Insurers may now be protected by federal law from providing information about their insureds when plaintiffs request information about prior claims involving non-parties. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (15 U.S.C. §§ 6801 et seq.) (GLB Act) requires "financial institutions" to provide consumers notice of their information-sharing practices and, more importantly, limits the sharing of consumers' private information.
At least one jurisdiction has recently affirmed the application of the GLB Act to prevent the discovery of the nonpublic information of an insurance company's insureds. (The Equitable Life Assurance Society of the United States v. Mary T. Irving, 2003 WL 22098021, Sept. 11, 2003.)
Under the GLB Act, "financial institutions" include companies that offer financial products or services to individuals, such as loans, financial or investment advice, or insurance. The Act requires insurers to protect information collected about individuals; the Act does not apply to information collected in business or commercial activities.
Commonly, in coverage and bad-faith litigation, the insured/plaintiff seeks, through written discovery, information on previous claims involving the same policy provisions or previous claims of bad faith. However, a strong, good faith argument exists that the GLB Act applies to prevent disclosure of such information as protected, nonpublic information. "Nonpublic" information can mean any information included in an application; information obtained by the insurers from another source, such as credit reports; or information about transactions between the insurer and its customers. Even the fact that an individual is a consumer or customer of a particular insurer is nonpublic, personal information.
Bear in mind that the protected information is limited to nonpublic information. Therefore, the GLB Act does not restrict information that is already public, such as prior litigation. Thus, discovery requests seeking information about previous lawsuits involving the financial institution would not be objectionable on the grounds that they violate the Act.
In practical terms, insurance companies may, in good faith, in the course of litigation, object and refuse to provide opposing counsel with any nonpublic information about any non-party consumer or client.