Ruling means there is no longer a need to show financial loss to claim compensation following data breach.
Law firm Moore Blatch has warned brokers that they could be hit with compensation claims in the event of a data protection breach even if no financial loss occurs.
This follows a ruling in the Court of Appeal last month, where the rules under the Data Protection Act 1988 were clarified.
Clause 13 of the Act will now be interpreted so that financial loss no longer needs to be shown for a compensation claim for emotional impact on the claimant, such as anxiety or stress.
Claims increase
The law firm said brokers need to have more stringent practices in place for data where a financial risk might be exposed by a data breach, such as the holding of bank or credit card details.
Moore Blatch detailed that the decision could lead to an increase in claims and a rise in class actions, which could prove costly to brokers in terms of damages.
John Warchus, partner, Moore Blatch, said: “Brokers, or indeed anyone in control of data, will now have an even stronger incentive to comply with data protection rules.
Damages
He added: “Brokers should urgently review their data protection procedures and strengthen where necessary as more compensation claims are likely and the amount of damages awarded is also likely to increase.”
Steve White, chief executive of the British Insurance Brokers’ Association told Insurance Age: “This doesn’t change the rules, it simply clarifies them. The rules are the rules, but this changes the consequences of a breach.
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