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LIABILITY OF INSURERS
FOR INVASIVE SURVEILLANCE
by Peter G. Van Bergen and Andrea E. Reisbord
*Presented by Peter G. Van Bergen at the 42nd Annual Northwest Claims Seminar in Minneapolis, Minnesota on December 3, 1999.
I. Introduction
In July of 1998, Minnesota joined the majority of jurisdictions nationwide that have recognized a tort cause of action for invasion of privacy. Following the Minnesota Supreme Court's decision in Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231 (Minn. 1998), only two jurisdictions, North Dakota and Wyoming, have yet to recognize any of the four traditional privacy torts. Two states, New York and Nebraska, statutorily protect privacy rights, but do not recognize a common law basis for the right to privacy.
The almost universal acceptance of the invasion of privacy tort carries with it significant implications for the insurance industry and, in particular, the manner in which claims by the insured or injured claimants are investigated by the insurance company, its agents and contractors. It took the Minnesota Supreme Court over one hundred years to recognize the common-law right to privacy existing in English and American Jurisprudence. It took the Minnesota Court of Appeals only nine months thereafter to give retroactive effect to the decision and allow an invasion of privacy claim to proceed against an insurance company and an investigation firm retained by the insurer to conduct surveillance on a workers' compensation claimant. Summers v. R & D Agency, Inc., 593 N.W.2d 241 (Minn. App. 1999). Minnesota is not alone in recognizing that an unreasonable surveillance of another may give rise to a viable invasion of privacy claim by the subject of the surveillance.
What follows is a brief discussion of the Lake decision and the invasion of privacy tort, followed by a summary of cases nationwide that have addressed the invasion of privacy tort in the context of surveillance and/or an insurer's investigation of a claim.
II. Minnesota Recognizes Invasion of Privacy as a Tort
A. Lake v. Wal-Mart Stores, Inc.
Vacationing in Mexico, Elli Lake and Melissa Weber were photographed by a friend while naked in the shower together. After the photographs were developed by Wal-Mart's photo lab, they received a notice that one or more photos had not been printed because of their nature. Unbeknownst to them, some of the nude photographs were developed by Wal-Mart employees and circulated in their small community. Lake and Weber sued Wal-Mart, alleging invasion of privacy, but their complaint was dismissed on the grounds that Minnesota had not recognized any of the four invasion of privacy torts, a decision that was affirmed by the Minnesota Court of Appeals.
On further review, the Minnesota Supreme Court reversed and reinstated Lake's and Weber's claims. Noting that one's naked body is a very private part of one's person generally known to others only by choice and a type of privacy interest worthy of protection, the court adopted three of the four privacy torts outlined in the Restatement (Second) of Torts §§ 652B-652E (1977). The invasion of privacy causes of action now recognized in the State of Minnesota are as follows:
Intrusion upon seclusion
Restatement (Second) of Torts § 652B.One who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the intrusion would be highly offensive to a reasonable person.
Appropriation of name or likeness
One who appropriates to his own use or benefit the name or likeness of another is subject to liability to the other for invasion of his privacy.Restatement (Second) of Torts § 652C.
Publicity given to private life (publication of private facts)
Restatement (Second) of § 652D.1One who gives publicity to a matter concerning the private life of another is subject to liability to the other for invasion of his privacy, if the matter publicized is of a kind that
(a) Would be highly offensive to a reasonable person, and
(b) Is not of legitimate concern to the public.
