Proactive Risk Management for Emerging Privacy Challenges 

Non-breach privacy risks are quickly becoming one of the most significant challenges for organizations across industries. Unlike traditional data breaches, these exposures arise from everyday business practices, such as website tracking pixels and poorly designed consent mechanisms, which plaintiffs’ attorneys are increasingly using as the basis for litigation. 

These claims now rival ransomware in terms of frequency and financial impact. The legal system is still adapting, insurance carriers are grappling with modeling losses, and organizations must keep pace in real time. 

This article, together with its companion webinar, examines the evolving landscape through discussion with a distinguished panel of experts from Woodruff Sawyer, Crum & Forster, and Wood, Smith, Henning & Berman, LLP. The panel provided in-depth insights regarding litigation trends, governance best practices, insurance considerations, and key priorities that companies should address in 2025. 

 You can also watch the complete webinar below, segmented by topic for easy reference: 

Current Threat Landscape & Litigation Trends 

Privacy litigation is accelerating. Class actions and mass arbitrations are being filed across the country, often under state privacy statutes, federal unfair trade practice laws, or healthcare-specific regulations. The result is a flood of cases targeting companies that may never have thought of themselves as privacy defendants. 

Plaintiffs’ attorneys are using increasingly aggressive tactics, such as using screenshots of company websites to demonstrate undisclosed data collection. Even simple tools like pixels, beacons, or trackers switched on by marketing teams are portrayed in complaints as invasive “big brother” surveillance. These allegations resonate with courts and juries because they suggest intentional overreach rather than accidental exposure. 

As David Anderson explained, “Claims frequency and severity within cyber insurance policies, specifically around privacy litigation, continue to increase.” Losses are rising across industries, creating a tougher insurance market and a more demanding underwriting environment. 

The exposure is not limited to healthcare or financial services, though those remain prime targets. Any company with a public-facing website or customer portal is potentially at risk if it collects, even inadvertently, visitor data without clear consent. Violet Sullivan captured a frequent company misstep: “The most common failure point is not getting legal and marketing in the same room.” 

Risk Identification Concepts for Privacy Risk Management 

Many organizations struggle to answer the most basic questions about their data practices. What are we collecting? Why are we collecting it? Who has access to it? Which vendors are involved? Without this visibility, companies are blindsided by claims that their website or mobile app is harvesting information without disclosure. In some cases, they are equally surprised to learn that an outside web developer or third-party vendor introduced tracking technology that violates state statutes. 

Practical measures such as creating a full data inventory, scanning websites for tracking technologies, and implementing change management processes can dramatically reduce these risks. Just as IT teams routinely test for external vulnerabilities, organizations now have tools to map data collection on every page of a site and flag high-risk practices before plaintiffs’ attorneys do. 

Chris Seusing stressed the importance of proactive inquiry: “Half the company doesn’t even realize what’s being collected. Just asking the right questions of your vendors and internal teams can surface risks before they escalate into litigation.” 

The rise of state-level privacy laws compounds the challenge. With no federal statute in place, companies must comply with a growing patchwork of state rules. Even when statutes differ, lawsuits are still being filed nationwide, often shoehorning claims into broader laws. 

The Next Wave: AI & Chatbot Exposures 

While pixels and trackers dominate today’s litigation, the panel underscored that AI-driven technologies are emerging as the next frontier. Companies that use AI chatbots or large language models (LLMs) for customer service, marketing, or internal workflows may be collecting and processing personal data without disclosing it to users. Plaintiffs’ attorneys are beginning to test claims in this area, and regulators are already responding. 

California recently updated its privacy law to incorporate AI, and other states are likely to follow. If data is collected and processed through an AI system to generate outputs affecting consumers or employees, the risk of litigation increases, especially if the AI system makes binding commitments or misrepresents information. The consequences can be significant. One chatbot incident in the travel industry led to a binding customer commitment that had to be honored. As Violet Sullivan noted, the damages risk is broader than statutory penalties. Companies may be held liable for chatbot “promises” that courts enforce as contractual obligations. 

This underscores a key theme from the discussion: privacy litigation evolves quickly. What was rare two years ago is now commonplace, and new technologies are already creating fresh exposures. 

Insurance Trends and Coverage Considerations 

Cyber insurance policies remain inconsistent in how they address non-breach privacy risks. Some provide affirmative coverage for wrongful collection, video tracking, or biometric claims. Others are silent or exclude these exposures altogether.  

