GovHawk.com -- Document

HB-6491, As Passed House, December 6, 2018

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 6491

 

 

 

 

 

 

 

 

 

 

 

 

 

A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

(MCL 500.100 to 500.8302) by adding chapter 5A.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

CHAPTER 5A

 

DATA SECURITY

 

Sec. 550. This chapter does not create or imply a private

 

cause of action for violation of its provisions and does not

 

curtail a private cause of action that would otherwise exist in the

 

absence of this chapter. Notwithstanding any other provision of

 

law, this chapter establishes the exclusive standards, for this

 

state, applicable to licensees for data security, the investigation

 

of a cybersecurity event, and notification to the director.

 


Sec. 553. As used in this chapter:

 

(a) "Authorized individual" means an individual known to and

 

screened by the licensee and determined to be necessary and

 

appropriate to have access to the nonpublic information held by the

 

licensee and its information systems.

 

(b) "Consumer" means an individual, including, but not limited

 

to, an applicant, a policyholder, an insured, a beneficiary, a

 

claimant, and a certificate holder, who is a resident of this state

 

and whose nonpublic information is in a licensee's possession,

 

custody, or control.

 

(c) "Cybersecurity event" means an event that results in

 

unauthorized access to and acquisition of, or disruption or misuse

 

of, an information system or nonpublic information stored on an

 

information system. Cybersecurity event does not include either of

 

the following:

 

(i) The unauthorized acquisition of encrypted nonpublic

 

information if the encryption, process, or key is not also

 

acquired, released, or used without authorization.

 

(ii) The unauthorized access to data by a person if the access

 

meets all of the following criteria:

 

(A) The person acted in good faith in accessing the data.

 

(B) The access was related to activities of the person.

 

(C) The person did not misuse any personal information or

 

disclose any personal information to an unauthorized person.

 

(d) "Encrypted" means the transformation of data into a form

 

that results in a low probability of assigning meaning without the

 

use of a protective process or key.


(e) "Information security program" means the administrative,

 

technical, and physical safeguards that a licensee uses to access,

 

collect, distribute, process, protect, store, use, transmit,

 

dispose of, or otherwise handle nonpublic information.

 

(f) "Information system" means a discrete set of electronic

 

information resources organized for the collection, processing,

 

maintenance, use, sharing, dissemination, or disposition of

 

electronic nonpublic information, as well as any specialized system

 

such as an industrial or process controls system, a telephone

 

switching and private branch exchange system, or an environmental

 

control system.

 

(g) "Licensee" means a licensed insurer or producer, and other

 

persons licensed or required to be licensed, authorized, or

 

registered, or holding or required to hold a certificate of

 

authority under this act. Licensee does not include a purchasing

 

group or a risk retention group chartered and licensed in a state

 

other than this state or a person that is acting as an assuming

 

insurer that is domiciled in another state or jurisdiction.

 

(h) "Multi-factor authentication" means authentication through

 

verification of at least 2 of the following types of authentication

 

factors:

 

(i) Knowledge factors, such as a password.

 

(ii) Possession factors, such as a token or text message on a

 

mobile phone.

 

(iii) Inherence factors, such as a biometric characteristic.

 

(i) "Nonpublic information" means electronic information that

 

is not publicly available information and is either of the


following:

 

(i) Any information concerning a consumer that because of

 

name, number, personal mark, or other identifier can be used to

 

identify the consumer, in combination with any 1 or more of the

 

following data elements:

 

(A) Social Security number.

 

(B) Driver license number or nondriver identification card

 

number.

 

(C) Financial account number, or credit or debit card number.

 

(D) Any security code, access code, or password that would

 

permit access to a consumer's financial account.

 

(E) Biometric records.

 

(ii) Any information or data, except age or gender, in any

 

form or medium created by or derived from a health care provider or

 

a consumer, that can be used to identify a particular consumer, and

 

that relates to any of the following:

 

(A) The past, present, or future physical, mental, or

 

behavioral health or condition of any consumer or a member of the

 

consumer's family.

