By GENE A. WEISBERG
Consumers have accidents every day, and insurers are there to protect them from the unexpected perils of everyday life. Laws have been enacted to protect our identities – including everything from credit card fraud to hacking our computers. But did you ever think having an auto accident may trigger a behind-the-scenes scheme devised to determine your insurance policy’s limits in an attempt to potentially collect hundreds of thousands of dollars? In several states, disclosing your liability limits prior to litigation is prohibited for good reason: to combat such schemes to treat up to the amount of the policy limit. Consequently, a cottage industry, otherwise known as “Policy Search Companies,” arose. They work hard to obtain and sell consumers’ protected insurance limits to attorneys so they can build unwarranted injury cases and get your insurance company to pay those limits or even try to go after your personal assets.
Once a lawsuit is filed, in many states a defendant is obligated to disclose their policy limits. But timing is everything. There is no obligation to provide that information pre-litigation. As one case stated, “By controlling the timing of the release of information we protect the premature release of confidential data.” (Griffith v. State Farm Mutual, 1991) The policy search companies, and their clients, want the information early because it is profitable. Knowledge is power. Knowing a consumer’s policy limits allows plaintiffs’ attorneys, medical providers and organized medical lien companies to determine up front the extent to which the attorney can build an injury case in light of the insurance available for recovery. The attorneys can then encourage claimants to seek excessive treatment with preplanned medical facilities at highly inflated rates. This can put insurers in a position that pressures them to pay more than the actual damages owed and up to the policy limits, leading to a potential impact on rates. This also can put injured claimants in a position of being told they need medical procedures that they do not need, and in some instances should not have, to drive up the bills paid to the medical provider who has a deal with the law firm.
Interestingly, when a claimant’s representative asks the insurer for the policy limits before litigation, because that information may be confidential, rather than rejecting the request some insurers ask their policyholder for consent to disclose the limits information. This shows a lack of understanding of the potential for misuse of the information.
Policy Search Companies secure policy limits information by various means. They have been known to fictitiously pose as an insured and call the insurer to fraudulently obtain policy limit information. Call center and claims representatives are service oriented and trained to assist consumers, so it is counterintuitive to these employees to be suspicious or withhold assistance. Knowing that these companies are attempting to fraudulently obtain information, these employees are being trained to try and spot when the caller is an identity thief. With stronger barriers in place, Policy Limit Search Companies have become more creative by spoofing phone numbers or calling in to request changes to policyholder contact information; then, they later access policy information through the contact information they themselves, not the customer, set up. Some companies have gone so far as to update insureds’ email addresses to an untraceable encrypted ProtonMail address that is controlled by the Policy Limit Search Company with a database of personal information that later can be sold. In some instances, they call back a few days later, impersonating the insured again and ask for policy information to be emailed to the new encrypted email address on record. Or they simply continue to call through a spoofed phone number, impersonating the insured to secure more and more information from the insurance carrier regarding personally identifiable information and policy limit information.
These examples, unfortunately, are becoming a trend rather than an anomaly. When a Policy Search Company uses another person’s personal identifying information secured without their permission especially by fraudulent means for financial gain, it is a crime. These activities, and the selling of private information, is funded when plaintiffs’ attorneys hire these companies to gather protected policy limit information. This is fraud: deliberate identity deception with the intent to collect information to which they are not entitled, and selling such information without the policyholder’s knowledge or authorization. Policy Search Companies are acting illegally when they illicitly collect policy information that they later sell.
In states such as California, liability policy limits are personal information that can be required to be produced in only limited circumstances. The California Court of Appeals determined in Griffith v. State Farm Mutual Auto Insurance Company that “the policy limits are ‘personal’ as they are ‘gathered in connection with an insurance transaction.’… In line with the policy of protecting a citizen’s privacy rights, the Insurance Code must be interpreted to include policy limits as an item which is ‘personal.’” The court concluded that “a third party claimant does not have the right to know the policy limits of another’s insurance policy prior to the filing of a formal proceeding.”
On the other hand, in some states there may be a pre-litigation obligation to provide insurance limits information. For example, in Virginia, a claimant or his lawyer can demand limits information from an insurer but must provide detailed information regarding the accident, a copy of the accident report, medical records, medical bills and wage-loss documentation pertaining to the claimed injury to establish that the losses equal or exceed $12,500. (Code of Virginia, Section 8.01-417(C)). In Florida, a Florida insurer must make such disclosure, under oath, within 30 days after it receives a request in writing. (Florida Statute 627.4137)
Insurers are fighting each day to protect policyholders and ensure that these Policy Search Companies do not obtain personal private information about insureds’ without their permission. Many of these businesses are purposefully committing identity theft to collect personal policy limit information in order to sell it to plaintiff firms. Both the policy search company’s illicit information gathering and law firms, medical providers, and medical lien providers’ use of such information should be investigated.
These Policy Search Companies consider themselves research groups catering to the plaintiff’s bar and offer “policy limit tracing” or “liability limit tracing.” Frequently, they brazenly state on their websites that they can “determine a defendant’s liability limits at the outset of a case without the effort and expense of discovery.” Some even have 24 hour rushed service or bulk discounts for multiple policy limit traces. However, other than directly from insureds or their insurance companies, there is no reliable, legitimate resource where attorneys in a number of states can legally receive private policy limit information.
It is in everyone’s best interest– especially insurers– to protect insureds from these schemes through traditional methods, including training call center employees and adjusters, and multifactor verification along with new techniques such as voice analytics, as well as educating their policyholders. However, with ever more sophisticated enterprises entering the policy information arena, it is becoming more difficult for even the most diligent insurer to effectively fight against schemes devised to illicitly secure private insurance information.
To address such schemes that ultimately harm consumers, insurance carriers, law enforcement, insurance departments, and other state regulators should come together to fight against deceit devised to elicit policy limit information and to protect consumers’ personally identifiable information. As insureds and insurance carriers report such activity to their state insurance departments, Attorneys General, and the NICB, it is imperative that these organizations investigate the accusations and take action in order to stop this illegal activity. Concerted action is needed.
Insurers and policyholders, and those who write the laws and regulations regarding policy limits disclosure, should consider the significance of when policy limits information should be disclosed. Disclosing limited information before medical treatment is completed, or at least is on a path based on medical condition rather than available insurance, makes fraud by the dishonest easier. When it is time to try to resolve a claim, disclosing policy limits information makes sense. Available limits should influence settlement, not medical treatment and bills.
Gene A. Weisberg is a founding lawyer with GladstoneWeisberg, ALC, in Culver City, California, with more than 40 years of trial and appellate experience focusing on insurance. He is a member of the Coalition Against Insurance Fraud’s Legal Affairs Committee, Lead Chair of the CLM Insurance Fraud Committee, an Associate of the American Board of Trial Advocates and rated AV Preeminent by Martindale Hubbell.
NOTE: This article was reprinted from the Journal of Insurance Fraud in America with permission from the Coalition Against Insurance Fraud. To learn more about their mission, membership requirements, or how to become a JIFA contributor visit www.InsuranceFraud.org.