Opening Yourself Up to Liability on the Cloud

While business owners are becoming more aware of the potential liability risks that they face when storing confidential information on the cloud, they are not always aware of the other ways that they can get themselves in trouble. Cloud services offer so much convenience, and they will be a strong component of the business world for some time to come. However, it’s important to understand the little ways you can increase your own risk and liability when using the cloud.

States do not have caps on punitive damages when it comes to lost or breached information on a cloud service. You as the business owner are directly liable, and you will only be able to sue the cloud service provider in certain scenarios. Here are some of the simple ways you can open yourself up to increased liability.


Sharing with More Than the Essential Individuals One of the great features of cloud services is the fact that you can share access with so many people. You can send large files for free to them or invite them to look at the work. The problem though comes when you decide to share the information with more than the essential individual. Most courts view this as an unnecessary risk. In other words, you should not share all of the data in your cloud service with all of your employees. Each individual you send large files for free to increases the possible locations you can lose that information. When dealing with confidential information, ask whether the individuals you are sending the data to actually need to know that information.

Remaining Logged into an Account One of the simplest ways that you can open yourself up to liability is remaining logged into your cloud account or even your email account. If you have decided to sync up your email with the cloud service so you can send large files for free, your email account is another point of danger. This is because an account that is logged in is more easily hacked. In fact, the hacker just has to be walking by. Security features may be lowered when you are online. Additionally, most courts deem this a sign of negligence. While it does not rise to the height of negligence per se, it can be difficult to defend.

Failing to Use Separate Encryption Procedures While the cloud service you choose may provide great encryption procedures, many states require that you go through your own procedures and efforts to encrypt all sensitive information. Many businesses do this anyway because of the increased standard of liability. However, Business Insider reports that smaller businesses are less inclined to follow through on this aspect of the business. Protect yourself and always encrypt sensitive information, even if you have a good cloud service that encrypts data separately.

Forgetting to Thoroughly Check Out the Cloud Service If your business is actually a corporation in a state like Delaware, the ABA reports that you need to have thoroughly checked out the cloud service. Part of thoroughly checking out the service includes discussing it in a formal business meeting. Whether this applies to LLCs is still debatable. However, sole proprietorships and partnerships would do well to also show that they have conducted a thorough evaluation of the service.

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