 

(B) The provision of health care to any consumer.

 

(C) Payment for the provision of health care to any consumer.

 

(j) "Publicly available information" means any information

 

that a licensee has a reasonable basis to believe is lawfully made

 

available to the general public from federal, state, or local

 

government records, by widely distributed media, or by disclosures

 

to the general public that are required to be made by federal,

 

state, or local law. A licensee has a reasonable basis to believe


that information is lawfully made available to the general public

 

if both of the following apply:

 

(i) The licensee has taken steps to determine that the

 

information is of the type that is available to the general public.

 

(ii) If an individual can direct that the information not be

 

made available to the general public, that the licensee's consumer

 

has not directed that the information not be made available to the

 

general public.

 

(k) "Risk assessment" means the risk assessment that each

 

licensee is required to conduct under section 555(3).

 

(l) "Third-party service provider" means a person that is not

 

a licensee and that contracts with a licensee to maintain, process,

 

or store, or otherwise is permitted access to nonpublic

 

information, through its provision of services to the licensee.

 

Sec. 555. (1) Commensurate with the size and complexity of the

 

licensee, the nature and scope of the licensee's activities,

 

including its use of third-party service providers, and the

 

sensitivity of the nonpublic information used by the licensee or in

 

the licensee's possession, custody, or control, each licensee shall

 

develop, implement, and maintain a comprehensive written

 

information security program, based on the licensee's risk

 

assessment, that contains administrative, technical, and physical

 

safeguards for the protection of nonpublic information and the

 

licensee's information system.

 

(2) A licensee's information security program must be designed

 

to do all of the following:

 

(a) Protect the security and confidentiality of nonpublic


information and the security of the information system.

 

(b) Protect against any threats or hazards to the security or

 

integrity of nonpublic information and the information system.

 

(c) Protect against unauthorized access to or use of nonpublic

 

information, and minimize the likelihood of harm to any consumer.

 

(d) Maintain policies and procedures for the secure disposal

 

on a periodic basis of any nonpublic information that is no longer

 

necessary for business operations or for other legitimate business

 

purposes.

 

(3) A licensee shall do all of the following:

 

(a) Designate 1 or more employees, an affiliate, or an outside

 

vendor to act on behalf of the licensee that is responsible for the

 

information security program.

 

(b) Identify reasonably foreseeable internal or external

 

threats that could result in unauthorized access, transmission,

 

disclosure, misuse, alteration, or destruction of nonpublic

 

information, including the security of information systems and

 

nonpublic information that are accessible to, or held by, third-

 

party service providers.

 

(c) Assess the likelihood and potential damage of these

 

threats, taking into consideration the sensitivity of the nonpublic

 

information.

 

(d) Assess the sufficiency of policies, procedures,

 

information systems, and other safeguards in place to manage these

 

threats, including consideration of threats in each relevant area

 

of the licensee's operations, including all of the following:

 

(i) Employee training and management.


(ii) Information systems, including network and software

 

design, as well as information classification, governance,

 

processing, storage, transmission, and disposal.

 

(iii) Detecting, preventing, and responding to attacks,

 

intrusions, or other systems failures.

 

(e) Implement information safeguards to manage the threats

 

identified in its ongoing assessment, and, no less than annually,

 

assess the effectiveness of the safeguards' key controls, systems,

 

and procedures.

 

(4) Based on its risk assessment, a licensee shall do all of

 

the following:

 

(a) Design its information security program to mitigate the

 

identified risks, commensurate with the size and complexity of the

 

licensee, the nature and scope of the licensee's activities,

 

including its use of third-party service providers, and the

 

sensitivity of the nonpublic information used by the licensee or in

 

the licensee's possession, custody, or control.

 

(b) Determine which of the following security measures are

 

appropriate and implement those appropriate security measures:

 

(i) Placing access controls on information systems, including

 

controls to authenticate and permit access only to authorized

 

individuals to protect against the unauthorized acquisition of

 

nonpublic information.