III. Invasion of Privacy and Surveillance
Of the four privacy torts, the investigation of a claim and surveillance of others is most likely to implicate the tort of intrusion upon seclusion. The comments to the Restatement indicate that the invasion need not be limited to a physical intrusion, but may also be by the use of the defendant's senses, with or without mechanical aids, to oversee or overhear the plaintiff's private affairs. Restatement (Second) of Torts § 652B, comment b (1977). As examples, the Restatement cites looking into another's upstairs windows with binoculars, tapping into other's phone lines, opening private or personal mail or examining a private bank account. Id. Whether actions taken in connection with an investigation intrude upon the seclusion of another or otherwise invades the privacy of another have been addressed in the following cases:
Minnesota
While now recognized, the exact question of what constitutes an unreasonable intrusion upon the seclusion of another has not been defined by a Minnesota court. In Lake, the court did not consider the merits of Lake and Weber's claims, only whether their lawsuit might proceed. Similarly, in Summers v. R & D Agency, Inc., 593 N.W.2d 241 (Minn. App. 1999), the Minnesota Court of Appeals, while declining to address the validity or underlying merits of a workers' compensation claimant's invasion of privacy claim against his employer's workers' compensation carrier and an private investigation firm hired by the insurer, held that the Lake holding should be given retroactive effect so that the employee's claims could proceed. The invasion of privacy claim in that case was based on allegations that the private investigation firm engaged in unlawful conduct including: (1) making harassing phone calls; (2) following family members and causing them apprehension, resentment, and fear; and (3) trespassing. Significantly, the defendants in this case included the investigative agency, the claims administrator and plaintiff's employer, which hired the claims administrator. While not specifically addressed by the court, this case provides ammunition for the argument that liability may attach not only to investigators, but to those parties which hire them.
Alabama
Although not arising in the context of an insurance claim, in Penttala v. David Hobbs BMW, 698 So.2d 137 (Ala. App. 1997), the Alabama Court of Appeals reversed summary judgment on a claim brought against a repossession firm for invasion of privacy. When the firm repossessed the plaintiff's Mercedes, the car contained various items of personal property, including the plaintiff's purse. In addition to seizing the plaintiff's purse, the record indicated that the repossession firm undertook a surveillance of her life in order to relocate the Mercedes and repossess it. The surveillance included following the plaintiff, coming on to her property, inspecting cars on the property other than the Mercedes, and questioning the plaintiff's neighbors about how she had obtained possession of the Mercedes. The Alabama Court of Appeals concluded that the defendants' superior title to the Mercedes, standing alone, did not eliminate any question of fact as to whether the defendants had wrongfully intruded into the plaintiff's private activities.
California
The facts of Unruh v. Truck Insurance Exchange, 7 Cal.3d 616, 498 P.2d 1063, 102 Cal. Rptr. 815, (1972) provide a good example of what not to do when investigating a claimant in a workers' compensation proceeding or other tort action. In that case, an investigator retained by the workers' compensation carrier befriended the claimant and, under the guise of friendship, took her to Disneyland. While at Disneyland, he enticed the claimant to cross a bridge which he violently shook while an associate secretly videotaped the claimant. He was also able to get the claimant to engage in other activities beyond her capacity so as to aggravate her injuries. The claimant, who apparently had developed a romantic attachment to the investigator, first learned of the ruse when the surveillance was shown at a compensation hearing. Upon learning of the deceit, the claimant suffered a physical and mental breakdown requiring hospitalization.
Unruh sued the investigators and the workers' compensation insurer alleging various causes of action including intentional infliction of emotional distress and assault and battery. She also claimed punitive damages. The California Supreme Court reversed the trial court's dismissal of these claims. In so doing, it recognized that the investigation of claims, when properly performed, is an important function of the insurer in the workers' compensation scheme since it is in the best position to detect fraudulent or grossly exaggerated claims for benefits and its non-medical investigation constitutes a service inextricably interwoven with the insurer's status. As a result, the exclusive remedy provisions of the workers' compensation laws preclude the insurer from being liable to a claimant for negligence. The California Supreme Court concluded, however, that an insurer steps outside its proper role as an insurer when, through its agents or others employed by it, the insurer intentionally embarks upon a deceitful course of conduct in its investigation which causes injury to the subject to the investigation. Unruh seemingly does not prohibit legitimate surveillance of a claimant, but clearly recognizes that there is a line over which the insurer may not cross in its investigation of the claim.
