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Financial Services Law Insights and Observations

New Jersey settles CFA and HIPAA matter with fertility clinic

State Issues New Jersey Privacy/Cyber Risk & Data Security State Attorney General Data Breach Consumer Protection

State Issues

On October 12, the New Jersey attorney general and the Division of Consumer Affairs announced an action against a healthcare provider alleging that the defendant violated the New Jersey Consumer Fraud Act, the federal Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, and the HIPAA Security Rule by removing administrative and technological safeguards for protected health information (PHI) and electronic PHI (ePHI). The settlement resolves allegations that the defendant’s data breach allowed instances, between August 2016 and January 2017, of unauthorized access to the defendant’s network, which permitted at least one intruder to access consumer ePHI. Among other things, the defendant’s alleged violations include failing to: (i) ensure the confidentiality, integrity, and availability of ePHI; (ii) implement a mechanism to encrypt ePHI; (iii) review and modify security measures; (iv) implement proper procedures for creating, changing, and safeguarding passwords; and (v) implement verification procedures. According to the consent order, the defendant must pay $412,300 in civil penalties and $82,700 in investigative costs and attorney fees. The defendant is also required to implement extensive reforms to its data security system and encryption protocols to protect clients' PHI and prevent future breaches.

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