 

(ii) Identifying and managing the data, personnel, devices,

 

systems, and facilities that enable the organization to achieve

 

business purposes in accordance with their relative importance to

 

business objectives and the organization's risk strategy.


(iii) Restricting physical access to nonpublic information to

 

authorized individuals only.

 

(iv) Protecting by encryption or other appropriate means all

 

nonpublic information while being transmitted over an external

 

network and all nonpublic information stored on a laptop computer

 

or other portable computing or storage device or media.

 

(v) Adopting secure development practices for in-house

 

developed applications utilized by the licensee.

 

(vi) Modifying the information system in accordance with the

 

licensee's information security program.

 

(vii) Using effective controls, which may include multi-factor

 

authentication procedures for employees accessing nonpublic

 

information.

 

(viii) Regularly testing and monitoring systems and procedures

 

to detect actual and attempted attacks on, or intrusions into,

 

information systems.

 

(ix) Including audit trails within the information security

 

program designed to detect and respond to cybersecurity events and

 

designed to reconstruct material financial transactions sufficient

 

to support normal operations and obligations of the licensee.

 

(x) Implementing measures to protect against destruction,

 

loss, or damage of nonpublic information due to environmental

 

hazards, such as fire and water damage or other catastrophes or

 

technological failures.

 

(xi) Developing, implementing, and maintaining procedures for

 

the secure disposal of nonpublic information in any format.

 

(c) Include cybersecurity risks in the licensee's enterprise


risk management process.

 

(d) Stay informed regarding emerging threats or

 

vulnerabilities and utilize reasonable security measures when

 

sharing information relative to the character of the sharing and

 

the type of information shared.

 

(e) Provide its personnel with cybersecurity awareness

 

training that is updated as necessary to reflect risks identified

 

by the licensee in the risk assessment.

 

(5) If a licensee has a board of directors, the board or an

 

appropriate committee of the board shall, at a minimum, do all of

 

the following:

 

(a) Require the licensee's executive management or its

 

delegates to develop, implement, and maintain the licensee's

 

information security program.

 

(b) Require the licensee's executive management or its

 

delegates to report in writing, at least annually, all of the

 

following information:

 

(i) The overall status of the information security program and

 

the licensee's compliance with this chapter.

 

(ii) Material matters related to the information security

 

program, addressing issues such as risk assessment, risk management

 

and control decisions, results of testing, cybersecurity events or

 

violations, and management's responses to the material matters

 

described in this subparagraph, and recommendations for changes in

 

the information security program.

 

(iii) If executive management delegates any of its

 

responsibilities under this section, it shall oversee the


development, implementation, and maintenance of the licensee's

 

information security program prepared by a delegate and shall

 

receive a report from the delegate complying with the requirements

 

of the report to the board of directors.

 

(6) A licensee shall exercise due diligence in selecting its

 

third-party service provider. A licensee shall require a third-

 

party service provider to implement appropriate administrative,

 

technical, and physical measures to protect and secure the

 

information systems and nonpublic information that are accessible

 

to, or held by, the third-party service provider.

 

(7) A licensee shall monitor, evaluate, and adjust, as

 

appropriate, the information security program consistent with any

 

relevant changes in technology, the sensitivity of its nonpublic

 

information, internal or external threats to information, and the

 

licensee's own changing business arrangements, such as mergers and

 

acquisitions, alliances and joint ventures, outsourcing

 

arrangements, and changes to information systems.

 

(8) As part of its information security program, each licensee

 

shall establish a written incident response plan designed to

 

promptly respond to, and recover from, any cybersecurity event that

 

compromises the confidentiality, integrity, or availability of

 

nonpublic information in its possession, the licensee's information

 

systems, or the continuing functionality of any aspect of the

 

licensee's business or operations. An incident response plan under

 

this subsection must address all of the following areas:

 

(a) The internal process for responding to a cybersecurity

 

event.


(b) The goals of the incident response plan.

 

(c) The definition of clear roles, responsibilities, and

 

levels of decision-making authority.

 

(d) External and internal communications and information

 

sharing.