Kansas
In Kansas, the tort of intrusion upon seclusion is based upon the manner in which an individual obtains information. Froelich v. Werbin, 219 Kan. 461, 548 P.2d 482 (1976). The Kansas Supreme Court has described several examples as illustrative, including installation of an electronic listening device in someone's bedroom; taking pictures and peeking through windows with binoculars; and unauthorized prying into a plaintiff's bank account. Id.2
Missouri
In Schupmann v. Empire Fire and Marine Ins. Co., 689 S.W.2d 101 (Mo. App. 1985), a minor sued an insurer for slander and invasion of privacy by its agent. The agent had asked a neighbor, in connection with a claim by the minor's mother, whether the minor had entered the hospital due to pregnancy. The Missouri Court of Appeals held that while the question may have been beyond the scope of the investigation, it did not assume or suggest the reason for the minor's hospitalization. The court concluded that asking one non-assuming question of one neighbor was not sufficient to constitute an intrusion into the private seclusion around the plaintiff's affairs. Because the other forms of invasion of privacy required publication, a circumstance that was absent in Schupmann, the plaintiff's invasion of privacy claim was dismissed in its entirety.
New Jersey
The plaintiff in Figured v. Paralegal Technical Services, Inc., 231 N.J. Super. 251, 555 A.2d 663 (1989) was involved in an automobile accident in which she claimed to have suffered physical, emotional and psychological injuries. Paralegal Technical Services was retained by the liability carrier for the other vehicle to investigate Figured's personal injury claims. Figured, in turn, filed a complaint alleging invasion of privacy and intentional infliction of emotional distress against the investigation agency based on two incidents occurring during the defendants' surveillance. On the first day, she received a telephone call from a neighbor who had noticed two suspicious looking vehicles going up and down the road in front of Figured's home. Later that day, the investigators followed Figured as she drove to an appointment. Later, when she parked her car in a public parking lot, the driver of one car allegedly walked around the front of Figured's car and stared at her as he passed. The second incident occurred one month later when Figured was followed by the investigators for over forty miles until she pulled into a rest area. After she stopped, she noticed that the other vehicle had pulled around and parked facing her.
The New Jersey Court of Appeals upheld summary judgment in favor of the defendant, Paralegal Technical Services. While the court noted that it may well be that "freedom from extensive shadowing and observation has come to be protected in most . . . jurisdictions, and that overzealous shadowing and monitoring may, therefore, be actionable," it concluded that the facts of the case before it, even accepting the plaintiff's version to be true in every respect, did not warrant relief. The allegations did not reveal an intrusion that would be "highly offensive" to a reasonable person, because all of the defendants' activities took place in the open, either on public thoroughfares or in areas where members of the public had a right to be. Interestingly, the court concluded with the observation that an individual who seeks to recover damages for alleged injuries must expect that her claim will be investigated.
Ohio
The Ohio Court of Appeals has addressed the tort of unreasonable intrusion into a plaintiff's seclusion on numerous occasions. In Blevins v. Sorrell, 589 N.E.2d 438 (Ohio App. 1990), for instance, the plaintiff property owners brought suit alleging invasion of privacy based on their neighbor's surveillance of their activities to determine if they were violating any ordinances. The defendants looked at the plaintiffs' home through telescopes, climbed trees and took photographs with a telescopic lens. The court of appeals upheld the trial court's determination that the defendants had a qualified privilege to inspect the otherwise publically visible activities of the plaintiffs. Because the plaintiffs had shown no malice, fraud or bad faith and had failed to establish the element of outrage, suffering, shame or humiliation, the privilege was not abused.
Similarly, in King v. Crown Cork & Seal Co., 449 N.E.2d 14 (Ohio App. 1982), the court of appeals held that the unauthorized taking of the plaintiff's picture in a public place, coupled with the unauthorized recording of the plaintiff's conversation with a union representative, which was subsequently destroyed, was not actionable.
