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PRIVACY AND CONFIDENTIALITY ISSUES - LIMITS
ON
ACCESS AND USE OF INFORMATION
PREFACE
The ideas expressed in this
paper should not be considered as legal advice that might apply in any
particular jurisdiction, claim situation, or lawsuit.
I.
THE INSURANCE COMPANY'S DUTY TO INVESTIGATE
A.
Statutory Requirements
Many states have statutes
which require insurers to investigate claims. For example, under
Florida Statutes, §626.9541(l)(i)(3), it is an unfair claim practice
for an insurer to fail to adopt and implement standards for the proper
investigation of claims. Also, under §626.9541(l)(i)(3)(d), it
is an unfair claim practice for an insurer in Florida to deny claims
“without conducting reasonable investigations based upon available
information...” That duty is also made apparent by Florida's
reservation of rights statute, §627.426(1)(c), which states that the
insurer does not waive any policy provision or defense
by “...investigating any loss or claim under any policy...”
Another example of the insurer's duty to investigate can be found
in California's Insurance Code §790.03(h)(3), which requires an
insurer to adopt and implement standards for the prompt investigation
and processing of claims. See also, Pennsylvania Statutes 40 P.S.
§ 1171.5(a)(10)(iii) and Texas Statues, V.A.T.S., Insurance Code, Art.
21.21-2 Section 2(B)(3).
With the proliferation
of fraudulent claims and the desire of legislatures to curb premium
increases needed to pay exaggerated and fraudulent claims, many states
have also mandated the creation of anti-fraud units within insurance
companies. Typically, such units are statutorily required to investigate
suspicious claims of all types. For example, Florida Statutes,
§626.9891(l), requires insurers with a certain premium volume to
“(a) establish and maintain a unit or division within the company
to investigate possible fraudulent claims by insureds or by persons
making claims for services or repairs against policies held by insureds;
or (b) contract with others to investigate possible fraudulent claims
for services or repairs against policies held by insureds.”
B. Case Law Requirements
In addition to the statutory
duty to investigate claims, the case law in many states indicates that
an insurer who fails to promptly and thoroughly investigate a claim
may be charged with bad faith. See, for example: Beckman v.
Safeco Ins. Co., 691 F.2d 898 (insurer has duty to conduct a reasonable
investigation); Davy v. Public National Ins. Co., 5 Cal. Rptr.
488 (failure to investigate may evidence bad faith); American Fidelity
& Casualty Co. v. Greyhound Corp., 258 F.2d 709 (5th
Cir. (Fla.) 1958)(insurance company's negligence in handling claim,
by not investigating and evaluating it, rendered company liable for
excess judgment); Kohlstedt v. Farm Bureau Mutual Ins. Co. 139
N.W. 2d 184 (Iowa 1965)(insurer has duty to conduct good faith investigation
of all aspects of case); Commercial Union Ins. Co. v. Liberty Mutual
Ins. Co., 357 N.W. 2d 861 (Mich. Ct. App. 1984) (definition of bad
faith includes insurer's failure to properly investigate claim);
and Radio Taxi Service, Inc. v. Lincoln Mutual Ins. Co., 157
A.2d 319 (N.J. 1960)(reasonably diligent effort must be made to ascertain
facts upon which good faith judgment as to settlement can be formulated).
C. Contractual Obligations
The contractual rights
and duties of the insurer and its insured are specified in the policy
language. Generally, policies require an insured to cooperate
with the insurer's efforts to investigate any first-party claim,
but do not specifically require the insurer to investigate that claim.
That is, the insurer may waive its right to investigate and simply pay
the insured's claim.
However, for third-party
liability claims, the insurer typically has a duty to defend its insured,
which generally requires the insurer to investigate the claim made against
its insured. An insurer's failure to reasonably investigate
and timely pay or settle such a claim may give rise to an excess or
bad faith judgment against the liability insurer.
D. Other Reasons for
Investigating
According to the most
recent report published by Conning & Company, a Hartford, Connecticut
insurance research company, fraud cost the entire insurance industry
about $120 billion in 1995. That same research company indicated
that the extent of property and casualty insurance fraud alone reached
$21 billion in 1996. Such alarmingly high losses due to insurance
fraud have prompted insurance companies to more vigorously investigate
this growing burden on the industry and society as a whole.
Since insurance fraud
costs the industry billions of dollars every year, the failure to thoroughly
investigate claims can facilitate even greater amounts of fraud and,
ultimately, threaten a company's viability. The diligent
investigation of claims should be undertaken to protect the company's
viability as well as its insureds. Furthermore, society as a whole
should benefit from the reduction in fraud that can be brought
about by thoroughly and properly investigating suspicious claims.
II.
INVESTIGATIVE RISKS TO AVOID
Whenever an insurance
company executes a plan of action for the investigation of a claim,
the company must operate within the legal environment in which that
claim is pending. In today's legal environment, an insurance
company and its representatives should consider and typically balance
their right and duty to investigate
against the insured's or third-party's right to privacy.
One way an insurance
company can balance these two competing interests is by ensuring that
its investigations of claims involve only the discovery of “material”
facts and circumstances. For an excellent discussion of what a
“material” fact is, see Application Misrepresentation
and Concealment in the Property Insurance Policy . . . The Elusive Elements
of the Defense, by Clayton H. Farnham, THE FORUM, Vol. XX,
Number 2, Winter 1985. Otherwise, a suit for invasion of privacy
and a variety of other causes of action may be asserted against the
insurer.
A. Invasion Of Privacy
Courts generally recognize
a cause of action for invasion of privacy. Mark v. Seattle
Times, 635 P.2d 1081 (Wash. 1981). The common law tort of
invasion of privacy actually consists of four distinct kinds of actions:
(1) Unreasonable intrusion upon the plaintiff's seclusion or solitude
or into his private affairs; (2) Public disclosure of private facts
about the plaintiff; (3) Publicity which places the plaintiff in a false
light in the public eye; (4) Appropriation, for the defendant's advantage,
of the plaintiff's name or likeness. See Industrial Found.
of the S. v. Texas Indus. Accident Board., 540 S.W.2d 668, 682 (Tex.1976),
cert. denied, 430 U.S. 931, 97 S.Ct. 1550, 51 L.Ed.2d 774 (1977). See
also, Mark v. King Broadcasting Co., 27 Wash.App. 344, 618 P.2d
512 (1980).
1. Unreasonable
Intrusion Upon The Seclusion Of Another
This tort occurs when one
person intentionally intrudes, physically or otherwise, upon the solitude
or seclusion of another or his private affairs or concerns. The person
who engages in the intrusive behavior is subject to liability to the
other for invasion of his privacy if the intrusion would be highly offensive
to a reasonable person. Restatement of Torts, 2nd,
§652A.