 

(e) Identification of requirements for the remediation of any

 

identified weaknesses in information systems and associated

 

controls.

 

(f) Documentation and reporting regarding cybersecurity events

 

and related incident response activities.

 

(g) The evaluation and revision as necessary of the incident

 

response plan following a cybersecurity event.

 

(9) By February 15 of each year, each insurer domiciled in

 

this state shall submit to the director a written statement,

 

certifying that the insurer is in compliance with the requirements

 

of this section. Each insurer shall maintain for examination by the

 

department all records, schedules, and data supporting this

 

certificate for 5 years. To the extent an insurer has identified

 

areas, systems, or processes that require material improvement,

 

updating, or redesign, the insurer shall document the

 

identification and the remedial efforts planned and underway to

 

address the areas, systems, or processes. The documentation

 

described in this subsection must be available for inspection by

 

the director.

 

Sec. 557. (1) If the licensee learns that a cybersecurity

 

event has or may have occurred, the licensee or an outside vendor

 

or service provider, or both, designated to act on behalf of the


licensee, shall conduct a prompt investigation.

 

(2) During the investigation under subsection (1), the

 

licensee, or an outside vendor or service provider, or both,

 

designated to act on behalf of the licensee, shall, at a minimum,

 

do as much of the following as possible:

 

(a) Determine whether a cybersecurity event has occurred.

 

(b) Assess the nature and scope of the cybersecurity event.

 

(c) Identify any nonpublic information that may have been

 

involved in the cybersecurity event.

 

(d) Perform or oversee reasonable measures to restore the

 

security of the information systems compromised in the

 

cybersecurity event to prevent further unauthorized acquisition,

 

release, or use of nonpublic information in the licensee's

 

possession, custody, or control.

 

(3) The licensee shall maintain records concerning all

 

cybersecurity events for at least 5 years from the date of the

 

cybersecurity event and shall produce those records on demand of

 

the director.

 

Sec. 559. (1) Each licensee shall notify the director as

 

promptly as possible but not later than 10 business days after a

 

determination that a cybersecurity event involving nonpublic

 

information that is in the possession of a licensee has occurred

 

when either of the following criteria has been met:

 

(a) This state is the licensee's state of domicile, for an

 

insurer, or this state is the licensee's home state, for an

 

insurance producer as that term is defined in section 1201, and the

 

cybersecurity event has a reasonable likelihood of materially


harming either of the following:

 

(i) A consumer residing in this state.

 

(ii) Any material part of a normal operation of the licensee.

 

(b) The licensee reasonably believes that the nonpublic

 

information involved is of 250 or more consumers residing in this

 

state and is either of the following:

 

(i) A cybersecurity event impacting the licensee of which

 

notice is required to be provided to any government body, self-

 

regulatory agency, or other supervisory body under any state or

 

federal law.

 

(ii) A cybersecurity event that has a reasonable likelihood of

 

materially harming either of the following:

 

(A) Any consumer residing in this state.

 

(B) Any material part of the normal operation of the licensee.

 

(2) The licensee shall provide the information under this

 

subsection in electronic form as directed by the director. The

 

licensee has a continuing obligation to update and supplement

 

initial and subsequent notifications to the director regarding

 

material changes to previously provided information relating to the

 

cybersecurity event. The licensee shall provide as much of the

 

following information as possible:

 

(a) The date of the cybersecurity event.

 

(b) A description of how the information was exposed, lost,

 

stolen, or breached, including the specific roles and

 

responsibilities of third-party service providers, if any.

 

(c) How the cybersecurity event was discovered.

 

(d) Whether any lost, stolen, or breached information has been


recovered and, if so, how this was done.

 

(e) The identity of the source of the cybersecurity event.

 

(f) Whether the licensee has filed a police report or has

 

notified any regulatory, government, or law enforcement agencies

 

and, if so, when the notification was provided.

 

(g) A description of the specific types of information

 

acquired without authorization. As used in this subdivision,

 

"specific types of information" means particular data elements

 

including, for example, types of medical information, types of

 

financial information, or types of information allowing

 

identification of the consumer.

