The Intersection of Privacy Legislation and Insurance Related Litigation

Privacy legislation has affected almost all consumers of goods and services in the United States.

Most notably, the Gramm-Leach-Bliley Act (GLBA) passed by the federal government in November of 1999 sets forth a complex set of rules intended to promote privacy protection. How the GLBA and other state statutes addressing privacy are to be interpreted when non-public personal information is sought from an insurer by an unaffiliated third-party during the adjustment or litigation of an insurance claim has been the subject of much debate. There is limited case law addressing the topic, but the Supreme Court of Appeals of West Virginia recently had the opportunity to address the issue. See, Martino v. Barnett, et al., 595 S.W.2d 65 (W. VA. 2004).

In Martino, the plaintiff alleged that he was injured in an automobile accident on November 18, 1999, due to the negligence of one of the defendants, Betty Jean Barnett. Ms. Barnett was insured by Nationwide Mutual Insurance Company (“Nationwide”). Before filing a civil complaint, the plaintiff asked Nationwide to supply Ms. Barnett’s home address so that he could attempt service of the summons and complaint. Nationwide refused to disclose Ms. Barnett’s home address, maintaining that to do so would violate the privacy provisions of the GLBA and the West Virginia Insurance Commission’s Privacy Rule.

The plaintiff eventually filed suit and informed Nationwide of its intent to depose a Nationwide representative in order to obtain certain factual information about Ms. Barnett as part of his attempts to effect service of process. The parties agreed the questions presented by the case concerning the interplay of privacy legislation and the insurance company’s obligations in responding to discovery could be properly certified to the Supreme Court of Appeals of West Virginia.

The Supreme Court of Appeals initially identified that the United States Congress had called upon the various state insurance authorities to implement regulations that would help to carry out and enforce the purpose and mandates outlined in the GLBA. In response, the West Virginia legislature had enacted regulations to support and enforce the GLBA. Thus, in analyzing the questions presented by the Martino case, the Court was presented with both the applicability of the GLBA and certain West Virginia regulations.

In evaluating the merits of the Martino case, the Court was called upon to determine whether the “judicial process” exception contained in the GLBA allowed an insurance company to supply nonpublic personal information about one of its insureds to a third-party. As part of its evaluation, the Court heavily relied upon a recent federal decision, Marks v. Global Mortgage Group, Inc., 218 F.R.D. 492 (S.D. W.Va. 2003).

In Marks (a case which was not rendered at the time of oral argument in the Martino case), the question presented was whether nonpublic information could be compelled from a mortgage lender about its customers. Citing specific exceptions in the GLBA, the Marks court found that the U.S. Congress intended to except civil discovery from the general privacy provisions of the GLBA.

With reference to the Marks decision, the Martino court found that the “judicial process” exception contained in the GLBA was intended to except civil discovery from the general privacy provisions of the GLBA. Even if the GLBA lacked a “judicial process” exception, the Court noted that a clear and strong indication is required from Congress before it can be implied that the policy of prohibition is of such force as to dominate the broad objective of doing justice (i.e. compelling the production of useful information).

Thus, the Court ruled an insurance company may disseminate non-public personal information attendant to judicial proceedings without running afoul of the GLBA and with the use of judicial protective orders and similar safeguards. Notably, the Court also ruled that an insurance company is obliged to release non-public personal information in response to discovery and in compliance with West Virginia Unfair Trade Practices Act provided that the insurance company has had the opportunity to inform the Court when the information is unnecessary or nondisclosure is warranted on other grounds.

Undoubtedly, additional cases will test the parameters of privacy regulation. The question of whether individual third-parties seeking nonpublic personal information from insurers legitimately need such information or are simply trying to exert pressure as part of settlement discussions also remains to be determined.

Andrew S. Boris is a partner in the Chicago office of Tressler Soderstrom Maloney & Priess. His practice is focused on litigation and arbitration of insurance coverage and reinsurance matters throughout the country, including general coverage, directors and officers liability, professional liability, environmental, and asbestos cases. Questions and responses to this article are welcome at aboris@tsmp.com The Tip of the Month runs each month on claimsguides.com.