Finally, in Sustin v. Fee, 431 N.E.2d 992 (Ohio 1982), the court considered whether there had been an invasion of privacy based upon the surveillance of the owners of a dog kennel by a township zoning inspector. The inspector conducted her surveillance through the use of binoculars. In concluding that the plaintiff's claims were not actionable, the court noted that the inspector used his binoculars only to survey the surrounding area and not to gaze into the plaintiffs' house and invade the privacy of their personal lives. This case strongly indicates that had the inspector used his binoculars to conduct surveillance into the plaintiffs' home, they might have been able to recover.
Pennsylvania
Pennsylvania courts also have addressed the tort of invasion of privacy. In Forster v. Manchester, 410 Pa. 192, 189 A.2d 147 (1963), the Pennsylvania Supreme Court held that detectives employed by an insurance company to make an investigation did not invade the privacy of a claimant since their surveillance "took place in the open or public thoroughfares where [the claimant]'s activities could be observed by passers-by." The court further concluded that the manner in which the investigation was conducted was not unreasonable, and therefore was not actionable, noting that "by making a claim for personal injuries [the claimant] must expect reasonable inquiry and investigation to be made of her claim and to this extent her interest in privacy is circumscribed."
The plaintiff's invasion of privacy claim in Hall v. Harleysville Ins. Co., 896 F. Supp. 478 (E.D. Pa. 1995) arose in a slightly different context. Hall was a case brought by a workers' compensation claimant and his wife against his employer's workers' compensation insurer, its employee, a loss prevention company and its principals, and another company hired to obtain a credit report on the claimant and his wife. The claimant alleged invasion of privacy and violation of the Fair Credit Reporting Act. The defendants asserted that the reports were obtained for the purpose of evaluating Mr. Hall's workers' compensation claim and, thus, did not constitute a consumer report under the Fair Credit Reporting Act. Noting that the FTC maintains that an insurer may not obtain a consumer report for the purpose of evaluating a claim to ascertain its validity or otherwise determine what action should be taken, the United States District Court concluded that the reports were consumer reports that were subject to the Fair Credit Reporting Act. It concluded there was a genuine issue of material fact as to whether the defendants willfully or negligently violated the Act by misrepresenting their purpose in seeking to obtain the report. The court also found genuine issues of material fact with respect to the invasion of privacy claim, citing the Restatement's suggestion that invasion of one's private bank records could qualify for the tort. In the court's opinion, a person's credit history is sufficiently analogous to bank records for an unauthorized search of the history to be a significant intrusion.
The Hall decision seemingly represents a departure from a case decided by the United States District Court for the Eastern District of Pennsylvania ten years earlier. See Houghton v. New Jersey Manufacturers Ins. Co., 615 F. Supp. 299 (E.D. Pa. 1985). That case also involved a claim for invasion of privacy based on the defendant's actions in causing to be prepared and receiving a credit report in violation of the disclosure requirements of the Fair Credit Reporting Act. Houghton was involved in an automobile collision with an insured of the defendant New Jersey Manufacturers Insurance Company. After Houghton filed suit against the insured for injuries resulting from the collision, including a claim for lost earnings, the defendant requested that Equifax Services conduct an investigation of the plaintiff and prepare a written report to include investigation of her activities since the date of her accident, her past history of illness, injuries or hospitalization and general financial information. Houghton first learned of the existence of the 1979 report four years later. She then sued the insurer alleging various causes of action including a claim for invasion of privacy based on publicity of private matters. The court dismissed the claim because, viewing the facts most favorably to the plaintiff, only a very small group of persons were privy to the report. Communication to such a small group did not satisfy the publicity requirement of a tort relating to publication of private facts.3
Utah
Turner v. General Adjustment Bureau, Inc., 832 P.2d 62 (Utah App. 1992) was an invasion of privacy claim brought by the wife of a workers' compensation claimant. The workers' compensation carrier hired GAB to adjust the husband's claim. GAB, in turn, hired Inteltech to conduct an investigation. As part of their investigation, Inteltech's employees masqueraded as representatives of a product marketing research company and, for approximately three months, used the facade to gain access to the plaintiff's home in order to gather information about her husband's activities. Specifically, the investigators visited the Turners at their home and asked them to test various consumer products on a continuing basis. The plaintiff first became aware of the Inteltech employees' true purpose when they appeared at a hearing on her husband's workers' compensation claim and testified about information gathered through the undercover investigation.
