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Authorized to Invade Your Privacy

Posted by David P. Martin | Jan 24, 2025 | 0 Comments

Have you ever reviewed a “medical” authorization an insurance company or plan requested you to sign? I mean really review it. This is typically presented to you as being needed to authorize the release of medical records. The form is always presented with a short or long-term disability, a health claim, subrogation, or perhaps with an investigation under the Americans with Disabilities Act. However, if you scrutinize the authorization, most authorize much more than simply obtaining medical records. 

 The authorization often allows the insurer or plan to obtain your consumer credit report, documents from any governmental agency, documents from your financial institution, and documents from any other person. Sometimes it may waive the attorney-client privilege. It may provide a right to obtain and report information from "the Medical Information Bureau Inc. (“MIB”). More on MIB next time. For now, we will discuss the insurer obtaining your credit report.

 First, it is unlawful for an insurer to obtain a credit report under the Fair Credit Reporting Act (FCRA) to evaluate a claim for insurance benefits. An insurance company can require a credit report to underwrite insurance for a consumer as noted in 15 U.S.C. § 1681b(a)(3)(C). However, the list of permissible uses does not include allowance for evaluating an insurance claim.

 As noted by the court in Padilla v. UNUM Provident, 2005 U.S. Dist. LEXIS 46454, *16 (D.N.M. 2005), “Indeed, the FTC's official comment … provides that insurers may not rely on the specific provision regarding ‘underwriting of insurance,' to "obtain a consumer report for the purpose of evaluating a claim (to ascertain its validity or otherwise determine what action should be taken)." 16 C.F.R. pt. 600 App., at 504 (emphasis added). The FTC's official comment on this subject accord with judicial interpretations of the FCRA as applied in the context of insurance claims. See, e.g., LeBlanc, No. Civ. A.99-2724, 2000 U.S. Dist. LEXIS 7056, 2005 WL 687900, at *2 (citing St. Paul Guardian Ins. Co. v. Johnson, 884 F.2d 881, 883 (5th Cir. 1989)).”

 So why do insurance companies seek to do something against the FCRA? That is because courts have held that if you sign the authorization an agreement or contract is formed, and it is enforceable as written. The insured's consent is a permitted use.  Padilla v. UNUM Provident, ruled that way. While as noted in LeBlanc v. Allstate Ins. Co., 2000 U.S. Dist. LEXIS 7056, *9 (E.D. La. 2000) “A credit reporting agency may issue a consumer report only to those whom it knows or expects will use the report for certain ‘permissible purposes' set forth in the FCRA. Id. § 1681a and 1681b”, consent by signing the authorization overcomes that. Thus, the only way the insurance company can obtain the insured's credit report is if you sign the authorization.

 That brings us to the next point and that is if you refuse to sign the authorization, will the claim be denied?  I suppose it is possible, but that may be a pretty good case against the insurer or plan if the insured signs an authorization that removes the objectionable parts and seeks to cooperate.  For example, if you are cooperating by agreeing to hear the insurance company's reason for demanding the credit report, and then if that reason is relevant and you cooperate by obtaining the information and sharing that, there are not good grounds to refuse to pay the claim.  Asserting rights under the FRCA is pretty good push back on this overreaching authorization. Furthermore, as I understand credit reports, the credit score may decrease the more often there are credit inquiries.

 What is really occurring here is the insurance company is "fishing" for reasons to deny the claim and unnecessarily invades the privacy of its insured to do so. It may be seeking to ascertain if it can contrive a reason to deny the claim. And then of course, after obtaining that information, it may share that information with other insurance companies and with MIB. That may impact you for years to come. That should give you cause to pause.

About the Author

David P. Martin

Senior & Managing Attorney

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