Unlike other privacy
torts, this cause of action does not require disclosure of the
private information to third parties. However, there is no liability
if the information in question is a public record or if the activity
occurred in a public place where there is no reasonable expectation
of privacy. Forster v. Manchester, 189 A.2d 147 (Pa. 1963).
Some courts have required
that the intrusion be “substantial” in order for the conduct
to be actionable. In Chicarella v. Passant, 494 A.2d 1109 (Pa.
Super.1985), an accident victim alleged that an insurance company and
its employees intentionally and substantially intruded upon his private
affairs by obtaining hospital records of his injuries. Rejecting
this argument, the court held that a description of the plaintiff's
medical treatment did not constitute a substantial intrusion and that
the information in the medical records would not cause mental suffering,
shame, or humiliation to a person of ordinary sensibilities.
Regardless of the nature of
the information collected, the insurance company should also make sure
that it collects information by lawful means. For example, unauthorized
wiretaps, in addition to being illegal under the Electronic Communications
Privacy Act, will support a cause of action for unreasonable intrusion.
See Rhodes v. Graham, 37 S.W. 2d 46 (Ky. 1931).
2. Publicity Given
To Private Life
A cause of action for
invasion of privacy may be pursued where one publicizes a matter about
the private life of another if the matter publicized is one that:
(a) would be highly offensive to a reasonable person; and (b) is not
of legitimate concern to the public. Restatement of Torts, 2nd,
§652D. Case law generally holds that it is not enough that the
information is communicated to one or even several people to support
this cause of action. Instead, the matter in question must be communicated
to enough persons so that it “ ...must be regarded as substantially
certain to become one of public knowledge.” Tureen v. Equifax,
571 F.2d 411 (8th Cir. 1978).
In that case, Equifax supplied
a life and health underwriting history report to the plaintiff's
health insurer, at the insurer's request. The court held that
Equifax's disclosure to the insurer, without further disclosure,
was not sufficient publication to support a cause of action for invasion
of privacy.
This cause of action will
also not be viable where the matter disclosed is one of legitimate public
interest. In Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 95
S.Ct. 1029 (1975), the United States Supreme Court held that disclosure
of the identity of a rape victim did not support a common law claim
for publicity given to the private life of another, because news relating
to crime is a matter of legitimate public interest. However, most states
now have “rape shield” laws, which prohibit the disclosure
of the identity of rape victims.
3.
Publicity Placing A Person In A False Light
Publicizing a matter
about another person that places that person before the public in a
false light is actionable if: (a) the false light in which the plaintiff
is placed would be highly offensive to a reasonable person; and (b)
the actor had knowledge of or acted in reckless disregard of the falsity
of the publicized matter and the false light in which the other would
be placed. Restatement of Torts, 2nd §652E.
See also, Larsen v. Philadelphia Newspapers, Inc., 543 A.2nd
1181 (Pa.Super 1988) quoting § 652E as authority.
This theory has been
used to sue information providers who supply erroneous information.
For example, in Dun & Bradstreet v. Greenmoss Bldrs., 472
U.S. 749,105 S.Ct. 2939 (1985), D&B disclosed a credit report with
inaccurate information in it, which placed Greenmoss, the subject of
the report, in a false light. D&B defended the invasion of
privacy claim by arguing that the credit report was a matter of public
importance and that the plaintiff should, therefore, be required to
show “actual malice” in order to prevail. The Court
rejected that argument and Mr. Greenmoss prevailed in the case.
It should also be noted
that this cause of action is against the provider of the information,
not the recipient. Therefore, it is incumbent upon the information
service provider to take reasonable steps to make sure that information
supplied is accurate. That is, an insurance company should take
reasonable steps to avoid providing inaccurate information to others.
4.
Appropriation Of Name Or Likeness
Under this theory, one
who appropriates the name or likeness of another to his own use or benefit
is subject to liability to the other for invasion of his privacy.
Restatement of Torts, 2nd §652C. This tort action
is typically asserted in cases involving the use of photographs and
audio of celebrities for product endorsements without their knowledge
or consent. More egregious examples include posting nude photos
of people or models on the Internet.
Because this tort is
frequently used by celebrities who are “public figures”,
the plaintiff often has a high burden to meet. That is, much of
what “public figures” do and say is considered to be a matter
of legitimate public interest. A claim for invasion of privacy
will not succeed if the disclosure involves a matter of legitimate public
interest. Carson v. Baskin, 30 So.2d 635 (Fla. 1947).
A few years ago, radio
host Howard Stern ran for governor of New York. An Internet provider,
Delphi, used Stern's photograph in an advertisement without his
permission, and Stern sued. However, Delphi had used Stern's
photograph specifically to advertise an online bulletin board which
was established to debate Stern's candidacy. The court found that
although Delphi had used Stern's likeness without his permission,
the use was permissible because his candidacy was a matter of
public interest. Stern v. Delphi Internet Services Corp.,
626 N.Y.S.2d 694 (Sup. Ct. 1995).
For all types of invasion
of privacy, it should be noted that the elements and exact requirements
for bringing this suit vary among the states. For example, in
Florida, a cause of action for invasion of privacy will normally only
lie if the information at issue is published to the world at large.
Publication to one or a few people will generally not support this cause
of action in Florida. See Santiesteban v. Goodyear Tire, Inc.,
306 F.2d 9 (5th Cir. 1962). Other states are less restrictive
than Florida.
In Borquez v. Ozer,
423 P.2d 166 (Colo. Ct. App. Div. I 1995), the plaintiff, Mr.
Borquez, was a lawyer in the Ozer firm. Mr. Borquez was gay, and
when he learned that his companion was HIV positive, disclosed both
his homosexuality and his need for testing to a partner in the firm.
Mr. Borquez asked that law partner to keep the information confidential,
but the partner made no promise to do so. Within a few days, Borquez's
situation became common knowledge throughout the firm.
Mr. Borquez sued for
invasion of privacy, and won a jury verdict which the Court of Appeals
affirmed. The Colorado Court of Appeals held that the disclosure
of this “private matter” would be highly objectionable to
a reasonable person because a strong stigma still attaches to both homosexuality
and AIDS. The court also held that the scope of the disclosure
or publication has to be measured by the sensitive nature of the information
and the relationship of the parties. Unlike the case law in Florida,
the Colorado court held that publication to the world at large is not
required where the information is of a highly personal nature.
In Borquez's case, the information was found to be so personal
that dissemination to his co-workers, who did not have a need to know,
was held to be sufficient publication for the invasion of privacy claim.
