No Privacy Protections in Response to Insurer’s Demand for Information
Safeco isn’t the NSA, but it doesn’t think that insureds have the right to demand privacy protections in the context of the adjustment of a claim. And neither does the Oregon Court of Appeals. Last week, the Oregon Court of Appeals held in Safeco Insurance Co. v. Masood (July 2, 2014) that an insured cannot require the insurer to agree to keep “sensitive” financial information private as a condition to sharing this information with the insurer.
After Sohail Masood’s home burned down, his homeowner’s insurer, Safeco, provided security while the home was being cleaned up. Masood claimed that about $3.5 million in personal property was stolen while Safeco was providing security, and he filed a claim for this loss. In response, Safeco’s adjusters requested financial records and “demanded that Masood consent to the disclosure of his Social Security information to vendors from which Masood had purchased tangible goods.”
Masood balked at this request, agreeing to comply with Safeco’s demands only if Safeco would agree to enter into a confidentiality agreement limiting Safeco’s use of the information and restricting release of this information to third parties. Safeco refused to acquiesce to these protections. Rather, Safeco sued Masood and obtained a declaratory judgment that Masood “could not condition his cooperation” with Safeco on getting assurances that his privacy would be protected. The Oregon Court of Appeals affirmed.
The impact of this case, however, should be cabined by what the Court of Appeals did not address. The opinion pointedly explains “what is not at issue in this dispute” with Safeco: any allegation that Safeco intended to misuse Masood’s information or that the information was “unrelated to the loss investigation.” Insureds in Oregon should carefully mind these issues when faced with onerous, and potentially prejudicial, requests for information from an insurer adjusting a loss.
A second caution may be in order: Masood arises in the context of a “first party” property policy — that is, the insured sought compensation for the loss of his own property. By contrast, I’ve pushed back for clients on insurers’ requests for information in the context of “third party” claims, where the insured is being sued by a third party and the insured seeks a defense from the insurer. Under Oregon law, the insurer cannot elude the duty to defend its insured by referring to any facts outside of two documents: the complaint and the policy. Nevertheless, insurers will often ask for information outside of the “eight corners” of these documents, looking for just enough rope from the insured to hang him or her with. Masood doesn’t change the insurer’s duty to defend, but careful coverage counsel (and insureds going it alone) are likely to see insurers applying its holding too broadly.