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Background Check Firm that Cleared Edward Snowden Suffers Data Breach

Background Check Firm that Cleared Edward Snowden Suffers Data Breach

A data breach at USIS, the background check firm that cleared Snowden, could cause millions in damages to the company. Learn how to protect your IT liability.

Wednesday, September 03, 2014/Categories: data-breach

According to the Washington Post, USIS – the background check company that botched Edward Snowden's screening process – was in the midst of one of its worst years when it found out that it had been the victim of a data breach. As they say: when it rains, it pours.

As one of the main contractors that perform background checks for government employees, USIS has frequently been the target of cyber criminals. Many attacks come from foreign governments looking to get info on U.S. government employees.

The size of the USIS data breach is unclear, and investigators don't know if the stolen data was encrypted. Regardless, this new data breach is a devastating blow to the company's already fragile reputation. USIS has suspended its operations until the breach is fully investigated and the data spill is cleaned up. When the dust settles, USIS could lose several high-paying contracts and be forced to downsize the company.

What IT Contractors Can Learn from the USIS Data Breach Mess

Like many IT businesses, USIS earns contracts based on its reputation, commitment to security, and ability to deliver. When a breach like this occurs, there's a huge domino effect. In fact, the breach has already begun to affect all aspects of USIS's business.

USIS suspended its company operations because of the breach, which means in addition to cleanup costs, the company will likely suffer lost revenue, missed deadlines, and lost business.

If you're responsible for securing client networks, your business could be liable for all the costs that accumulate because of the breach. You can also be sued for damages to your client's reputation and the revenue they lose. And if you were working for a major player like USIS, those damages can be astronomical.

That’s why many IT professionals protect their business with Errors & Omissions Insurance, which can cover the costs associated with a data breach lawsuit.

IT Insurance: What it Costs and What it Covers

E&O Insurance (also called Professional Liability Insurance) covers lawsuits over…

  • Client data breaches (aka third-party cyber liability).
  • Missed deadlines.
  • Lost revenue because of IT errors or breaches.
  • Latency / performance issues.

Most small IT businesses and IT contractors sign up for a policy that offers $1 million in lawsuit protection. The cost of IT insurance depends on the size of your business, but annual insurance costs are typically between $700 and $2,000.

Here's how this coverage works.

Say your client runs a background check company. Protecting the personal data of their customers and their job applicants is crucial to your client's reputation. The nature of their work means that they partner with a few large businesses, which give them long-term contracts to handle HR screening. What would happen to your company if this client were hacked?

If the client's network is compromised, undoubtedly one (or more) of their big clients would take their business elsewhere. The client could sue you for the breach, claiming that the failure of your IT solutions caused them to lose the contracts.

A data breach lawsuit like this could easily cost upwards of $100,000 dollars when you consider lost income, repair costs, damages to the client's reputation, and other expenses related to the breach.

Fortunately for IT contractors, TechInsurance agents can customize an E&O Insurance policy to offer third-party Cyber Liability Insurance and other coverage for IT liabilities.

For free IT insurance quotes, submit an online insurance application.

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