Courts have required
greater degrees of publication to support a claim for invasion of privacy
where the information is of a less personal nature. For example,
a court has held that the disclosure to a small group of co-workers
that a dismissed worker had been to a “career counselor”
prior to discharge is not a sufficient publication to support a claim
for invasion of privacy. Croston v. Kamauf, 932 F.Supp.
676 (D. Md. 1996). Also, a hospital counseling center's
disclosure that one of the hospital's employees had been in counseling
did not violate that employee's right to privacy. Hanson
v. Hancock County Mem. Hosp., 938 F.Supp. 1419 (N.D. Iowa 1996).
These cases indicate
that the degree of publication necessary to constitute an invasion of
privacy is a function of the nature of the information disclosed.
Therefore, insurance companies, like others, should consider exercising
additional caution when handling claims that involve highly personal
information, such as medical and mental health information.
Another growing problem
is “Identity Theft.” Identity theft occurs when someone
acquires key pieces of someone's identifying information and impersonates
that person when committing various crimes in that person's name.
The basic information sought by identity thieves is a person's
name, address, phone number, social security number, driver's
license number, and credit card numbers. These thieves also seek
telephone calling card numbers, birth certificates and passports.
By obtaining this type of information, the identity thief is able to
commit various types of fraud; such as going on spending sprees using
the victims name, opening new financial accounts, taking over existing
accounts, diverting mail, and applying for loans, credit cards, social
benefits, etc.
Identity theft can leave
the victim with a poor credit rating or bad reputation that may take
years to correct. With the increased use of the internet, more
information than ever is available to the savvy identity thief.
In order to protect electronic transactions, more consumers are using
various types of digital signature protection and other encryption methods.
Congress has passed the Identity Theft and Assumption Deterrence Act,
codified at 18 U.S.C. § 1028. This act makes it a felony to knowingly
use the identification of another person with the intention of committing
any unlawful activity under federal or state law.
B. Trespass
Trespass is the entering
onto the property of another without permission or legal authority.
Prosser on Torts, 4th Ed §13. To avoid potential
liability for trespass, insurers and their representatives may include
policy language to allow inspections of any insured's property,
and obtain written permission or consent forms from the property owners
prior to entry onto the property. Also, when surveillance activity
is undertaken, it should be conducted from public places to avoid claims
of trespass.
C. Defamation
Defamation is any written
or oral communication about another which would expose the subject of
those statements to hatred, contempt, ridicule, or which causes or tends
to cause any person to be shunned or avoided. See, for example,
Layne v. Tribune Co., 146 So. 234 (Fla. 1933). When conducting
interviews during an investigation, insurance company representatives
should take care to avoid making statements that could be considered
as derogatory remarks about the insured or any other person. In
Nebraska, in order to have a cause of action for defamation, there must
be: (1) a false and defamatory statement concerning the plaintiff; (2)
an unprivileged publication to a third party; (3) fault amounting to
at least negligence on the part of the publisher; and (4) either actionability
of the statement irrespective of special harm or the existence of special
harm caused by the publication. Norris v. Hathaway, 5 Neb.App.
544, 547‑48, 561 N.W.2d 583, 585 (1997). Accord, 50 Am.Jur.2d
Libel and Slander § 21 (1995); Restatement (Second) of Torts
§ 558 (1977).
D. Breach of Contract
Where the insurer has
a duty to defend or investigate a claim under its policy, and
fails to do so in a reasonable manner, its insured may bring a breach
of contract action against it. Similarly, a lienholder or mortgagee
may assert such an action against the insurer. A failure to pay
because of the lack of an appropriate investigation by the insurer is
a claim many plaintiffs have alleged. An arguable basis for that
inappropriate investigation may be the insurer's invasion of the
insured's or third-party claimant's privacy.
E. Bad Faith
Creative counsel for
claimants look for additional grounds for asserting “bad faith”
claims. In many states, bad faith claims can arise from a first-party
claim or a third-party liability claim. A typical allegation is
that the insurer did not act fairly towards its insured. The creative
claimant's attorney will argue that any invasion of privacy amounts
to a failure to act fairly towards its insured or is an unfair claims
settlement practice that amounts to “bad faith”.
F. Infliction
of Emotional Distress
Although frequently
pled, this cause of action rarely succeeds. In order to prevail
on a claim for infliction of emotional distress, the plaintiff must
typically show that the defendant engaged in conduct so extreme and
outrageous as to go beyond all bounds of decency, and which is regarded
as atrocious and utterly intolerable in a civilized society. Mere
rudeness or lack of courtesy will not support a cause of action for
emotional distress. Mundy v. Southern Bell Tel. & Tel.
Co., 676 F.2d 503 (11th Cir. 1982). Also, many
cases require that the plaintiff sustain some actual physical impact
or bodily injury from the alleged tortious conduct.
The Florida Supreme
Court, in Time Ins. Co. v. Burger, 712 So.2d 389, 393 (Fla. 1998),
held that in order to recover damages for emotional distress, the plaintiff
must prove: (1) that the bad-faith conduct resulted in the insured's
failure to receive necessary or timely health care; (2) that,
based upon a reasonable medical probability, this failure caused or
aggravated the insured's medical or psychiatric condition; and
(3) that the insured suffered mental distress related to the condition
or the aggravation of the condition. In order for the insured
to recover, these allegations must be substantiated by the testimony
of a qualified health care provider. Prior to Burger and
the enactment of F.S.A. § 624.155, emotional distress damages were generally
unavailable absent physical contact arising out of the conduct of an
insurer.
G.
Interference with Business Relationship
To sustain a cause of
action for interference with a business relationship, the plaintiff
must establish (1) the existence of a business relationship, which need
not be evidenced by an enforceable contract; (2) knowledge of the relationship
on the part of the defendant; (3) intentional and unjustified interference
with the relationship by the defendant; and (4) damage to the plaintiff
as a result of the breach of the relationship. G.M. Brod & Co.
v. U.S. Home Corp., 757 F.2d 1526 (11th Cir. 1985).
This cause of action may arise where an investigator or adjuster inappropriately
interviews a claimant's business associates, customers, or clients.
H.
Class Action Litigation
Class action suits are
governed by Rule 23 of the Federal Rules of Civil Procedure. A
class action suit can be maintained if the following conditions are
met: (1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3) the
claims or defenses of the representative parties are typical of the
claims and defenses of the class; and (4) the representative parties
will fairly and adequately protect the interest of the class.
There has been a tremendous growth in class action lawsuits in recent
years, due in part to the potential for large judgments.
For example, in Avery
v. State Farm Mutual Automobile Ins. Co., 1999 WL 955543 (Ill.Cir.
