8 Red Flags That Suggest a Data Breach Lawsuit Is Worth Filing

An ongoing data breach.

Imagine waking up to find unauthorized transactions draining your bank account. In 2017, the Equifax data breach exposed the personal information of nearly 147 million people, including social security numbers and addresses, leading to widespread identity theft. Similarly, in 2013, Target suffered a breach that compromised the financial information of 40 million customers. Businesses that fail to protect sensitive information put customers at risk of financial loss, identity theft, and legal complications.

If you’ve suffered because a company failed to protect your sensitive information, you may have a strong case for legal action. This article discusses key red flags that suggest a data breach lawsuit is worth filing, helping you determine if your situation qualifies for legal recourse.

1. Suspicious Activity on Financial Accounts

Cybercriminals target financial data through weak security measures. Customers often notice a security incident when unauthorized withdrawals, credit card fraud, or loan applications appear on their records. Organizations must implement strong internal controls to prevent such breaches.

Key Signs:

  • Unfamiliar transactions on a bank account or credit card

  • Declined transactions despite sufficient funds

  • Credit reports showing new accounts without authorization

  • A breach affecting a mobile device, such as unauthorized access to banking apps or stored passwords, can lead to financial fraud and identity theft.

In the Capital One breach of 2019, a hacker gained access to 100 million credit card applications, exposing customers to potential fraud. Plaintiffs’ attorneys frequently argue that poor data security practices create cybersecurity risks. Companies must mitigate risks by enforcing strict security programs and protecting financial information.

2. Notification of a Data Breach

Businesses must report security breaches to affected individuals. When companies delay notifications or provide vague details, they raise red flags about their data security practices. The Federal Trade Commission (FTC) and other agencies regulate reporting requirements to protect consumers.

Legal Protections:

  • The FTC enforces penalties against companies that fail to notify customers about security breaches.

  • Regulatory and enforcement actions by government agencies strengthen consumer protection laws.

  • Public companies face legal consequences for materially false disclosures about cybersecurity issues.

In 2018, Uber paid $148 million in a settlement after concealing a data breach that exposed 57 million users’ information. If an organization downplays a breach, affected individuals may consider filing a class action lawsuit.

3. Surge in Phishing Attempts and Scams

A rise in scam emails, fraudulent calls, or identity theft attempts signals a potential data breach. Cybercriminals sell stolen customer lists, including Social Security numbers and phone numbers, on the dark web.

  • Companies must maintain industry standards for data security.

  • Businesses with weak security programs face personal liability for failing to prevent breaches.

  • Incident response teams must act immediately to contain cybersecurity issues and prevent further damage.

Following the 2021 T-Mobile data breach, affected customers reported an increase in phishing attempts and fraudulent activities. Companies that fail to implement effective security programs put consumers at risk.

4. Third-Party Service Providers Mishandling Data

Many businesses rely on other contractors and third-party service providers to manage data. Weak security measures in these external systems can compromise sensitive information.

Company Responsibilities:

  • Risk assessment before granting legitimate access to external vendors

  • Strong security measures to prevent unauthorized access

  • Strict information security policies to ensure protection

A company’s board and senior management bear responsibility for data security breaches linked to third-party providers. In the 2019 Quest Diagnostics breach, an external billing vendor exposed the personal information of approximately 11.9 million people, including patient records. Failure to implement effective security programs may justify a lawsuit.

5. Failure to Meet Industry Standards and Regulations

Businesses must comply with laws governing information security. Neglecting cybersecurity risks exposes customers and employees to data breaches.

Key Regulations:

  • Health Insurance Portability and Accountability Act (HIPAA): Requires covered entities to safeguard medical records.

  • General Data Protection Regulation (GDPR): Protects customer data in global transactions.

  • California Consumer Privacy Act (CCPA): Grants consumers control over personal data.

A company that ignores legal requirements places itself at risk for class action lawsuits and regulatory penalties. 

6. Lack of Internal Controls and Poor Security Measures

A chief information security officer (CISO) and senior management must implement strict security measures to prevent breaches. Weak oversight allows bad actors to exploit vulnerabilities.

Signs of Negligence:

  • Weak passwords and no multi-factor authentication

  • Unencrypted sensitive information

  • Outdated software lacking security patches

When a breach occurs due to poor security programs, victims may have legal grounds for compensation. A court noted that organizations must implement strong security controls to protect confidential information. The Colonial Pipeline ransomware attack in 2021 disrupted fuel supplies across the U.S. due to a compromised password with no multi-factor authentication.

7. Negligence in Reporting or Information System Oversight

Companies must follow strict reporting or information system management protocols. A failure to disclose security breaches or materially false statements about cybersecurity risks can lead to lawsuits.

Red Flags:

  • Delayed breach notifications

  • Inadequate risk assessment before incidents occur

  • Attempts to cover up cybersecurity issues

  • In a landmark ruling, the Delaware Supreme Court reinforced that companies have a fiduciary duty to implement robust cybersecurity measures to protect consumer data.

Public companies must maintain transparency to preserve consumer trust. If a court found that an organization misled customers about a breach, plaintiffs’ attorneys could strengthen a lawsuit. 

8. Unauthorized Access by Employees or Insiders

Data breaches do not always result from external hackers. Employees, board members, or contractors may exploit legitimate access privileges to steal sensitive information.

Indicators of Insider Breaches:

  • Employees downloading large amounts of confidential data

  • Unauthorized sharing of financial information or customer lists

  • Ignoring internal controls to gain access to restricted files

A company’s board must implement strict security programs to prevent unauthorized access. Without proper oversight, a business may face serious legal consequences. The Tesla insider data breach in 2023 involved employees leaking sensitive company data, highlighting the risks of poor internal controls.

Holding Companies Accountable for Data Security Failures

A data breach can cause long-term damage, from financial losses to identity theft. If suspicious activity, security failures, or corporate negligence suggest wrongdoing, legal action may be necessary. Laws exist to protect individuals from data security breaches, and businesses must uphold strict data protection standards.

Bourassa Law Group fights for data breach victims, ensuring negligent organizations face justice. If you suspect a company’s failure led to a data breach, contact us today for a free consultation.

Related Posts

Free Case Evaluation

The evaluation is FREE! You do not have to pay anything to have an attorney evaluate your case.