Schneck Medical Center Settles HIPAA Lawsuit with Indiana AG
Seymour, IN-based Schneck Medical Center has settled a lawsuit with the Indiana attorney general, Todd Rokita, over a 2021 ransomware attack and data breach that affected 89,707 Indiana residents. Schneck Medical Center has agreed to pay a penalty of $250,000 to resolve alleged violations of the Health Insurance Portability and Accountability Act (HIPAA) and state laws and will implement additional safeguards to prevent further data breaches.
According to the lawsuit, Schneck Medical Center conducted a risk analysis in December 2020 which revealed many critical security issues, but Schneck Medical Center failed to address them. 9 months later, on or around September 29, 2021, security flaws were exploited by a malicious actor who gained access to the network, exfiltrated sensitive patient data, and then deployed ransomware to encrypt files. The information stolen in the attack included names, addresses, dates of birth, Social Security numbers, driver’s license numbers, financial account information, payment card information, diagnoses, and health insurance information.
Schneck Medical Center was quick to alert patients to the cyberattack through a statement on its website on September 29, 2021; however, the Indiana AG alleged that Schneck Medical Center failed to disclose the risk patients faced and did not encourage them to take steps to protect themselves against identity theft and fraud, even though Schneck Medical Center was aware at the time that a large quantity of sensitive data had been stolen.
Another statement was released two months later on November 26, 2021, confirming that files had been stolen in the attack; however, Schneck Medical Center failed to disclose that protected health information had been exposed, despite being aware that PHI had been stolen. Schneck Medical Center also failed to issue timely individual notifications, which were not mailed until May 13, 2022 – 226 days after the discovery of the data breach. Schneck Medical Center also claimed in a May 13, 2022, substitute breach notice that data theft was discovered on March 17, 2022, when Schneck Medical Center was aware on September 29, 2023, that data had been stolen.
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The Indiana attorney general alleged multiple violations of the HIPAA Privacy Rule, Security Rule, and Breach Notification Rule and violations of the Indiana Disclosure of Security Breach Act and the Indiana Deceptive Consumer Sales Act. In addition to the financial penalty, Schneck Medical Center must implement an information security program within 90 days to address all identified security failures, develop and implement an incident response plan to ensure a timely and HIPAA-compliant response to future security incidents and provide data security and privacy training to all individuals with access to personal information or protected health information.
Schneck Medical Center Compensates Patients for Losses
Schneck Medical Center has also recently settled a consolidated class action lawsuit for $1.3 million. Two lawsuits were filed in response to the ransomware attack and data breach by patients Jalen Nierman, Bryce Sheaffer, Jennifer Renoll, Patricia White, and Nigel Myers who sought compensation for the data breach. The plaintiffs alleged Schneck Medical Center failed to implement reasonable and appropriate safeguards to ensure the confidentiality of patient data. Schneck Medical Center agreed to a settlement with no admission of wrongdoing.
Under the terms of the settlement, class members are entitled to claim up to $500 in ordinary expenses, including up to 4 hours of lost time at $15 per hour. Individuals who incurred extraordinary expenses due to the data breach can claim up to $6,000. Claims may be paid pro rata, depending on the number of claims received. The settlement also includes 27 months of free credit monitoring and identity theft protection services and coverage through a $1 million identity theft insurance policy.
