SK:rm
SUBJECT
Privacy: Security Breach Notifications
DESCRIPTION
This bill would amend California's security breach notification
law to provide that any agency, person, or business required to
issue a notification under existing law must meet additional
requirements regarding that notification. This bill would
require that security breach notifications be written in plain
language and contain certain specified information, including,
among other things, contact information regarding the breach,
the types of information breached, and, if possible to
determine, the date, estimated date, or date range of the
breach. This bill would provide that a security breach
notification may also include other specified information, at
the discretion of the entity issuing the notification.
Under this bill, any agency, person, or business that must
provide a security breach notification under existing law to
more than 500 California residents as a result of a single
breach would be required to submit the notification
electronically to the Attorney General.
BACKGROUND
In 2003, California's first-in-the nation security breach
notification law went into effect. Since that time, 45 other
states and the District of Columbia, Puerto Rico, and the Virgin
Islands have enacted breach notification laws, following
California's lead. California's statute requires state agencies
and businesses to notify residents when the security of their
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personal information is breached. According to Privacy Rights
Clearinghouse, more than 515 million records containing
sensitive personal information have been involved in security
breaches in the United States since January 2005.
Although existing law requires state agencies and businesses to
notify affected consumers when there is a breach in the security
of their information, the law does not contain requirements for
the content of those notifications. This bill is intended to
fill that gap by establishing standard, core content for breach
notification letters.
The author has carried previous measures which propose to
standardize the content of breach notification letters. For
example, both SB 1166 (2010) and SB 20 (2009) would have
required that those notifications be written in plain language
and contain specified information. Both of these bills were
vetoed. (See Comment 6.)
CHANGES TO EXISTING LAW
1. Existing law requires any agency, person, or business that
owns or licenses computerized data that includes personal
information to disclose a breach of the security of the system
to any California resident whose unencrypted personal
information was, or is reasonably believed to have been,
acquired by an unauthorized person. The disclosure must be
made in the most expedient time possible and without
unreasonable delay, consistent with the legitimate needs of
law enforcement, as specified. (Civ. Code Secs. 1798.29(a)
and (c) and 1798.82(a) and (c).)
Existing law requires any agency, person, or business that
maintains computerized data that includes personal information
that the agency, person, or business does not own to notify
the owner or licensee of the information of any security
breach immediately following discovery if the personal
information was, or is reasonably believed to have been,
acquired by an unauthorized person. (Civ. Code Secs.
1798.29(b) and 1798.82(b).)
Existing law defines "personal information," for purposes of
the breach notification statute, to include the individual's
first name or first initial and last name in combination with
any one or more of the following data elements, when either
the name or the data elements are not encrypted: social
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security number; driver's license number or California
Identification Card number; account number, credit or debit
card number, in combination with any required security code,
access code, or password that would permit access to an
individual's financial account; medical information; or health
insurance information. "Personal information" does not
include publicly available information that is lawfully made
available to the general public from federal, state, or local
government records. (Civ. Code Secs. 1798.29(e) and (f) and
1798.82(e) and (f).)
Existing law requires health care facilities to notify a
patient if his or her medical information is accessed, used,
or disclosed unlawfully or without authorization. Existing
law, which requires the notification to be provided to the
patient within five business days after the breach is detected
unless notification would impede law enforcement's
investigation of the incident, does not specify the
information that must be contained in the notification.
(Health & Saf. Code Sec. 1280.15.)
Existing federal law , the Health Information Technology for
Economic and Clinical Health Act (HITECH Act), requires
covered entities such as health care providers to notify a
patient whose "unsecured protected health information" has
been, or is reasonably believed to have been, accessed,
acquired, or disclosed as a result of the breach. The HITECH
Act requires that notice of the breach include, to the extent
possible, certain items of information, including the type of
unsecured protected health information breached and the date
of the breach. (42 U.S.C. 17932(f).)
This bill would provide that any agency, person, or business
required to issue a security breach notification under
existing law must also meet certain requirements regarding the
notification including that it be written in plain language.
This bill would also require that the notification include, at
a minimum, the following information:
a. the name and contact information of the reporting
agency, person, or business;
b. a list of the types of personal information that were or
are reasonably believed to have been the subject of the
breach;
c. any of the following, if the information is possible to
determine at the time the notice is provided: the date or
estimated date of the breach, or date range within which
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the breach occurred;
d. the date of the notice;
e. whether the notification was delayed because of an
investigation by law enforcement, if the information is
possible to determine at the time the notice is provided;
f. a general description of the breach incident, if the
information is possible to determine at the time the notice
is provided; and
g. the toll-free telephone numbers and addresses of the
major credit reporting agencies if the breach exposed a
social security number, or a driver's license or California
identification card number.