The trial court in Turner granted JNOV to the plaintiff ruling that "no reasonable minds could have differed on the evidence which was presented to [to the jury] . . . . And it was highly offensive to this court for the defendants to do what they did to [Turner]." It entered judgment, jointly and severally, against GAB and Inteltech on fraud, invasion of privacy and conspiracy claims. The court of appeals, however, reversed, concluding that competent evidence supported the jury's verdict of no invasion of privacy. First, the record disclosed that the purpose and scope of the investigation was limited to gathering information concerning the workers' compensation claim and there was no evidence that Inteltech's employees harassed or annoyed Turner in the course of the investigation. The court also noted that at no time did Inteltech representatives enter Turner's home without her permission and the investigation visits were relatively short. Based on this evidence, the jury reasonably could conclude that Inteltech employees did not substantially intrude in a manner that would be highly offensive to a reasonable person.
IV. How to Avoid Invasion of Privacy Claims
Rather than orally assigning surveillance to an investigator, an insurer should consider setting forth rules or requirements in a letter agreement with the investigator (and following these rules itself when doing its own investigation). The goal is to avoid comparison of the insurer's surveillance with "Big Brother." Some suggestions include:
- Don't enter onto the subject's property;
- Refrain from photographs or videos of the subject in a home, apartment or other building where privacy is expected. Taking a video in a restaurant is probably defensible, although a jury may not care for it. Photographs or video of the subject outside in the yard are acceptable;
- Don't record private discussions, even those which occur in public places (i.e., a table in a restaurant) since one can have a private discussion in a public place;
- Don't follow the subject into a doctor's office or hospital or church or synagogue. Not only is a jury likely to be offended, but such places can cease to become public places when they move close to areas of evidentiary privilege;
- If you have to think twice about whether the surveillance would be offensive, avoid it. While the surveillance may not rise to the level of an invasion of privacy, it could engender contempt from the jury and damage the underlying case.
V. Pre-Litigation Duty to Disclose Pursuant to Minnesota's Unfair Claims Practices Act
An insurer may have a duty to disclose surveillance material upon demand by a claimant seeking no-fault benefits even prior to initiation of arbitration proceedings. Minnesota Statutes section 72A.201, subdivision 6 provides as follows:
Excepted from the materials required to be disclosed are "materials that relate to any insurance fraud investigation." An insurer could take the position that a surveillance "relates" to an insurance fraud investigation and not disclose. Absent a more comprehensive investigation than a surveillance film or photographs, however, an insurer may be hard pressed to deny that the surveillance was for the purpose of demonstrating the extent and validity of claimant's injuries, rather than actual insurance fraud.Subd. 6. Standards for automobile insurance claims handling, settlement offers, and agreements. . . . the following acts by an insurer, adjuster, or a self-insured or self-insurance administrator constitute unfair settlement practices:
. . .
(13) failing to provide, to an insured who has submitted a claim for benefits described in section 65B.44 [no-fault benefits], a complete copy of the insurer's claim file on the insured, excluding internal company memoranda, all materials that relate to any insurance fraud investigation, materials that constitute attorney work-product or that qualify for the attorney-client privilege, and medical reviews that are subject to section 145.64, within ten business days of receiving a written request from the insured. The insurer may charge the insured a reasonable copying fee. This clause supersedes any inconsistent provisions of sections 72A.49 to 72A.505.
While such a failure to disclose may serve as a basis for administrative sanctions by the commissioner, it does not give rise to a private cause of action. Glass Service Co., Inc. v. State Farm Mut. Auto. Ins. Co., 530 N.W.2d 867 (Minn. App. 1995).
