SIU Today Summer 2022 - 10

state courts have not examined the type of conduct that constitutes
" malice " or " bad faith " for purposes of insurance fraud immunity
statutes, courts that have addressed this issue have applied a variety
of standards. For example, the California Supreme Court has held
that for purposes of the state's insurance fraud immunity statute,
an insurer acts with " malice " if its actions were motivated by
" hatred or ill will or in reckless disregard of the insured's rights. " 4
An insurer must be found to have acted " without malice " if it
has " evidence providing probable cause to believe an insurance
fraud has occurred, " and the report " does not contain known
inaccuracies and is not incomplete. " 5
In Frommoethelydo, the
plaintiff alleged that the insurer failed to interview all necessary
witnesses (including the plaintiff), failed to advise the plaintiff
of its intent to make the fraud referral, and failed to consult a
document examiner.6
The court found that an insurer will not face
liability for relaying its suspicions of insurance fraud where there
was probable cause to believe fraud occurred, even if the carrier
should have investigated the loss further.7
Similarly, in Schatzberg v. State Farm Mut. Auto Ins. Co.8
, the United
States District Court for the Eastern District of Pennsylvania stated
that regarding defamation claims, statutory immunity is subject to
a general exception for " actual malice, " which requires evidence
that the insurer " knew that the statements were false or recklessly
disregarded their falsity. " The court further explained that failure
to check sources and mere proof of a failure to investigate, without
more, cannot establish actual malice.9
In Schatzberg, the court held
that allegations of failure to interview certain witnesses did not rise
to actual malice.10
Courts interpreting the New York insurance fraud
immunity statute have defined " fraud or bad faith " as " intentionally
knowing wrongful conduct " in filing an insurance fraud report.11
In addition to providing immunity for sharing information
regarding suspected insurance fraud with law enforcement,
immunity statutes often extend to communications between
insurers and other groups. For example, several states offer
immunity for insurers who provide information regarding
suspected fraud to the state's insurance department,12
while other
states extend immunity to communications with the National
Association of Insurance Commissioners and anti-fraud agencies.13
Several states also provide immunity for communications among
insurers regarding suspected fraud.14
Investigators and claims professionals must also be aware that
several states have enacted laws requiring insurers to timely report
" In addition to providing immunity for sharing
information regarding suspected insurance
fraud with law enforcement, immunity statutes
often extend to communications between
insurers and other groups. "
10 SIU TODAY | SUMMER 2022
suspected fraudulent claims to the state insurance department and/
or a state fraud unit.15
Accordingly, while certain communications
between carriers and law enforcement are often protected by statutes,
such fraud referrals are also often required by other statutes.
B. ARSON IMMUNITY STATUTES
Most states have also enacted immunity statutes protecting
individuals from reporting potential arson to law enforcement.
Like insurance fraud immunity statutes, states enacted many of
these statutes in accordance with provisions authorizing agencies
to compel insurers to release information pertaining to their
investigation of suspicious fires. For example, California law states
that certain authorized agencies may compel insurers to release
relevant information " when there is evidence or suspicion that
an arson has been committed. " 16
Additional states -- including
Florida, Delaware, Pennsylvania, New Jersey, and New York -- have
enacted similar statutes.17
As with insurance fraud immunity statutes, arson immunity
statutes typically provide that insurers complying with reporting
provisions will not face civil liability unless they have acted with
fraud or malice.18
to insurers for sharing information regarding suspected arson
with other insurers and industry organizations.19
There are
relatively few cases interpreting arson immunity statutes.
However, at least one court analyzing whether an insurer has
acted with " malice " pursuant to such a statute focused upon
whether the insurer had " reasonable grounds for believing [its
report of suspected arson] to be accurate. " 1
C. THE LIMITS OF IMMUNITY
As the laws summarized above reflect, civil immunity of insurers
for statements made to law enforcement officials and other
authorities is not without important limits. First, in virtually all
states, immunity is not available for statements made maliciously
and in bad faith. Depending upon the state, this exception may be
limited to knowing falsehoods, or may extend to statements made
in reckless disregard of the truth.
Furthermore, many states limit immunity of insurers to disclosures
regarding suspected insurance fraud and arson. Although most
discussions between insurers and law enforcement concern
these topics, insurers sometimes provide information regarding
other investigations. For example, an insurer may cooperate in
an investigation as to a policyholder's suspected theft of vehicles.
Insurers' assistance in investigations outside the scope of immunity
statutes has been subject to challenge by implicated policyholders,
including bad faith claims.
Pursuing a bad faith claim for the disclosure of information to law
enforcement or other parties may be unlikely to succeed in states
recognizing that a bad faith claim must concern " the manner in
In addition, some states provide civil immunity
SIU Today Summer 2022

Table of Contents for the Digital Edition of SIU Today Summer 2022
