Cyber-insurance covers est. $7 mil loss from state’s 1099 goof

Editor’s note: This report combines Vermont Daily reporting with a press release issued Wednesday by the Scott administration.

A cyber-insurance policy taken out by the State of Vermont in 2019 will save almost $7 million in projected losses from the inadvertent disclosure of many 1099-G forms last month, the Scott administration announced Wednesday. Thanks to the policy, the State of Vermont will owe only the $250,000 deductible, rather than an expected $7 million expense.

That’s the good news for Vermont taxpayers not affected by the disclosure. For those who were, the State is offering – free of charge – a suite of identity protection services.

state of Vermont

Department of Labor Commissioner Michael Harrington

The cyber-snafu – the second since April involving the dilapidated Department of Labor computer – underscores the need for an overhaul of the State’s extensive IT system. In his budget address, Gov. Scott recommended spending significant sums of one-time federal money on a statewide upgrade. If approved, it will proceed under the care of Chief Information Officer John Quinn.

The State of Vermont will provide a suite of identity protection services to all unemployment insurance claimants who will receive a 2020 1099-G from the Vermont Department of Labor (VDOL). This service is being provided in response to the inadvertent disclosure that occurred on January 29 when VDOL mailed incorrect 1099-G forms to some unemployment claimants.

“I know this does not make up for the concerns this incident has caused, but I do hope it provides some reassurance that your identity can be protected and monitored, and in worst case scenarios, expenses will be covered to restore incurred losses,” Gov. Phil Scott said.

While not all unemployment insurance claimants were impacted by the unintentional disclosure, these services will be offered to the more than 100,000 2020 unemployment beneficiaries, out of an abundance of caution.

Identity Theft Guard Solutions, Inc. (IDX) Protection Packages Include:

  • Single Bureau Credit Monitoring
  • CyberScan Identity Monitoring
  • Identity Theft Insurance
  • Fully Managed Identity Recovery Services
  • Call Center and Informational Member Website

Next week claimants will receive direct notification containing details and instructions from IDX, the State’s contracted vendor. As soon as claimants sign up, protections will be retroactive to January 29, the date of the incident. The protection will last for a minimum of 12 months from the date of the incident.

Fortunately, the Scott Administration purchased a cyber security insurance policy in May of 2019 to protect the identities of Vermonters affected by these incidents. Initial estimates were thought to be up to $7 million, but thankfully this insurance policy, and more affordable pricing from the vendor, resulted in the State covering just the $250,000 deductible.

In addition to the services provided through IDX, claimants are also encouraged to contact the three major credit bureaus to place a security freeze on their credit. This can be done online or by calling the numbers listed below:

As a reminder, the Department of Labor is issuing recapture envelopes this week. Claimants should expect to see a VDOL envelope with instructions and a return envelope to mail back the 1099-G document they were mailed VDOL, even if it is believed to have accurate information. The Department is verifying and validating claimant information to reissue accurate VDOL 1099-G forms to all 2020 unemployment insurance claimants.

“I would again like to extend my sincerest apology to those who are impacted by this incident and reinforce that the Department of Labor remains committed to ensuring its processes are of the highest quality and that the information we are entrusted with is safe and secure,” said Commissioner of Labor Michael Harrington. “With that in mind, we will continue to review and improve our procedures as we work to regain the public’s trust.”

Image courtesy of state of Vermont

One thought on “Cyber-insurance covers est. $7 mil loss from state’s 1099 goof

  1. What VT DOL and VT DOT have failed to advise taxpayers of is the greatly expanded and free IRS program that allows any taxpayer to request a 6-digit IP PIN from the IRS which must be used on your 2020 tax return or it will be rejected when e-filed with the IRS. The process is easy and takes about 10 minutes. So anyone who may have obtained your personal identity information will not be able to file a bogus tax return in your name since they do not know this number.

    Unfortunately, in spite of me several days ago telling my rep, the DOT commissioner’s office and the author of the Digger articles on this problem, there is still no mention of this simple thing that one can do to protect their tax returns in today’s announcement or on their websites.

    BTW, the use of the term “data breach” is misleading. This event was NOT a breach which implies that there was a break-in to the system from an outside entity. It was a self-inflicted internal error, an “inadvertent disclosure” as stated in today’ notice.

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