Cybersecurity, Identity Theft, and the Limits of Tort Liability

Full Title of Reference

Cybersecurity, Identity Theft, and the Limits of Tort Liability

Full Citation

Cybersecurity, Identity Theft, and the Limits of Tort Liability (bepress Legal Series. Working Paper 713, 2005). Web

BibTeX

Categorization

• Issues: Incentives, Information Sharing/Disclosure, Privacy
• Approaches: Regulation/Liability

Key Words

identity fraud/theft, communications privacy law

Synopsis

This article considers to what extent database possessors (such as credit card companies and universities) can be held liable for harm caused to data subjects (such as consumers, applicants, and alumni) when information relating to those persons is hacked or otherwise subject to improper access. Addressing common-law and statutory sources (including new legislation in 17 states) the article clearly differentiates the duty to safeguard data from the duty to notify data subjects that the security of their information has been breached. By analogy to the “medical-monitoring damages” which some states award in toxic-exposure cases, the article argues that “security-monitoring damages” should be available in database-intrusion cases. More specifically, the article proposes that, in cases of ordinary negligence, the interests of society will be best served by limiting recoverable economics losses to the cost of security-monitoring damages once a database possessor discloses to the affected individual the fact that data has been improperly accessed. This approach will encourage database possessors to discover and reveal instances of data intrusion. It will also place data subjects in a position to protect their own interests by monitoring their economic and personal security when there is heightened vulnerability.

Additional Notes and Highlights

Outline:

 I.  The Vulnerable Foundations of Modern Society
 II.  The Duty to Protect Database Information
    A.     Statutes Legislatively Creating a Cause of Action
    B.     Statutes Judicially Determined to Set the Standard of Care
           1.     The Gramm-Leach-Bliley Act
           2.     State Security Breach Notification Laws
    C.     Basic Tort Principles
           1.     Palsgraf, Kline, and Related Cases
           2.     Public Policy Analysis
           3.     Voluntary Assumption of Duty
    D.     Fiduciary Obligations
 III. The Duty to Reveal Evidence of Security Breaches
    A.     Statutory Duties
    B.     Basic Tort Principles
           1.      General Duty or Limited Duty
           2.     The Obligation to Correct Previous Statements
           3.     Conduct Creating a Continuing Risk of Physical Harm
    C.     Fiduciary Duty of Candor
 IV.  Limiting Cybersecurity Tort Liability
    A.     The Economic-Loss Rule
    B.     Emotional-Distress Damages
    C.     Security-Monitoring Damages
 V.   Conclusion: Security in Insecure Times