VI. Other Considerations
While the focus of this discussion has been on surveillance and the invasion of privacy tort, there are additional considerations and tort causes of action that may be triggered by an insurance company's investigation of a claim and its surveillance of a claimant. As the foregoing cases demonstrate, obtaining a credit report may trigger liability under the Federal Fair Credit Reporting Act and persons claiming to be aggrieved by an alleged unreasonable surveillance may attempt to assert claims for negligent and intentional infliction of emotional distress.
Also important to keep in mind is the availability of a common law, and in some cases statutory, remedy for trespass. In Wisconsin, for instance, all persons who cooperate, instigate, encourage, condone, or assist in the commission of a trespass are liable as co-trespassers. Prahl v. Brosamle, 98 Wis.2d 130, 295 N.W.2d 768, 782 (Wis. App. 1980). Entering the land or premises of another in order to conduct surveillance may subject both the insurer and the investigation firm to liability for trespass in addition to invasion of privacy.
Finally, insurers authorizing surveillance should be mindful of state and federal wiretapping statutes. 18 U.S. Code § 2520 creates a civil cause of action where there has been:
- an interception, disclosure or intentional use of a
- wire, oral or electronic communication
- in violation of the Wiretapping Act.
VII. Conclusion
All this is not to suggest that insurers should abandon surveillance. To the contrary, surveillance can be an effective weapon against fraudulent claims. But it is a reminder that in light of, and perhaps in large part due to, advances in technology, invasion of privacy issues may become a "hot button" for courts, as well as national and state legislation. After long rejecting invasion of privacy theories, Minnesota, as well as other jurisdictions, appear poised to permit damages for invasive investigation not only against the investigators, but those who employ them as well.
Footnotes:
1 The Minnesota Supreme Court declined to recognize the fourth privacy cause of action for false light publicity. The court reasoned that such claims are similar to claims of defamation, and to the extent that false light is more expansive than defamation, tension between this privacy tort and the First Amendment is increased. Lake, 582 N.W.2d at 235. The court concluded that although there may be some untrue and hurtful publicity that should be actionable under false light, the risk of chilling speech was too great to justify protection for this small category of false publication not otherwise protected under common law defamation. Id. at 236.BACK
2 Froelich did not arise in the context of an insurance company investigation. Rather, in that case the defendant doctor wrote a letter to a judge presiding over a divorce proceeding in which he described the plaintiff's admission and stay at a psychiatric hospital, as well as the psychological problems which led to her admission. BACK
3 With respect to the Fair Credit Reporting Act claim, the court did conclude that the report was a "consumer report" for purposes of the Act, but the Third Circuit Court of Appeals reversed on this issue. See Houghton, 795 F.2d 1144 (3rd Cir. 1986). BACK
Born Minneapolis, Minnesota, April 17, 1948; admitted to bar, 1974, Minnesota. Education: University of Virginia; B.A., University of Minnesota, 1970; J.D., William Mitchell College of Law, cum laude, 1974. Member: Hennepin County Bar Association; Minnesota State Bar Association; Minnesota Defense Lawyers Association; Defense Research Institute; Association of Defense Trial Attorneys. Certified as a Civil Trial Specialist by the Minnesota State Bar Association.
direct dial number: (612)525-6952
e-mail: pvb@cousineaulaw.com
Born Los Angeles, California, June 24, 1965; admitted to bar, 1990, California, U. S. District Court, Central District of California; 1992, Minnesota; 1994, U.S. District Court, District of Minnesota. Education: B.A., Occidental College, magna cum laude, Phi Beta Kappa, 1987; J.D., University of California, Los Angeles, 1990. Member: Hennepin County Bar Association; Minnesota State Bar Association; California Bar Association (inactive); American Bar Association; Minnesota Defense Lawyers Association, Minnesota Women Lawyers.
direct dial number: (612)525-6925
e-mail: aer@cousineaulaw.com