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Supreme Court ruling is good news but businesses must remain vigilant

A significant ruling has been handed down by the Supreme Court which confirms that employers will not be vicariously liable for an extensive data breach intentionally caused by a disgruntled employee.

The recent ruling was in favour of Morrisons and said that the company was not liable for an extensive data breach triggered by a senior auditor who had in 2014  leaked the data of 9,263 employees. The employees brought a claim against Morrisons on the basis the company should be vicariously liable for his actions.

The judgment overturned a previous Court of Appeal ruling that, if upheld, would have significantly extended employers’ liability for data breaches, even in cases where an employee’s actions are criminal and they actively attempt to hide their wrongdoing.

While the decision is good news for businesses it is a warning about the continuing risks posed to directors and the need to ensure they hold the correct level of Directors and Officers liability Insurance  as claims for data breaches in the UK remain a factor with group actions one potential threat.

Therefore, it is critical that directors ensure there is a regular review of company cyber protection revolving around training, risk assessment, technology support and systems in place to counter potential cyber breaches. The coronavirus pandemic has seen homeworking becoming the norm with employees operating outside the office cyber security environments, opening the possibility of more attacks and responsibility for complying with GDPR falls on directors.

This makes the need for risk management even more relevant, particularly as GDPR non-compliance can attract significant fines with experts warning that despite the Supreme Court ruling it is critical that businesses remain vigilant.

For companies seeking Directors and Officers Insurance, Richard Bowdidge, Director, Professional & Financial Risks is the W Denis D&O Point of Contact on Direct Line: +44(0) 203 713 3976

Mobile: +44(0) 7503 630314  or richard.bowdidge@wdenis.co.uk

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