This bill would provide that an agency, person, or business
may also include the following information in a security
breach notification, at its discretion:
a. information regarding what the entity has done to
protect individuals whose information has been breached;
and
b. advice on steps that the individual may take to protect
himself or herself.
This bill would require any agency, person, or business that
must provide a security breach notification pursuant to
existing law to more than 500 California residents as a result
of a single breach of the security system to submit a single
sample copy of the notification electronically to the Attorney
General. That copy shall not be considered to be a record of
complaint or investigation under the California Public Records
Act.
This bill would provide that a "covered entity" under the
federal Health Insurance Portability and Accountability Act
(HIPAA) is deemed to have complied with the bill's
notification requirements regarding standardized content if
the entity has complied completely with the notification
requirements contained in the federal HITECH Act.
2. Existing law requires an agency, person, or business to
provide breach notification using either written notice,
electronic notice, or substitute notice. An entity may use
substitute notice when it demonstrates that the cost of
providing notice would exceed $250,000, or that the affected
class of persons to be notified exceeds 500,000, or if the
entity does not have sufficient contact information.
Substitute notice must consist of: (a) e-mail notice when the
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entity has an e-mail address for the affected individuals; (b)
conspicuous posting of the notice on the entity's Web site;
and (c) notification to major statewide media. (Civ. Code
Secs. 1798.29(g) and 1798.82(g).)
This bill would additionally require notification to the
Office of Information Security within the office of the State
Chief Information Officer when an agency uses substitute
notice and notification to the Office of Privacy Protection
within the State and Consumer Services Agency when a person or
business uses substitute notice.
COMMENT
1.Stated need for the bill
In support of the bill, the author writes:
In 2002, California adopted a first-in-the-nation security
breach notification statute (AB 700, Simitian, Chapter 1054,
Statutes of 2002), that requires data holders to notify
individuals when there has been a data breach of personal
information. Since that time, 45 other states, as well as the
District of Columbia, Puerto Rico, and the U.S. Virgin
Islands, have also enacted security breach notification laws
that are modeled upon the California statute. This leaves
Alabama, Kentucky, New Mexico and South Dakota as the only
remaining states without a legal requirement to notify
affected individuals in the event of a breach.
In addition, at least fourteen states �Hawaii, Iowa, Maryland,
Massachusetts, Minnesota, New Hampshire, New York, North
Carolina, Oregon, Vermont, Virginia, West Virginia, Wisconsin,
and Wyoming] and Puerto Rico have built upon California's
model and added more detailed requirements for SBNs �security
breach notifications] to include certain types of information.
And most of these states �Alaska, Hawaii, Louisiana, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York,
North Carolina, South Carolina, Vermont, and Virginia] require
an entity that suffers a security breach to notify a state
regulator, such as the Attorney General, as well as the
affected individuals.
Even the federal government has weighed in; as of February 19,
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2009, for breaches of personal medical information,
individuals have to be notified and those notifications must
contain certain specified content.
California's law is built on the premise that individuals have
a right to know when a data breach has affected them. Quite
simply, in order for consumers to protect themselves from the
unauthorized acquisition and use of confidential information,
the consumer has to know that an unauthorized acquisition has
occurred. Without that knowledge, consumers aren't even aware
of the need to protect themselves.
In the ensuing years, however, a gap has been identified in
our state statute. While current law requires data holders to
notify individuals when there has been a data breach of
personal information, that same law is silent on what
information should be contained in the notification. As a
result, �security breach notification] letters vary greatly in
the information provided, leaving consumers confused and
businesses exposed.
Individuals are left to question what information was
breached, when did the breach occur, and what should they do
to protect themselves. Moreover data holders are left exposed
and uncertain of what is expected of them in the event of a
breach. SB 24 fills in this gap by establishing standard,
core content for the notification letters, thereby ensuring
the notifications actually work.
These relatively modest but helpful changes will enhance
consumer knowledge about, and understanding of, security
breaches and the steps they can take to protect themselves.
Supporter Privacy Rights Clearinghouse echoes the author,
writing that when breach notifications lack critical information
such as the type of personal information breached and the date
of the breach, consumers are left "uncertain about how to
respond to the breach, or confused about how to protect
themselves from identity theft. SB 24 addresses this confusion
by standardizing the core content contained in security breach
notices."
