A Chicago federal judge has tapped the brakes on a class action alleging State Farm improperly shared personal health information of claimants involved in car crashes and other incidents.
Four plaintiffs — all injured in car crashes involving a State Farm client — sued in state court, bringing claims of negligence, unjust enrichment, public disclosure of private facts and intrusion upon seclusion in violation of Illinois privacy laws. In addition to State Farm, the complaint targeted Insurance Services Office, a subscription-based data analysis industry association. After State Farm and ISO removed the complaint to federal court, they asked U.S. District Judge LaShonda Hunt for dismissal, which she granted in January.
The complaint hinges on allegations that personal health information drivers submit for the purposes of claim evaluations ends up retained as fodder for rate and underwriting calculations. The complaint further alleges State Farm gives reports including protected data to ISO, which uses that information to sell its services and products, all without notifying anyone how the companies are using their medical histories. Plaintiffs allege ISO has “approximately three billion detailed premium and loss records, and ISO has a database of more than 32 billion records,” according to Hunt. “Additionally, ISO’s practices generate billions of dollars annually.”
The plaintiffs propose two classes: one for State Farm clients who suffered an injury that required a claim, and a second for those not covered under a State Farm policy. Both classes would date to July 19, 2018.
In arguing for dismissal, State Farm and ISO said the disclosures are legal facilitation of underwriting, claims processing and fraud prevention. They said the Illinois Insurance Code provides immunity for this action and argued the plaintiffs’ common law claims are underdeveloped.
Judge Hunt substantially agreed.
Nothing in the relevant Insurance Code section “limits protection to disclosures pertaining to adjudication of a claim at issue,” Hunt wrote. “Rather, the statute excepts information provided ‘in connection with an insurance transaction,’ and ‘insurance transaction’ is specifically defined as encompassing a broader range of circumstances than the claims adjudication process.”
Hunt further agreed with the reading of the Insurance Code authorizing “qualified advisory organizations” such as ISO “to compile statistics and to formulate insurance policies, bond forms and underwriting rules and to furnish that which it prepares to its members and subscribers.”
The plaintiffs claimed ISO exceeded that protection by disclosing information to entities like third-party claims administrators or people who are self insured. The defendants responded by arguing state approval of ISO’s membership list has more bearing than a law that doesn’t define “insurance company.” Hunt said the issue presents a factual dispute unsuitable for a dismissal motion.
Hunt also said the defendants couldn’t completely invoke protections for disclosure “to a law enforcement or other governmental authority” because although some data recipients are state fraud bureaus, the complaint alleges data disclosure with customers outside of the government or law enforcement.
Ultimately, Hunt wrote that “plaintiffs paint with too broad of a brush” because the only listed exception to the immunity the defendants invoked is instances of disclosure — or providing false information — with willful intent or malice.
Hunt rejected the negligence claims, noting the Health Insurance Portability and Accountability Act (HIPPA) doesn’t allow private litigation or impose on State Farm the duty of care the plaintiffs alleged. She said the plaintiffs “simply assume that every post-litigation or non-litigation related (personal health information) disclosure is unreasonable, which is not the conclusion” the Illinois Supreme Court reached in earlier opinions.
She further said that in addition to the defendants’ immunity from privacy invasion claims, the allegations about public disclosure fail because ISO communicates to subscribers, not to the public or in a fashion “that is substantially certain to become public knowledge.” Claims of intrusion upon seclusion failed because each plaintiff voluntarily provided the information at question.
Finally, Hunt agreed the unjust enrichment claim failed because such claims cannot stand on their own and she’d already dismissed the other elements. The plaintiffs have until Feb. 21 to amend their complaint and attempt to remedy the shortcomings in their case identified by the judge.
Plaintiffs are represented by attorneys Martin Woodward, of Kitner Woodward, of Dallas; Korey Nelson, Amanda Klevorn, Claire Bosarge and Natalie Earles, of Burns Charest, of New Orleans; and Daniel S. Kirschner and William T. Gibbs, of Corboy & Demetrio, of Chicago.
State Farm is represented by attorneys Frederick J. Sudekum III, of Sudekum, Cassidy & Shurluff, of Chicago; and Cari K. Dawson and Tiffany Powers, of Alston & Bird, of Atlanta.
State Farm did not respond to a request for comment.