1999) , the jury awarded the class of plaintiffs $243,740,000.00 for
class-wide specification/direct damages, $212,440,000.00 for class-wide
installation damages plus interest of $456,180.00. These large
sums were only for Count 1 of the complaint. Counts II and II
were questions of law decided by the judge. The court awarded
an additional $130,000,000.00 for violating the Consumer Fraud
Act of Illinois, and also awarded punitive damages in the amount of
$600,000,000.00. The total damages awarded came to $1,186,636,180.00.
The case involved State Farm's requiring the use of non-OEM parts.
An example of an activity
that may lead to class action type liability is the routine obtaining
of credit reports without first getting a release. If an insurance
company engages in the repeated or regular practice of conducting improper
investigations, including, for example, the invasion of persons'
privacy, the insurance company could become the target of a class action
suit, which could be extremely expensive to defend and settle.
Therefore, it is important that an insurance company conduct investigations
with an awareness of this risk.
III.
PROFESSIONAL INVESTIGATORS
A. Private Investigators
1.
Licensing requirements
 An
insurer's hiring of a private investigator is not prohibited by state
insurance codes. However, state statutes do establish regulations
for the licensing of private investigators. See, for example,
Florida Statutes, §493.6100; Nebraska Statutes, § 71-3202; Pennsylvania
Statutes, 22 P.S. § 13; and Texas Statutes, Vernon's Ann.Civ.St. Art.
4413(29bb) Sec. 13(a). When hiring private investigators, insurance
companies should determine that the private investigators retained are
properly licensed in each jurisdiction where they will be working.
It could happen that a private investigator licensed in one state may
cross over state lines and operate illegally.
2.
Surveillance/Investigation by Audio, Video, and Electronic Means
In an effort to detect
and defend against the increasing volume of fraudulent claims, insurance
companies frequently investigate suspicious claims by having investigators
engage in video, audio, and electronic surveillance of claimants.
Employers, banks, merchants and even amusement companies have similarly
responded to their losses from external and internal fraud and theft.
Despite the need to
vigorously pursue investigations of suspicious claims, investigators
must limit themselves to “reasonable” means of surveillance,
or be subject to liability for the invasion of an individual claimant's
right to privacy. That usually involves the balancing of the insurer's
right and duty to investigate the validity of claims filed against the
claimant's right to privacy.
In the context of claim
investigations involving surveillance, claimants may assert a claim
or cause of action against the insurance company and its private investigator
for unreasonably intruding upon their solitude or seclusion. In
determining whether to sustain such a claim for wrongful intrusion,
the courts question: (1) whether there was a legitimate purpose
for the investigation that led to the intrusion; and (2) whether
the means employed in conducting the investigation were reasonable.
Courts have uniformly
held that an individual who files a personal or bodily injury claim
should expect that the insurance company will conduct a reasonable inquiry
and investigation to determine the validity of the claim. Pinkerton
Nat'l. Detective Agency, Inc. v. Stevens, 132 S.E.2d 119 (Ga.
1963). Therefore, when a claimant files a personal or bodily injury
claim, that claimant's interest in privacy is sacrificed to the
extent of a “reasonable” investigation. However, if the
insurance company conducts the investigation in an offensive, objectionable,
or unreasonable manner, it will be liable for wrongful intrusion even
if it had a legitimate purpose for the investigation.
With regard to the means
employed in conducting the investigation, the insurance company will
not incur liability for invasion of privacy based on wrongful intrusion
if the company conducted the surveillance in a “reasonable”
manner. As a general rule, surveillance of a claimant in a public
place and from a public vantage point in which a passerby could have
made the same observations does not constitute an invasion of privacy
if conducted in a reasonable and non-obtrusive manner. In Forster
v. Manchester, 189 A.2d 147 (Pa. 1963) (1963), a private investigator
took motion pictures of the plaintiff driving her car on public thoroughfares.
The court held that the motion pictures were a reasonable means of procuring
evidence and did not constitute an invasion of privacy because the plaintiff
was exposed to public observation. Id. at 197.
In McLain v. Boise
Cascade Corp., 533 P.2d 343 (Or. 1975), an investigator trespassed
upon the border of the claimant's property to obtain a better
position to videotape the claimant during day light hours. In
affirming the dismissal of the claim, the Oregon Supreme Court overlooked
the trespass because the claimant was unaware that he was being videotaped
and conceded that the activities filmed could have been observed by
his neighbors or a passenger watching from an adjacent road. Therefore,
the Court found that the investigator's conduct could not constitute
an unreasonable surveillance highly offensive to a reasonable person.
But see Alabama Electric Cooperative, Inc. v. Partridge, 225
So.2d 848 (Ala. 1969), where the jury found that hiding in an abandoned
house near the claimant's home and using high-powered binoculars
to videotape the claimant's family moving about their home was
unreasonable.
In Unrah v. Truck
Insurance Exchange, 498 P.2d 1063 (Cal. 1972), the California Supreme
Court determined that the insurer's investigators went too far
and held the insurer liable for “additional injuries” caused
by the investigation. In Unrah, the plaintiff was being
investigated for workers' compensation fraud. The investigator
befriended the plaintiff, took her to Disneyland, and engaged in physically
demanding activities while at the park. A second investigator
videotaped the events. When the videotape was shown to the plaintiff,
she suffered a mental breakdown. This type of activity was held
to go beyond the bounds of a reasonable investigation.
In addition, an action
for invasion of privacy or wrongful intrusion does not result when an
investigator obtains information about the claimant from public records
or interviews acquaintances or friends of the claimant. To the
extent that third parties are willing to talk to investigators, the
courts will not find a violation because the claimant made the information
public when he/she voluntarily revealed it to others and assumed the
risk that a friend or acquaintance in whom the claimant confided might
breach the confidence. Schupmann v. Empire Fire & Marine
Ins., 689 S.W.2d 101 (Mo. App. 1985).
However, the revelation
of too much information, especially unsupported allegations or innuendo,
can lead to the imposition of liability on both the insurer and its
investigator for invasion of privacy. For example, in Republic
Ins. Co. v. Hires, 810 P.2d 790 (Nev. 1991), the insurer's
investigator conducted an intense investigation of a burglary loss claimant's
neighbors, asking if they had any information that the claimant staged
the burglary and if they were aware that the claimant's wife was
involved in an affair with the neighbor who discovered the burglary.
If an insurer or its
private investigator conducts an investigation in a malicious manner
that is not reasonably limited to obtaining information needed for analyzing
or defending a claim, or deliberately conducts an investigation so as
to intentionally torment or frighten the subject of the investigation,
the investigator and the insurer may be liable for wrongful intrusion.