 

(h) The period during which the information system was

 

compromised by the cybersecurity event.

 

(i) The number of total consumers in this state affected by

 

the cybersecurity event. The licensee shall provide the best

 

estimate in the initial report to the director and update this

 

estimate with each subsequent report to the director under this

 

section.

 

(j) The results of any internal review identifying a lapse in

 

either automated controls or internal procedures, or confirming

 

that all automated controls or internal procedures were followed.

 

(k) A description of efforts being undertaken to remediate the

 

situation that permitted the cybersecurity event to occur.

 

(l) A copy of the licensee's privacy policy and a statement

 

outlining the steps the licensee will take to investigate and

 

notify consumers affected by the cybersecurity event.

 

(m) The name of a contact person who is both familiar with the


cybersecurity event and authorized to act for the licensee.

 

(3) For a cybersecurity event in a system maintained by a

 

third-party service provider, of which the licensee has become

 

aware, the licensee shall treat the event as it would under this

 

section unless the third-party service provider provides the notice

 

required under this section to the director. The computation of the

 

licensee's deadlines begins on the day after the third-party

 

service provider notifies the licensee of the cybersecurity event

 

or the licensee otherwise has actual knowledge of the cybersecurity

 

event, whichever is earlier. This chapter does not prevent or

 

abrogate an agreement between a licensee and another licensee, a

 

third-party service provider, or any other party to fulfill any of

 

the investigation requirements imposed under section 557 or notice

 

requirements imposed under this section.

 

(4) For a cybersecurity event involving nonpublic information

 

that is used by the licensee that is acting as an assuming insurer

 

or in the possession, custody, or control of a licensee that is

 

acting as an assuming insurer and that does not have a direct

 

contractual relationship with the affected consumers, the assuming

 

insurer shall notify its affected ceding insurers and the director

 

of its state of domicile within 10 business days after making the

 

determination that a cybersecurity event has occurred. The ceding

 

insurers that have a direct contractual relationship with affected

 

consumers shall fulfill the consumer notification requirements

 

imposed under this section. For a cybersecurity event involving

 

nonpublic information that is in the possession, custody, or

 

control of a third-party service provider of a licensee that is an


assuming insurer, the assuming insurer shall notify its affected

 

ceding insurers and the director of its state of domicile within 10

 

business days after receiving notice from its third-party service

 

provider that a cybersecurity event has occurred. The ceding

 

insurers that have a direct contractual relationship with affected

 

consumers shall fulfill the consumer notification requirements

 

imposed under this chapter.

 

(5) A licensee acting as an assuming insurer does not have

 

other notice obligations relating to a cybersecurity event or other

 

data breach under this section or any other law of this state.

 

(6) For a cybersecurity event involving nonpublic information

 

that is in the possession, custody, or control of a licensee that

 

is an insurer or its third-party service provider for which a

 

consumer accessed the insurer's services through an independent

 

insurance producer, and for which consumer notice is required under

 

this chapter, the insurer shall notify the producers of record of

 

all affected consumers of the cybersecurity event not later than

 

the time at which notice is provided to the affected consumers. The

 

insurer is excused from this obligation for any producer who is not

 

authorized by law or contract to sell, solicit, or negotiate on

 

behalf of the insurer, and in those instances in which the insurer

 

does not have the current producer of record information for any

 

individual consumer.

 

Sec. 561. (1) Unless the licensee determines that the security

 

breach has not or is not likely to cause substantial loss or injury

 

to, or result in identity theft with respect to, 1 or more

 

residents of this state, a licensee that owns or licenses data that


are included in a database that discovers a security breach, or

 

receives notice of a security breach under subsection (2), shall

 

provide a notice of the security breach to each resident of this

 

state who meets 1 or more of the following:

 

(a) That resident's unencrypted and unredacted personal

 

information was accessed and acquired by an unauthorized person.

 

(b) That resident's personal information was accessed and

 

acquired in encrypted form by a licensee with unauthorized access

 

to the encryption key.

