One of the more common questions that we receive from insurance agencies and brokerages is how to handle requests for the disclosure of information that is contained in their insured's file. If such a request is received and handled properly, an agency or brokerage can help reduce the likelihood of becoming involved in an E&O claim or lawsuit.  In this issue of The E&O Report, we will review some of the procedures that an agency or brokerage should follow if it receives a request from an insurance company, an insured, an attorney, or anyone else, to disclose information regarding that is contained in an insured's file.

When an agency or brokerage receives any type of request to provide information or documents regarding an insured, the agency or brokerage should be sure to handle that situation with care.  Such a request may potentially constitute a claim against the agency or brokerage, or possibly contain facts which give rise to a potential claim; both of which would require that notice be given to the E&O insurer for the agency or brokerage pursuant to the terms of its insurance policy.  E&O insurance policies, like other types of insurance policies, require that insureds provide prompt notice of not only actual claims, but also notice of any circumstances that may give rise to a potential claim.  For this reason, we advise agencies or brokerages that when they receive a request for any to be disclosed concerning an insured, they should consider whether they need to report that situation to their E&O insurer.  

Providing prompt notice to the E&O insurer will ensure that if the situation eventually develops into an E&O claim or lawsuit, the E&O insurer cannot take the position that it was not timely notified of the situation.  It is very difficult for an insurance agency or brokerage, faced with a late notice situation under its own insurance policy, to claim that it was not familiar with, or did not understand, the claims reporting requirements contained in its professional liability insurance policy.  Also, E&O insurers will often appoint counsel to assist the agency or brokerage in dealing with the request for the disclosure of information, since having counsel involved helps reduce the chance of the situation developing into and E&O claim or lawsuit.

One of the more common requests we see in our practice is where an insurance agency or brokerage is asked by an insurance company to provide either information or documents concerning an insured.  One thing to keep in mind is that if an agency or brokerage is faced with a request made by an insurance company to disclose information regarding an insured, it is usually in connection with the insurer's investigation or denial of a claim.  Insurance companies will often contact the agency or brokerage during the course of its claims investigation and request that the agency or brokerage provide either a written or recorded statement or copies of its file materials.  

If the insurance company conducting the investigation is one that the agency or brokerage has an agency agreement or an ongoing relationship with, the insurance company may take the position that the agency or brokerage is obligated to provide the requested information.  Any agency or brokerage faced with this situation must remember that, under most circumstances, it does not have a legal obligation to provide this information.  Also keep in mind that if this information is provided by the agency or brokerage to the insurance company, and then that information is subsequently used as a basis for the denial of an insured's claim, it is quite possible that the agency or brokerage will then become involved in any litigation arising out of the insurer's denial of the claim.

Agencies and brokerages are also often asked by their insureds themselves to provide information or documents from the files that are maintained by the agency or brokerage.  If this should occur, remember that an insured is not entitled to obtain copies of file materials maintained by the agency or brokerage that relate to his or her insurance.  The documentation that is created and maintained by the agency or brokerage, constitute its business records; as such, that documentation is the property of the agency or brokerage.  We understand that sometimes when an insured requests information or documentation from its files that the agency or brokerage may be inclined to provide that information in order to foster good will and maintain the relationship, even though there is no legal obligation to do so.  

Accordingly, if an agency or brokerage is faced with such a situation and would like to comply with the request, it should do so on a limited basis and provide the insured with only those documents that the insured would have received in the ordinary course of the relationship.  For example, the agency or brokerage may provide the insured with copies of insurance policies, endorsements, certificates of insurance, letters and other communications that they may have received in connection with their insurance.  However, the agency or brokerage should not disclose to the insured such items as notes, records from the agency management system, or any internal communications within the agency or brokerage.  In our experience, an insured will often request copies of this type of information if they contemplating a potential claim or lawsuit against the insurance company and/or the insurance agency or brokerage. Similarly, if the agency or brokerage receives a request for information or file materials from an attorney for an insured, this should likewise be reported to the E&O insurer.  Our experience has shown that when an insured goes so far as to enlist the services of an attorney to inquire into the practices of an insurance company, or the agency or brokerage, an E&O claim or lawsuit is likely to follow.

As you could imagine, an agency or brokerage should proceed most cautiously when it is served with a subpoena seeking information or documents.  Although the agency or brokerage is may be non-party to the legal proceeding in which the subpoena was served, a legal proceeding is, in fact, pending and it is very easy for the agency or brokerage to be added as a party to that proceeding. Often agencies and brokerages served with subpoenas simply comply with the subpoena served and provide the requested testimony or documents without the assistance of an attorney.  While it is true that an agency or brokerage that is properly served with a valid subpoena has an obligation to comply or risk being held in contempt of court, we recommend that an attorney always be involved to assist in responding.  Many times a subpoena is defective in some manner because the attorney who served it either failed to comply with the strict legal requirements governing the manner in which service may be made or the scope or type og information that may be requested. If an agency or brokerage simply complies with a subpoena without the assistance of an attorney, they may be providing information that they are not legally required to disclose and put itself at risk of becoming involved in an E&O claim or lawsuit.

Our final recommendation on this topic is that every agency and brokerage should make certain that all employees are aware of the procedures to be followed within the agency or brokerage if it receives a request to disclose information concerning an insured.  We suggest that all such inquiries be directed to one person at the agency or brokerage so that the requests are handled properly and consistently.  The prudent insurance agency or brokerage that follows the procedures that we have outlined above will help reduce the likelihood that the request for information will develop into something much more serious, such as an E&O claim or lawsuit.

Submitted by:

James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP​​

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​​Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.