In this area, insurance companies should be aware of two types of investigations
that generally give rise to a sustainable cause of action for wrongful
intrusion, namely: (a) listening to or viewing, with or without
the assistance of electronic devices, the purely private affairs of
the claimant that could not be readily ascertained by the casual observer;
and (b) obtrusive surveillance designed to make the claimant and the
public aware of the surveillance, commonly referred to as “rough
shadowing”.
With regard to electronic
surveillance, insurance companies and investigators must be aware of
federal and state wiretapping statutes that apply to all kinds of recording
of the voice, such as tape-recording, videotaping, and using sound on
video. The Electronic Communications Privacy Act, 18 U.S.C. §2511(1),
also known as the federal wiretapping statute, prohibits warrant-less
wiretapping unless one of the parties to the conversation consents and
the recording is not being made for the purpose of committing any criminal
act in violation of the Constitution or laws of the United States or
any state. See United States v. Wright, 573 F.2d 681 (1978).
In addition, most states
have statutes restricting the interception of “wire communications”.
For example, the California Privacy Act makes it unlawful to eavesdrop
or record a confidential communication “intentionally or without
the consent of all parties by means of any electronic amplifying or
recording device”. West's Ann.Cal.Penal Code 15 §631
- 632. See also, Coulter v. Bank of America Nat'l. Trust
& Sav. Assoc., 33 Cal. Rptr. 2d 766 (1994).
In that case, Christopher
G. Coulter sued Bank of America, where he worked as an automatic teller
machine mechanic. Anticipating litigation for sexual harassment
that he would later file, Mr. Coulter secretly recorded more than 160
face-to-face and telephone conversations with various bank employees,
supervisors, and officers. When Mr. Coulter filed his suit for
sexual harassment, the bank and eleven of its employees initiated a
cross-complaint against Mr. Coulter for invasion of privacy and for
violation of the California Privacy Act. In dismissing Mr. Coulter's
lawsuit, the trial court found in favor of the bank and the employees
on their privacy act claim. Rejecting Mr. Coulter's argument
that he never disclosed the tapes to any third party, the California
Appeals Court affirmed the trial court and held that “the statute
is violated simply by the recording of confidential communications without
the consent of all parties; violation does not require disclosure to
a third party”. Id. at 771.
Like California, Florida
has a state statute that limits the scope of surveillance by wiretapping.
Florida Statutes, §934.03, applies to any person, and prohibits the
intentional interception or the intentional use or disclosure of wire,
oral, or electronic communications.
Effective October 1,
1974, the Florida Security of Communications Act was amended to prohibit
a party to a conversation from recording that conversation without the
consent of all parties to the conversation, provided that the conversation
is not public or the intercept is not conducted for the purpose of obtaining
evidence of a criminal act. Florida v. News-Press Publishing
Co., 338 So.2d 1313 (2d DCA 1976). In that case, the 2d DCA
held that tape recordings of conversations obtained without the knowledge
and permission of all parties involved in those conversations were illegal
intercepts because the Florida legislature intended to allow each party
to a conversation an expectation of privacy from interception by the
other party.
Similarly, Pennsylvania
requires consent of all parties to the communication (See 18 Pa.C.S.A.
§ 5704(4)); while in Texas, when one party consents to the recording
of the communication, the recording is permissible. (See V.T.C.A., Penal
Code § 16.02(c)(4).) In both Texas and Pennsylvania, not only
is the person who improperly makes a recording subject to criminal penalties,
but if anyone uses the information gained, with the knowledge it was
illegally obtained, that person can also be subject to criminal sanctions.
Pa.C.S.A. § 5703(3) and V.T.C.A. Penal Code § 16.02(b)(3).
Therefore, if an investigator illegally tapes a conversation and the
insurance company is aware (or even suspects) that the tape was made
illegally, the insurance company representative may be subjected to
criminal sanctions.
With regard to what
is known as “rough shadowing”, the seminal case on
point is Pinkerton National Detective Agency, Inc. v. Stevens,
132 S.E.2d 119 (Ga.App. 1963). In that case, investigators, hired
by an insurance company to determine the extent of injuries suffered
by a bodily injury claimant, shadowed the claimant almost continuously
for nearly four months, peeped and eavesdropped through her windows,
and gave the claimant's neighbors the impression that the claimant
was involved in some wrongful activity. The court held that such
behavior was unreasonable and invaded the claimant's right to
privacy because the surveillance was not intended to acquire information
but to intentionally and maliciously disturb, harass, and injure the
claimant.
3.
Insurer Liability for Private Investigators
Whenever an insurance
company retains a private investigator to assist with the investigation
of a claim, the insurance company may become liable for the torts of
the private investigator. Noble v. Sears, Roebuck & Co.,
33 Cal.App.3d 654 (1979). In order to determine if liability
attaches to an insurer for the tort committed by its private investigator
upon the investigation's subject, one must first determine if
the investigator is an agent of the insurer, or an independent
contractor.
 Generally,
an insurer who entrusts work to an independent contractor is not liable
for the tortious acts or omissions of that contractor. On the
other hand, an insurer who entrusts work to an agent will be liable
for the agent's conduct. See Mahon v. City of Bethlehem,
898 F.Supp. 310 (E.D.Pa. 1995); and Baldassarre v. Butler, 625
A.2d 458 (N.J. 1993).
In determining whether
a private investigator is the agent of an insurance company, courts
will consider whether the insurer had the right to control the performance
of the private investigator's work. King v. Loessin,
572 S.W.2d 87 (Tex, Civ. App. 1978). If the insurer exercised
control over the manner in which the investigator went about
his/her investigation, then the “independence” of the independent
contractor relationship will fall away. For example, see
Pinkerton Nat'l. Detective Agency, Inc. v. Stevens, 132
S.E.2d 119 (1963), where the court held that the subject of the investigation
had an action for invasion of privacy against both the detective agency
and the insurance company.
If, on the other hand,
control over the manner of the investigation remains with the private
investigator, the independent relationship will remain in tact.
For “[I]f the employer is interested only in the results, and
there is left to the party performing such services complete control
over the details as to the method and manner of such performance, then
the relationship of independent contractor exists.” King
v. Loessin, 572 S.W.2d 87, 89 (Tex. Civ. App. 1978); see also, AT&T
v. Winback & Conserve Program, Inc., 42 F.3d 1421 (3d Cir. 1994).
In dealing with privacy
concerns and the hiring of private investigators, insurance companies
will want to make certain that the private investigator's conduct
will not be deemed to establish an agency relationship if, in fact,
the private investigator is acting as an independent contractor.
Likewise, the insurance company will usually want to make certain that
its private investigators comply with appropriate general guidelines
in undertaking their work, while not specifically directing the manner
in which that work is undertaken. By doing so, the prudent insurer
can minimize the chance that it will be held liable for the misconduct
of a private investigator.
