In practically every homeowner insurance policy, the insurance company requires the insured to perform certain duties after a loss. Among the duties is to provide the insurance company, when requested, documents including banking or financial records. Often this type of documentation is requested in conjunction with an examination under oath, but can also be requested during the initial claim investigation. Many policyholders are uncomfortable furnishing personal financial records in fear that such information will not be safeguarded and will be used improperly. Well, can an insured require an insurer to execute a confidentiality agreement that imposes limitations on the insurer’s use of the insured’s personal information? This issue was addressed by a court of appeals in Oregon last month and the answer was no.
In Safeco Insurance Company of Oregon vs. Masood,1 the underlying claim involved a theft after a house fire. The insured reported a theft of approximately $3.5 million of personal property. Safeco, the insurance company, initiated an investigation of the claim and requested that the insured furnish various financial information. In response to the request and before furnishing the requested financial information, the insured demanded that Safeco sign a confidentiality agreement that imposed certain restrictions on Safeco’s use of the personal information. Safeco rejected the proposed confidentiality agreement insisting it was entitled to the information as stated in the insurance policy. Both the trial and appellate court agreed with Safeco holding that under the insurance policy, Safeco had an express contractual right to the information and the insured had an express contractual duty to provide the requested information. In addressing the issue from a strictly contractural perspective, the court determined that the insured was not free to unilaterally modify the insurance contract to impose restrictions on Safeco’s claim investigation.
The takeaway from all of this is that, when an insurance company requests certain personal information, the insured must cooperate. When it comes to claims investigations, the cooperation clause is not bilateral, but unilateral. All of the power, fair or unfair, is possessed by the insurance company. However, the insurance company’s requests for personal information must still be reasonably related to the claims investigation. Importantly, the court in Massood stressed that an insurance company owes the insured an “implied duty to act in good faith in making its information demands and in handling [the insured’s] personal information.” If you have a question about documents requested by an insurance company or are unclear if the insurance company has a right to demand certain information, it is a good idea to contact an insurance professional.