 

(2) Unless the licensee determines that the security breach

 

has not or is not likely to cause substantial loss or injury to, or

 

result in identity theft with respect to, 1 or more residents of

 

this state, a licensee that maintains a database that includes data

 

that the licensee does not own or license that discovers a breach

 

of the security of the database shall provide a notice to the owner

 

or licensor of the information of the security breach.

 

(3) In determining whether a security breach is not likely to

 

cause substantial loss or injury to, or result in identity theft

 

with respect to, 1 or more residents of this state under subsection

 

(1) or (2), a licensee shall act with the care an ordinarily

 

prudent person or agency in like position would exercise under

 

similar circumstances.

 

(4) A licensee shall provide any notice required under this

 

section without unreasonable delay. A licensee may delay providing

 

notice without violating this subsection if either of the following

 

is met:

 

(a) A delay is necessary in order for the licensee to take any


measures necessary to determine the scope of the security breach

 

and restore the reasonable integrity of the database. However, the

 

licensee shall provide the notice required under this subsection

 

without unreasonable delay after the licensee completes the

 

measures necessary to determine the scope of the security breach

 

and restore the reasonable integrity of the database.

 

(b) A law enforcement agency determines and advises the

 

licensee that providing a notice will impede a criminal or civil

 

investigation or jeopardize homeland or national security. However,

 

the licensee shall provide the notice required under this section

 

without unreasonable delay after the law enforcement agency

 

determines that providing the notice will no longer impede the

 

investigation or jeopardize homeland or national security.

 

(5) A licensee shall provide any notice required under this

 

section by providing 1 or more of the following to the recipient:

 

(a) Written notice sent to the recipient at the recipient's

 

postal address in the records of the licensee.

 

(b) Written notice sent electronically to the recipient if any

 

of the following are met:

 

(i) The recipient has expressly consented to receive

 

electronic notice.

 

(ii) The licensee has an existing business relationship with

 

the recipient that includes periodic electronic mail communications

 

and based on those communications the licensee reasonably believes

 

that it has the recipient's current electronic mail address.

 

(iii) The licensee conducts its business primarily through

 

internet account transactions or on the internet.


(c) If not otherwise prohibited by state or federal law,

 

notice given by telephone by an individual who represents the

 

licensee if all of the following are met:

 

(i) The notice is not given in whole or in part by use of a

 

recorded message.

 

(ii) The recipient has expressly consented to receive notice

 

by telephone, or if the recipient has not expressly consented to

 

receive notice by telephone, the licensee also provides notice

 

under subdivision (a) or (b) if the notice by telephone does not

 

result in a live conversation between the individual representing

 

the licensee and the recipient within 3 business days after the

 

initial attempt to provide telephonic notice.

 

(d) Substitute notice, if the licensee demonstrates that the

 

cost of providing notice under subdivision (a), (b), or (c) will

 

exceed $250,000.00 or that the licensee has to provide notice to

 

more than 500,000 residents of this state. A licensee provides

 

substitute notice under this subdivision by doing all of the

 

following:

 

(i) If the licensee has electronic mail addresses for any of

 

the residents of this state who are entitled to receive the notice,

 

providing electronic notice to those residents.

 

(ii) If the licensee maintains a website, conspicuously

 

posting the notice on that website.

 

(iii) Notifying major statewide media. A notification under

 

this subparagraph must include a telephone number or a website

 

address that a person may use to obtain additional assistance and

 

information.


(6) A notice under this section must do all of the following:

 

(a) For a notice provided under subsection (5)(a) or (b), be

 

written in a clear and conspicuous manner and contain the content

 

required under subdivisions (c) to (g).

 

(b) For a notice provided under subsection (5)(c), clearly

 

communicate the content required under subdivisions (c) to (g) to

 

the recipient of the telephone call.

 

(c) Describe the security breach in general terms.

 

(d) Describe the type of personal information that is the

 

subject of the unauthorized access or use.