B. Special Investigative
Units (SIUs)
Insurance companies
have responded to the increased volume of fraudulent insurance claims
by creating in-house special investigative units (SIUs) as part of their
fraud control programs. Additionally, an ever increasing number
of states have legislatively mandated anti-fraud investigative units.
For example, Florida Statutes, §626.9891, requires that every insurer
admitted to do business in Florida who in the previous calendar year
had $10 million or more in direct premiums shall establish and maintain
a division, either within or outside the company, to investigate possibly
fraudulent claims.
Under the Pennsylvania
Insurance Fraud Prevention Act, 40 P.S. § 3701-101 et seq., the
legislature established a seven member board comprised of the Attorney
General, a representative of the Philadelphia Federal Insurance Fraud
Task Force, four representatives of insurers and one representative
of the average insurance purchaser. This board is responsible for overseeing
all insurance fraud programs throughout the state.
Texas has created a
separate Insurance Fraud Unit within the Texas Department of Insurance
to investigate and manage fraudulent insurance practices. See
V.T.C.A., Insurance Code, Art. 1.10D. Similarly, in Nebraska,
the Director of the Department of Insurance appoints people to serve
in the Insurance Fraud Prevention Division. § 44-6606
State requirements vary
when mandating SIUs. Some states require that the insurance company
be accountable for staffing, for what the SIUs do, and the level of
expertise of SIU personnel. Typically, the personnel in SIU units are
experienced in the investigation of suspicious claims and may have substantial
law enforcement backgrounds.
To protect insurance
companies from potential tort liability for invasion of privacy claims
that can arise from SIU investigations, SIU personnel must take the
same precautions that private investigators and claims personnel do
when handling suspicious claims. That includes conducting a reasonable
investigation in a timely, objective, and open-minded approach.
In addition, insurers may reduce their exposure to claims arising from
SIU investigations by monitoring SIU compliance with company procedures
and claim handling guidelines.
C. Public Sector Investigators
and Public Information
1.
Public Investigators
Conducting a reasonable
and thorough investigation frequently requires that contact be made
with public officials, including police investigators who work for the
public good. However, insurance companies must be careful not
to violate a third-party claimant or insured's right to privacy when
seeking information from public sector investigators.
Regardless of whether
the public sector investigator is a federal, state, county, or municipal
official, there will usually be a restriction upon the public investigator's
ability to assist or cooperate with investigators who are not employed
in the public sector. It may even be a crime for a public investigator
to release certain information, such as that pertaining to an active
or on-going criminal investigation. See, for example, Florida
Statutes, §119.07(3)(b), permitting law enforcement agencies to withhold
information regarding an active criminal investigation, and 18 U.S.C.
§1905, making it a crime for an officer or employee of any federal agency
to release financial information or trade secrets without authorization.
However, once reports become public, public officials are often a valuable
source of information in the investigation of claims to which their
reports pertain.
2.
Public Records
a. Public Records
Defined
Most states have statutorily
defined what public records are. For example, California's definition
is as follows:
“Public records”
includes any writing containing information relating to the conduct
of the public's business prepared, owned, used, or retained by
any state or local agency regardless of physical form or characteristics.
“Public records” in the custody of, or maintained by, the
governor's office means any writing prepared on or after January
6, 1975. California Public Records Act §6252.
Florida, on the other
hand, has a more explicit definition. Florida's statute
states:
“Public records”
means all documents, papers, letters, maps, books, tapes, photographs,
films, sound recordings, data processing software, or other material
regardless of the physical form, characteristics, or means of transmission,
made or received pursuant to law or ordinance or in connection with
the transaction of official business by any agency. F.S.A. § 119.011.
Moreover, Florida's
legislature has expanded the above definition with the following statuatory
language:
If public funds are
expended by an agency defined in § 119.011(2) in payment of dues or
membership contributions to any person, corporation, foundation, trust,
association, group, or other organization, then all the financial, business,
and membership records pertaining to the public agency from which or
on whose behalf the payments are made, of the person, corporation, foundation,
trust, association, group, or organization to whom such payments are
made shall be public records and subject to the provisions of §119.07.
F.S.A. § 119.012.
For a state-by-state listing
of public records Web sites, go to www.ntlaw.com/ state_public_records.htm.
b.
Generally Available Public Records
(1) Electronic
Data Base Information
Currently, personal
information about an individual that is within public records can be
legally collected without notice to or input by an individual insured
or claimant. Examples of public records that are now or soon may
be available from your state, online, include the following: appellate
court records; arrest records; articles of incorporation; bankruptcy
records; civil court indices to lawsuits; corporate status reports;
criminal records; death records; divorce records; FAA records; fictitious
names; hospital liens; judgments; limited partnership records; mechanic's
liens; motor vehicle and driving records; OSHA reports; probate records;
police reports; professional licenses; real estate ownership; SEC reports;
tax liens; UCC indices; voter registration records; watercraft ownership
records; and workers compensation records. As more government
entities maintain public records electronically, and as more public
records are marketed electronically by data base vendors, such information
will become more readily available online.
Those who gather and use electronic
data base information should recognize and respect the privacy interest
that individual insureds and claimants have in personal information
by (1) assessing the impact on the subject's privacy, in deciding
whether to obtain or use personal information; and (2) obtaining and
using only information that could be reasonably expected to support
current or planned activities pertaining to the investigation or analysis
of a pending claim.
(2) Hard-copy
Public Records
Records accessible to
the general public are often an invaluable source of background information
on both claimants and potential witnesses. Furthermore, it is
not necessary for the insurer to obtain an authorization to conduct
a search of public records. Frequently examined public records
are those pertaining to litigation, driving history, and police reports.
Most trial level courts
maintain Plaintiff and Defendant indices which an insurance company
can access to determine whether the claimants have been involved in
prior litigation. These indices can lead to court files containing
information concerning a claimant's past injuries, medical treatment,
financial situation, and other prior losses.
In many states, the
Office of the Secretary of State, Department of Transportation, or Department
of Motor Vehicles will provide a written abstract of prior motor vehicle
convictions, suspensions, and license revocations for any licensed driver
in that state. Those reports provide invaluable information concerning
the claimant's prior driving record.
Police reports also
represent an invaluable source of information. However, sensitive
data is frequently redacted from police reports when they are made public.
Also, care should be taken to follow the proper procedure for obtaining
police reports where there are local requirements for that.
There are many other
forms of “hard copy” public records available for inspection,
ranging from real property ownership to handicapped parking permits,
some or all of which may be needed to investigate a particular claim.
And, if such records are “public” records, there can be
no invasion of privacy claim for the insurer's review of them.