The uncertainty makes specialized guidance essential. Generic brokers may not flag the nuances that determine whether a policy will respond to a claim. Carriers differ not only in coverage terms but also in the services bundled with a policy, which can include privacy workshops, scanning tools, tabletop exercises, and discounted technology solutions. These services often go underused, yet they can supplement compliance budgets and provide valuable defensibility. Policyholders should always ask what services are available and how they can be leveraged. Anderson emphasizes the importance of strategic decision-making: “You get what you pay for in coverage. You get what you pay for from the broker you work with, and you get what you pay for from the experts you engage.” 

Security Concepts That Are Leading Cyber Risk Discussion in 2025 

Beyond privacy litigation, several broader themes are shaping the cyber risk conversation in 2025. 

Governance and culture: Organizations must break down silos. Effective risk management requires legal, marketing, IT, HR, and compliance leaders to share responsibility for privacy and security practices. 

Supply chain dependencies: Vendors and subcontractors can introduce significant liabilities, as seen in recent airline outages and high-profile technology failures. Regulators and insurers now expect companies to map and manage their third- and fourth-party risk. 

Mergers and acquisitions: Acquiring organizations may inherit legacy vulnerabilities or shadow IT from smaller entities. Without thorough due diligence, these gaps can undermine an otherwise secure environment. 

Regulatory reach: Even if a company is headquartered in one state, collecting information from residents in other jurisdictions may subject it to additional privacy statutes. Companies must align their compliance practices with the locations of their customers and employees, not just where they operate. 

Critical Underwriting Areas of Focus 

Insurers are raising the bar for coverage. Core controls such as multi-factor authentication (MFA), endpoint detection and response (EDR), and tested backups are now baseline requirements. Employee training, phishing simulations, and patch management processes are also under scrutiny. As Sullivan explained, “MFA, EDR, and backups aren’t just technical requirements—they’re foundational to whether or not you can even rebuild after an attack.” 

Underwriters are also examining technical debt. Outdated operating systems, unsupported software, or unpatched servers can result in exclusions or reduced coverage. Organizations must be prepared to explain why legacy systems remain in place and how they are protected. 

Coverage Pitfalls to Avoid 

Despite the progress in cyber insurance, several exclusions are becoming more common: 

• Unsupported software exclusions may deny coverage for claims tied to outdated systems unless the organization can demonstrate compensating controls. 
• Failure to maintain security posture clauses may invalidate coverage if practices lapse after the policy is bound. 
• Systemic or widespread event exclusions can restrict coverage for reliance on major vendors, from cloud hosting providers to DNS services. 
• Patch-related exclusions may scale down coverage if vulnerabilities are not addressed within 30, 90, or 180 days. 

The CrowdStrike outage provided a recent example of ripple effects across industries, reinforcing why organizations must examine systemic event language carefully. 

Biometric data, wrongful collection, and failure-to-delete exclusions also vary significantly across policies. Companies collecting sensitive information must confirm that their policies provide adequate protection. 

Takeaways

Non-breach privacy risks are no longer emerging; they are here, reshaping the legal, regulatory, and insurance landscape. Organizations that want to stay ahead should consider taking these steps: 

• Build visibility: Maintain a data and asset inventory to understand what is collected, why it is collected, and who has access to it. 
• Strengthen governance: Align marketing, legal, IT, and compliance teams to ensure consent mechanisms, cookie banners, and disclosures meet regulatory standards. 
• Use your insurance services: Leverage privacy scans, tabletop exercises, and training resources that come with your policy to supplement internal budgets. 
• Review vendor contracts: Ensure responsibility for privacy violations is clearly allocated to third parties that collect or process data. 
• Evaluate coverage exclusions: Scrutinize policies for gaps in wrongful collection, biometrics, or systemic event language. 
• Engage stakeholders early: Bring the CFO, general counsel, CISO, and other leaders into renewal discussions to align expectations and ensure adequate protection. 

Organizations must take a hard look at their vendor contracts and data practices, understanding the importance of each policy and using it proactively. Remember that insurance decisions are not just about premiums; they are about aligning the right experts, brokers, and stakeholders to make informed choices. Together, these perspectives provide a roadmap for companies seeking to mitigate privacy risks, strengthen governance, and secure meaningful coverage in an increasingly complex environment.