The Role of Indemnification in Cloud Data Storage

cloud data storage

Storing data in the cloud

Content and regulatory compliance woes can hit businesses deep in the pocket, and data security and compliance is a growing concern across all industries. One way companies can protect themselves is by negotiating strong indemnification agreements as part of any contract involving outsourced storage and handling of their data, documents, and records by cloud vendors.

Why Indemnification for Information Management?

The cost of a data breach, accidental exposure, spoliation, or inappropriate record loss can be as much as the cost for a lawsuit in some instances. Recent data exposures have cost companies millions of dollars in legal fees and fines, and that doesn’t even include financial impact to brand value or the cost of communication and customer retention following a data breach.

Companies in specific niches can experience further consequences of records management errors. Release of incomplete information about a new drug development may cause problems with public opinion and the Food and Drug Administration, for example. Data about a new product that is leaked could lead to a competitor beating your company to market, and communication between employees that is taken out of context can lead to damaging media or legal speculation.

Avoiding Damaging Information Errors

A strong information governance strategy can help your company avoid risks associated with data errors. Detailed security measures, procedures that account for regulatory and retention requirements, and thorough staff training are all important to risk management. Working with cloud storage vendors to develop comprehensive procedures across all entities that handle your data also reduce risks.

Negotiating Indemnification Clauses

Mistakes do happen, however, and they can’t be completely eradicated with polices and training. When the mistake happens on your watch or within your walls, your company will likely be responsible for the full damages caused. When the mistake happens because of cloud vendor employees, procedures, or services, then an indemnification agreement may allow your company to seek compensation for some losses from the vendor.

When discussing indemnification with a vendor, find out what coverage the vendor already offers or whether it is willing to negotiate specific coverage for your company based on the potential risk of the content stored. Scenarios where indemnification may come into play include unintentional release of sensitive data, inappropriate deletion or retention of content outside of your RM schedule, or failure to comply with regulations or laws when handling data. Negotiations should also include whether the cloud vendor offers indemnification against errors and damages caused by their own storage subcontracts.

Indemnification is like car insurance: it doesn’t solve or prevent a problem. Companies must take other steps to avoid data management issues, but seeking indemnification agreements is an easy way to insure your company against potential losses in the future.

Contact us to discuss your content and regulatory compliance.