As long as the insurance company uses the public information to assist
it in the analysis or defense of a pending claim, obtaining such information
will usually not result in an allegation of invasion of privacy claims.
However, a more delicate situation arises when an insurance company
investigates the criminal history of an individual.
c. Criminal History
on Adults and Juveniles
(1) An Adult's
Criminal Record
There is no prohibition
against an insurer conducting a courthouse search to obtain public records
of criminal acts by an adult. Most states provide that felony
and misdemeanor convictions which result in a sentence other than supervision
(i.e., probation or incarceration) are available as public record.
There are services available in most states which, for a minimal fee,
will obtain an abstract of prior criminal convictions and certified
copies of the conviction records. Also, there are private data
base companies that collect criminal records that are public record,
and make that information available for a nominal fee.
However, in Westbrook
v. County of Los Angeles, 27 Cal.App. 4th 157 (Cal.App.2
Dist. 1994), a private company that sold criminal background information
was restricted by the court. The company asked the municipal
courts of Los Angeles County to provide a monthly list of every person
against whom criminal charges were pending in the 46 municipal courts.
Even though the information sought was public, the court denied the
company's request on the basis that “while there is no question
the court proceedings should not be conducted in secrecy, the public's
right to information of record is not absolute. Where that right
conflicts with the right of privacy, the justification supporting the
requested disclosure must be balanced against the risk of harm posed
by disclosure.” Id.
Developed by the Federal
Bureau of Investigation, the National Crime Information Center (NCIC)
has a computerized, national law enforcement system that links more
than 4,000 police agencies through the use of over 100 terminals in
the 50 states, Washington D.C., and Canada. The nine basic record
files in the NCIC computer system consist of stolen motor vehicles,
stolen articles, stolen, missing or recovered guns, stolen license plates,
wanted persons, stolen securities, stolen boats, computerized criminal
history, and missing persons. The computerized criminal history
file consists of arrest records going into the F.B.I. primarily from
state and local agencies. Those records contain the complete criminal
history of each individual from arrest through the criminal justice
system process, including court decisions, probation, and incarceration.
The NCIC prohibits use of its data base to non law enforcement personnel
who seek to obtain the criminal history of an individual. Therefore,
if an insurance company seeks information from this data base, directly
or indirectly, to obtain a criminal history on an individual, without
authorization to do so, the insurer may be exposed to liability under
a claim for invasion of privacy.
(2) Juvenile Criminal
Records
In general, juvenile
records information from either law enforcement agencies or court records
is not available to governmental non-criminal justice agencies, private
organizations, the media, or the public. Federal law flatly
prohibits the disclosure of juvenile records held by federal courts
to non-criminal and non-juvenile justice agencies, private employers,
the press, or the public. Department of Justice Regulations prohibit
state and local criminal justice agencies which are covered by their
Regulations from disclosing juvenile record information to any non-criminal
justice agency unless a statute, court order, rule or court decision
specifically authorizes dissemination of the juvenile records.
Not one juvenile code
authorizes the dissemination of juvenile record information to private
employers, the media, or any other private group. For example,
Florida Statutes, §39.411 of the Florida Rules of Juvenile Procedure,
provides in pertinent part as follows: “(3)...All court records
required by this part shall not be open to inspection by the public.
All records shall be inspected only upon order of the court by persons
deemed by the court to have a proper interest therein ...” However,
such statutes generally give juvenile courts the discretion to release
information to any party with a legitimate interest. Thus, such
records may be obtained with an appropriate Court Order.
Courts have analyzed
whether insurance companies have a legitimate interest in obtaining
juvenile records in the investigation of claims. In People
v. John F. & Steven H., 665 N.Y.S.2d 822 (1997), the defendants
were charged with criminal offenses relating to an incident that occurred
on July 2, 1994, allegedly causing injury to the complainant.
The criminal actions were disposed of by Youthful Offender findings
pursuant to Criminal Procedure Law §720.20(3). The court clerk
duly sealed the court file pursuant to Criminal Procedure Law §720.35(2),
which states in pertinent part as follows: “1. A youthful
offender adjudication is not a judgment of conviction for a crime or
any other offense. 2. Except where specifically required
or permitted by statute or upon specific authorization of the court,
all official records and papers, whether on file with the court, a police
agency or the division of criminal juvenile services, relating to a
case involving a youth who has been adjudicated a youthful offender,
are confidential and may not be available to any person or public or
private agency, other than an institution to which such youth has been
committed, or a probation department of this state that requires such
official records and papers for the purpose of carrying out duties specifically
authorized by law ...”.
State Farm Fire and
Casualty Insurance Company issued a homeowners insurance policy and
an  umbrella
policy, which included John and Steven as covered persons. In
a civil lawsuit against John and Steven, Joseph Pierse alleged that
on July 2, 1994, John and Steven negligently or willfully assaulted
him about his face and head. In providing a defense to John and
Steven, State Farm desired to unseal the two criminal court files of
John and Steven to obtain copies of the Certificates of Dispositions
and plea allocution minutes, in the event that they entered guilty pleas.
In reviewing the Youthful
Offender Law, the court stated that the primary purpose of the youthful
offender process is avoidance of the stigma and practical consequences
of a conviction for a crime. In denying State Farm's
motions to have access to the sealed files of the criminal proceedings
against Youthful Offenders John and Steven, the court stated that the
social policy goal of restoring a youth to the status that he or she
previously held, after a successful termination of a criminal proceeding
or after being adjudicated a youthful offender, far outweighed any pecuniary
or economic reason of the homeowners' insurer in seeking to unseal
the youthful offender records and disclaim coverage in the alleged battery
victim's tort action against the juveniles.
High-profile crimes
involving minors have contributed to changes in public attitudes about
the juvenile justice system and a youthful offender's right to
privacy. More states are opening up their juvenile courts to some
degree. For example, court records and proceedings involving youths
charged with offenses that would be considered felonies if committed
by adults are public in Maryland and West Virginia. In addition,
Oklahoma and Arizona have passed laws creating a presumption of openness
for all juvenile records. Nevertheless, in order to prevent a
claim for invasion of privacy in obtaining juvenile information, insurance
companies should seek legal advice regarding the juvenile laws in the
state where they want to obtain the juvenile information, before proceeding
with the investigation of a juvenile's criminal history.
3.
Cooperation with Public Officials/Immunity Statutes
In Vogel v. Gruaz,
110 U.S. 311, 316, 4 S.Ct. 12, 15 (1884), the United States Supreme
Court held that “it is the duty of every citizen to communicate
to [the] government any information which [they have] of the commission
of an offense against its laws.” That would include corporate
citizens such as insurance companies. However, due to insureds
and third-party claimants readily pursuing tort liability against insurance
companies based upon allegations of defamation, bad faith, and invasion
of privacy, insurance companies are often reluctant to disclose its
suspicions about possible fraud or to disclose incriminating information
about insureds and claimants.