 

(e) If applicable, generally describe what the licensee

 

providing the notice has done to protect data from further security

 

breaches.

 

(f) Include a telephone number where a notice recipient may

 

obtain assistance or additional information.

 

(g) Remind notice recipients of the need to remain vigilant

 

for incidents of fraud and identity theft.

 

(7) A licensee may provide any notice required under this

 

section under an agreement between the licensee and another

 

licensee, if the notice provided under the agreement does not

 

conflict with this section.

 

(8) Except as provided in this subsection, after a licensee

 

provides a notice under this section, the licensee shall notify

 

each consumer reporting agency that compiles and maintains files on

 

consumers on a nationwide basis, as defined in 15 USC 1681a(p), of

 

the security breach without unreasonable delay. A notification

 

under this subsection must include the number of notices that the


licensee provided to residents of this state and the timing of

 

those notices. This subsection does not apply if either of the

 

following is met:

 

(a) The licensee is required under this section to provide

 

notice of a security breach to 1,000 or fewer residents of this

 

state.

 

(b) The licensee is subject to 15 USC 6801 to 6809.

 

(9) A licensee that is subject to and complies with the health

 

insurance portability and accountability act of 1996, Public Law

 

104-191, and with regulations promulgated under that act, 45 CFR

 

parts 160 and 164, for the prevention of unauthorized access to

 

customer information and customer notice is considered to be in

 

compliance with this section.

 

(10) A person that provides notice of a security breach in the

 

manner described in this section when a security breach has not

 

occurred, with the intent to defraud, is guilty of a misdemeanor

 

punishable as follows:

 

(a) Except as otherwise provided under subdivisions (b) and

 

(c), by imprisonment for not more than 93 days or a fine of not

 

more than $250.00 for each violation, or both.

 

(b) For a second violation, by imprisonment for not more than

 

93 days or a fine of not more than $500.00 for each violation, or

 

both.

 

(c) For a third or subsequent violation, by imprisonment for

 

not more than 93 days or a fine of not more than $750.00 for each

 

violation, or both.

 

(11) Subject to subsection (12), a person that knowingly fails


to provide a notice of a security breach required under this

 

section may be ordered to pay a civil fine of not more than $250.00

 

for each failure to provide notice. The attorney general or a

 

prosecuting attorney may bring an action to recover a civil fine

 

under this section.

 

(12) The aggregate liability of a person for civil fines under

 

subsection (11) for multiple violations of subsection (11) that

 

arise from the same security breach must not exceed $750,000.00.

 

(13) Subsections (10) and (11) do not affect the availability

 

of any civil remedy for a violation of state or federal law.

 

(14) This section applies to the discovery or notification of

 

a breach of the security of a database that occurs after December

 

31, 2019.

 

(15) This section does not apply to the access or acquisition

 

by a person or agency of federal, state, or local government

 

records or documents lawfully made available to the general public.

 

(16) This section deals with subject matter that is of

 

statewide concern, and any charter, ordinance, resolution,

 

regulation, rule, or other action by a municipal corporation or

 

other political subdivision of this state to regulate, directly or

 

indirectly, any matter expressly set forth in this section is

 

preempted.

 

(17) As used in this section:

 

(a) "Data" means that term as defined in section 3 of the

 

identity theft protection act, 2004 PA 452, MCL 445.63.

 

(b) "Identity theft" means that term as defined in section 3

 

of the identity theft protection act, 2004 PA 452, MCL 445.63.


(c) "Personal information" means that term as defined in

 

section 3 of the identity theft protection act, 2004 PA 452, MCL

 

445.63.

 

(d) "Security breach" means that term as defined in section 3

 

of the identity theft protection act, 2004 PA 452, MCL 445.63.