In addition, there also appears to be evidence that the
information provided to consumers in breach notification letters
is insufficient. A 2007 study entitled "Security Breach
Notification Laws: Views from Chief Security Officers" by the
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Samuelson Law, Technology, and Public Policy Clinic, at UC
Berkeley School of Law found that 28 percent of consumers who
received a breach notification letter did not "understand the
data involved or the potential consequences of the breach after
reading the letter."
2. Standardized content requirements for security breach
notifications
While existing law imposes requirements for notification of
security breaches, it does not contain requirements for the
content of those notifications. This bill is intended to fill
that gap by establishing standard, core content for breach
notification letters. Under the bill, breach notification
letters sent to consumers must contain: (1) the name and contact
information of the reporting agency, person, or business; (2) a
list of the types of personal information that were or are
reasonably believed to have been the subject of the breach; and
(3) the toll-free telephone numbers and addresses of the major
credit reporting agencies if the breach exposed a social
security number, or a driver's license or California
identification card number.
The following information must also be included in the
notification if the information is possible to determine at the
time the notice is provided: (1) a general description of the
breach incident; (2) whether the notification was delayed
because of an investigation by law enforcement; and (3) any of
the following: the date or estimated date of the breach, or date
range within which the breach occurred.
California's Office of Privacy Protection (OPP) suggests
including several of these items of information in breach
notification letters. In its "Recommended Practices on Notice
of Security Breach Involving Personal Information" issued in
June 2009, OPP suggests that the following information should be
included in a breach notification letter:
1. a general description of what happened;
2. the specific type of personal information that was
involved including, in the case of a breach of
financial-related information, a social security number,
driver's license or California identification number;
3. what the entity has done to protect the consumer's
personal information from further unauthorized acquisition;
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4. what the entity will do to assist consumers, including
providing a toll-free contact telephone number;
5. information on what consumers can do to protect
themselves from identity theft, as appropriate for the
specific type of personal information involved.
Although these best practice guidelines are not regulations and
are not binding, they do arguably recognize the important
consumer benefits that result when consumers affected by a
breach are provided more specific information about the breach.
For example, if the breach exposed a social security number,
knowing that fact will help a consumer to quickly mitigate any
possible harm-such as new account fraud-that may occur as a
result of the breach. Furthermore, a business that currently
follows the OPP's Recommended Practices would be in compliance
with this bill.
3. Exemption for HIPAA-covered entities in compliance with
HITECH Act
This bill would provide that a HIPAA-covered entity is deemed to
have complied with the bill's notification requirements
regarding standardized content if the entity has complied
completely with the notification requirements contained in the
federal HITECH Act. This exemption was included in the author's
SB 1166 when that bill was heard last year in the Assembly in
order to address concerns raised by the California Hospital
Association (CHA).
As CHA noted at the time, recently enacted federal law also
recognizes the importance of standardized breach notices in the
context of medical information. The HITECH Act, enacted as a
part of the American Recovery and Reinvestment Act of 2009
(ARRA) (Pub. Law 111-5), established a federal requirement for
notification of a breach in the security of health information
that is not encrypted or otherwise made indecipherable. Under
the HITECH Act, covered entities such as health care providers
must notify each individual whose "unsecured protected health
information" has been, or is reasonably believed to have been,
accessed, acquired, or disclosed as a result of the breach. The
HITECH Act requires that notice of the breach include, to the
extent possible, the following items of information:
1. a brief description of what happened, including the date
of the breach and the date of the discovery of the breach,
if known;
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2. a description of the types of unsecured protected health
information that were involved in the breach (such as full
name, social security number, date of birth, home address,
account number, or disability code);
3. the steps individuals should take to protect themselves
from potential harm resulting from the breach;
4. a brief description of what the covered entity involved
is doing to investigate the breach, to mitigate losses, and
to protect against any further breaches; and
5. contact procedures for individuals to ask questions or
learn additional information, which shall include a
toll-free telephone number, an e-mail address, Web site, or
postal address. (42 U.S.C. 17932(f).)
Although not specified in the statute, interim final rules
issued in August 2009 by the U.S. Department of Health and Human
Services require that breach notifications be written in plain
language. (45 C.F.R. Parts 160 and 164.) Those interim final
rules also provide that the notice to consumers may include
information about how to contact the credit bureaus as well as
information concerning steps the covered entity is taking to
retrieve the breached information. As a result, the HITECH
content notification requirements are substantially similar to
the content requirements of this bill. The only apparent
difference between this bill and the HITECH Act is that this
bill would require the breach notification to specify whether
the notification was delayed as a result of a law enforcement
investigation (provided that information is possible to
determine at the time the notice is issued).