In an effort to address
those concerns, Ohio became the first state to enact “arson reporting
immunity” legislation that was intended to assist insurers and
law enforcement agencies in their respective efforts to combat insurance
fraud, by providing limited immunity to insurers. Since then,
each of the 50 states and Washington D.C. have enacted various statutes
to protect those who disclose information to law enforcement or governmental
agencies in the fight against insurance fraud.
For example, Florida
Statutes, §626.989(4)(c), provides qualified civil immunity to those
providing information on suspected insurance fraud to state law enforcement
officials as well as to the State's Division of Insurance Fraud.
See Pearce v. United States Fidelity & Guaranty Co., 476
So.2d 750 (Fla. 4th DCA 1985). In addition, Pennsylvania
has a comprehensive statute (Pennsylvania Statutes Annotated, 40 P.S.
§474.1) which broadly immunizes good faith efforts to investigate fraud;
as does Illinois in its Insurance Information and Privacy Protection
Act, 215 ILCS 5/1014.
Some states, like Virginia,
make reporting information on an insured to a law-enforcement agency
or other government authority confidential by statute. For example,
Virginia Code Annotated §38.2-613(A) provides that an insurance institution
shall not disclose any personal or privileged information about an individual
collected or received in connection with an insurance transaction unless
the disclosure is: (6) to a law-enforcement or other government
authority: (a) to protect the interests of the insurance
company in preventing fraud upon it; or (b) if the insurance company
reasonably believes that illegal activities have been conducted by the
individual; or (c) upon written request of any law-enforcement agency,
for all insured or claimant information in the possession of an insurance
company or agent which relates to an ongoing criminal investigation.
In that situation, any information released to a law-enforcement agency
pursuant to such a request shall be treated as confidential criminal
investigation information and not be disclosed further except as provided
by law.
Because immunity statutes
vary from state to state, insurance companies must be familiar with
the reporting/immunity statutes in its respective states. That
is particularly important since some immunity statutes only provide
qualified immunity based upon the absence of malice or wilful intent.
Therefore, insurers should exercise caution in their cooperative
efforts with law enforcement officials, by insuring that all materials
reflect a good faith, careful investigation that is coupled with objectivity
and fairness. Also, the insurer's letter transmitting information
on file materials should document the absence of malice or adverse wilful
intent.
IV. SOME
LONGSTANDING CONCERNS IN REQUESTING INFORMATION
A.
Constitutional Privacy Issues
1.
Federal Constitutional Provisions
The Federal Constitution
does not specifically mention privacy. However, the Fourth Amendment,
which prohibits unreasonable searches and seizures, has been interpreted
to imply a right of privacy. Beginning in the early 1960s, the United
States Supreme Court decided a line of cases which held that privacy
is an implied right under the Fourth and Fourteenth Amendments.
For example, in Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705 (1973),
the Court addressed the right to privacy in the area of birth control
and abortion.
In Katz v. United
States, 389 U.S. 347, 88 S.Ct. 507 (1967), the United States Supreme
Court recognized a reasonable expectation of privacy for telephone conversations.
The Court in that Fourth Amendment case indicated that the attorney-client
privilege turns on whether the communication enjoys a “reasonable
expectation of privacy.”
Lower courts vary in
the tests they apply to determine if there is a reasonable expectation
of privacy. Some courts hold that any disclosure, even inadvertent,
will waive the privilege. See, In Re Sealed Case, 877 F.2d
976, 980 (D.C. Cir. 1989). Other courts have held that there must
be a knowing relinquishment of the privilege. See, Underwater
Storage, Inc., 314 F.Supp. 546, 549 (D.D.C. 1970).
A “balancing test”
is used to determine whether the attorney-client privilege has been
waived. This test is case specific and evaluates (1) the reasonableness
of the precautions taken to prevent disclosure; (2) the amount of time
taken to remedy the error; (3) the scope of the disclosure; (4) the
extent of the disclosure; and (5) the overriding issue of fairness.
Alldread v. City of Grenada, 988 F.2d 1425, 1433 (5th
Cir. 1993).
Although the Federal
Constitution's privacy protections limit the power of the government
because they apply to “state action” i.e., acts taken by
the government, insurance companies should be aware of these safeguards
whenever dealing with public officials. For example, when there
is an ongoing investigation by both public officials and insurers, the
insurance company could be deemed an agent of the state, and would then
be subject to constitutional provisions that would limit the government
in its ability to gather evidence. See Coolidge v. New Hampshire,
403 U.S. 443, 487, 91 S.Ct. 2022, 2049 (1971). Thus, if an insurance
company acts as an agent of the state, and fails to comply with Fourth
Amendment requirements, evidence the company acquires may be inadmissible
in court.
A court will likely
deem the company a state agent if three conditions are met: (1) there
is a manifestation by the principal that a person is acting for that
principal; (2) there is acceptance by an agent of the relationship;
and (3) there is an understanding that the principal is in control of
the acts of the agent. See, State v. Smith, 673 A.2d 1149
(Conn. App. 1995). To avoid being classified as a state agent,
an insurance company should neither give directions to, nor take directions
from, any state agency, including law enforcement agencies. See
also, State of Utah v. Brenda Ellingsworth N0. 971456-CA (Utah.
App. 1998), where a workers compensation claimant was found not to have
been entitled to Fourth Amendment protections because the investigating
employer, although a state entity itself, had a purpose for investigating
that was completely independent of law enforcement.
Similarly, in United
States v Howard, 752 F.2d 220, 227 (6th Cir. 1985), and
United States v Pervaz 118 F.3d 1, 5-6 (1st Cir 1997),
the courts held that private investigations were not “state actions”
because the parties' intent was “primarily to benefit private
interest and not law enforcement.” Under this analysis, an investigation
undertaken primarily to analyze or defend against a claim would not
constitute state action. However, until more courts adopt this
analysis, the more cautious approach is for insurers to keep their investigations
separate and independent from the investigations of public officials.
2.
State Constitutions
Some states have constitutional
provisions which expressly provide citizens with a right of privacy.
For example, §23 of Florida's Constitution guarantees each citizen
a right of privacy, pursuant to the following language: "Every natural
person has the right to be let alone and free from governmental intrusion
into his private life except as otherwise provided herein. This section
shall not be construed to limit the public's right of access to public
records and meetings as provided by law."
By its terms, §23 only
applies to governmental action. Consequently, insurers in Florid |