 

Sec. 563. (1) Any documents, materials, or other information

 

in the control or possession of the department that is furnished by

 

a licensee or an employee or agent of the licensee acting on behalf

 

of the licensee under section 555(9), section 559(2)(b), (c), (d),

 

(e), (h), (i), and (j), or that is obtained by the director in an

 

investigation or examination by the director is confidential by law

 

and privileged, is not subject to the freedom of information act,

 

1976 PA 442, MCL 15.231 to 15.246, is not subject to subpoena, and

 

is not subject to discovery or admissible in evidence in any

 

private civil action. However, the director is authorized to use

 

the documents, materials, or other information in the furtherance

 

of any regulatory or legal action brought as a part of the

 

director's duties. The director shall not otherwise make the

 

documents, materials, or other information public without the prior

 

written consent of the licensee.

 

(2) Neither the director nor any person that received

 

documents, materials, or other information while acting under the

 

authority of the director is permitted or required to testify in

 

any private civil action concerning any confidential documents,

 

materials, or information under subsection (1).

 

(3) To assist in the performance of the director's duties

 

under this chapter, the director may do any of the following:


(a) Share documents, materials, or other information,

 

including the confidential and privileged documents, materials, or

 

information subject to subsection (1), with other state, federal,

 

and international regulatory agencies, with the National

 

Association of Insurance Commissioners, its affiliates, or its

 

subsidiaries, and with state, federal, and international law

 

enforcement authorities, if the recipient agrees in writing to

 

maintain the confidentiality and privileged status of the document,

 

material, or other information.

 

(b) Receive documents, materials, or information, including

 

otherwise confidential and privileged documents, materials, or

 

information, from the National Association of Insurance

 

Commissioners, its affiliates, or its subsidiaries, and from

 

regulatory and law enforcement officials of other foreign or

 

domestic jurisdictions, and shall maintain as confidential or

 

privileged any document, material, or information received with

 

notice or the understanding that it is confidential or privileged

 

under the laws of the jurisdiction that is the source of the

 

document, material, or information.

 

(c) Share documents, materials, or other information subject

 

to subsection (1) with a third-party consultant or vendor if the

 

consultant agrees in writing to maintain the confidentiality and

 

privileged status of the document, material, or other information.

 

(d) Enter into agreements governing sharing and use of

 

information consistent with this subsection.

 

(4) A waiver of any applicable privilege or claim of

 

confidentiality in the documents, materials, or information does


not occur as a result of disclosure to the director under this

 

section or as a result of sharing as authorized under subsection

 

(3).

 

(5) This chapter does not prohibit the director from releasing

 

final, adjudicated actions that are open to public inspection

 

pursuant to the freedom of information act, 1976 PA 442, MCL 15.231

 

to 15.246, to a database or other clearinghouse service maintained

 

by the National Association of Insurance Commissioners, its

 

affiliates, or its subsidiaries.

 

(6) Any documents, materials, or other information in the

 

possession or control of the National Association of Insurance

 

Commissioners or a third-party consultant or vendor under this

 

chapter is confidential by law and privileged, is not subject to

 

the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,

 

is not subject to subpoena, and is not subject to discovery or

 

admissible in evidence in any private civil action.

 

Sec. 565. (1) A licensee that meets any of the following

 

criteria is exempt from section 555:

 

(a) The licensee has fewer than 50 employees, including any

 

independent contractors.

 

(b) The licensee has less than $10,000,000.00 in gross annual

 

revenue.

 

(c) The licensee has less than $25,000,000.00 in year-end

 

total assets.

 

(2) A licensee subject to and in compliance with the Health

 

Insurance Portability and Accountability Act of 1996, Public Law

 

104191, and with regulations promulgated under that act, is not


required to comply with this chapter except for the requirements

 

under sections 559 and 561.

 

(3) An employee, agent, representative, or designee of a

 

licensee, who is also a licensee, is exempt from section 555 and

 

does not need to develop its own information security program to

 

the extent that the employee, agent, representative, or designee is

 

covered by the information security program of the other licensee.

 

(4) If a licensee ceases to qualify for an exception under

 

subsection (1), the licensee has 180 days to comply with this

 

chapter.

 

(5) This chapter takes effect on January 20, 2020. A licensee

 

shall implement section 555 by January 20, 2021. However, a

 

licensee has until January 20, 2022 to implement section 555(6).