Because the content notification requirements of this bill and
the HITECH Act are substantially similar, this bill provides
that complete compliance with the HITECH requirements is deemed
to be compliance with this bill's content notification
requirements. It is important to note, however, that this
exemption does not excuse HIPAA-covered entities from other
requirements imposed upon them under California's breach
notification law. For example, these entities must still send
breach notifications to California residents as specified under
existing law. And, under this bill, they must also submit a
copy of a security breach notification to the Attorney General
when more than 500 residents are affected. (See Comment 4.)
4. Notification to Attorney General when more than 500
California residents affected by a single breach
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This bill would require an agency, person, or business to submit
a security breach notification electronically to the Attorney
General when more than 500 California residents are affected by
a single breach of the security system. The author indicates
that similar provisions are contained in other state breach
laws. For example, several state laws require notification to
the Attorney General, credit reporting agencies, and-in the case
of New York-the Office of Cyber Security and Critical
Infrastructure Coordination. By requiring notification to the
Attorney General in cases where more than 500 California
residents are affected by a single breach, this bill would allow
the Attorney General to track breaches, look at trends, and
investigate a major breach, if she or he deemed it to be
necessary.
5. Amendments to prior bill addressed concerns raised by
stakeholders at that time
Except for the exemption for HIPAA-covered entities as described
in Comment 3, this bill is identical to the enrolled version of
SB 20 (Simitian, 2008). When that bill was heard in this
committee it was opposed by various groups representing the
financial, insurance, and technology industries. As the bill
moved through the legislative process, however, the author made
several amendments to the bill which addressed opposition
concerns raised at that time, including deleting the requirement
that the breach notification contain the number of persons
affected by the breach. As a result, there was no listed
opposition to the enrolled version of SB 20. Because last
year's SB 1166 was identical to SB 20, these groups did not
oppose that bill either.
6. Governor's veto of SB 1166 and SB 20
The governor stated the following in vetoing both SB 1166 and SB
20:
California's landmark law on data breach notification has had
many beneficial results. Informing individuals whose personal
information was compromised in a breach of what their risks
are and what they can do to protect themselves is an important
consumer protection benefit. This bill is unnecessary,
however, because there is no evidence that there is a problem
with the information provided to consumers. Moreover, there
is no additional consumer benefit gained by requiring the
Attorney General to become a repository of breach notices when
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this measure does not require the Attorney General to do
anything with the notices. Since this measure would place
additional unnecessary mandates on businesses without a
corresponding consumer benefit, I am unable to sign this bill.
7. Technical amendments needed
The following technical amendments are needed:
a. On page 5, line 3, before "Web" insert "Internet"
b. On page 6, line 34, after "Act" insert "of 1996"
c. On page 6, line 38, strike "104-191" and insert "111-5"
d. On page 8, line 21, before "Web" insert "Internet"
Support : Privacy Activism; Privacy Rights Clearinghouse
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
SB 1166 (Simitian, 2010) would have required that breach
notifications be written in plain language and contain specified
information. This bill was vetoed. (See Comment 6.)
SB 20 (Simitian, 2009) was identical to SB 1166. This bill was
vetoed. (See Comment 6.)
SB 364 (Simitian, 2008) also would have required that breach
notifications be written in plain language and contain specified
information. This bill was vetoed.
AB 1656 (Jones, 2008) would have, among other things, required a
person, business, or agency that maintains personal information
to include specified items in a breach notification to the owner
or licensee of the information. This bill was vetoed.
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AB 779 (Jones, 2007), among other things, would have provided
that the Office of Privacy Protection be notified if substitute
notice was used and would have required an agency, person, or
business that owns, licenses, or maintains personal information
related to various payment devices to notify the owner,
licensee, or California resident of a security data breach. The
bill would also have required that the notification contain
certain items of information, including, among other things,
when the breach occurred and the categories of personal
information breached. This bill was vetoed.
AB 2505 (Nunez, 2006) would have provided that the Office of
Privacy Protection be notified if substitute notice was used.
This bill died on the Senate Floor.
SB 852 (Bowen, 2006) would have required that a security breach
notification be issued regardless of whether or not the data
breached was computerized. The bill would also have required
notice to the Office of Privacy Protection. This bill died in
the Assembly Business and Professions Committee.
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