The Oregon Court of Appeals on July 2, 2014, issued an opinion in Safeco Ins. Co. of Oregon v. Masood, — Or App —, — P3d —, 2014 WL 2978311 (2014), addressing whether an insured may condition compliance with an insurance company’s requests for information on requiring execution of a confidentiality agreement imposing limits on the ability to use the personal information. The Court of Appeals upheld the trial court’s determination that the terms of the insurance policy required the insured to cooperate with the insurance company’s investigation and that the insured could not condition cooperation on the negotiation of additional contractual terms. In making its ruling, the Court of Appeals determined that neither the insured’s “reasonable expectations” nor the duty of good faith and fair dealing could be used to supplement or amend the unambiguous terms of an insurance contract.
In the case, the insured’s home was destroyed by fire. The insured was displaced from the home following the fire while the property was cleaned. The insurance company provided security for the property while the work was being completed. Upon returning to the home, the insured reported a $3.5 million theft of personal property from the home that allegedly occurred while the insurance company had control of the property. The insured filed a claim for the theft. The insurance company commenced an investigation of the claimed theft, including requesting a number of documents. Among the documents that the insurance company requested were financial statements, records of the insured’s children’s college fees, health insurance costs for the insured and his family, and monthly expenses associated with the insured’s pet care.
The insurance policy included terms requiring the insured to provide certain documentation if requested by the insurance company during a claim investigation. In response to the document requests, the insured drafted a proposed confidentiality agreement that placed restrictions on the insurance company’s ability to use the information and contact third parties regarding the claim. The insured invited the insurance company to negotiate the terms of the confidentiality agreement and noted that the other information would be provided to the extent the insured’s privacy was protected. The insurance company rejected the proposed agreement and filed a declaratory judgment action seeking a declaration that it was entitled to the requested information. The trial court entered summary judgment in favor of the insurance company. The insured appealed the decision.
At the Court of Appeals, the insured argued that “because the financial information was ‘sensitive,’ and because every insurance contract in Oregon includes the implied duty of good faith and fair dealing, and because the contract must be construed in a manner consistent with the understanding of an ‘ordinary’ insured, he had a contractual right to require [the insurance company] to enter into a confidentiality agreement before furnishing the requested financial information.” The court rejected the insured’s arguments, upholding the trial court’s ruling. The court initially noted that the insured still had the benefit of existing legal protection, which provided legal recourse should the insurance company improperly or maliciously use the information. Next, the court determined that the express terms of the contract required the insured to provide the information. It found that the insured’s attempt to condition production on a confidentiality agreement impermissibly altered or added terms to the contract and the insurance company was, therefore, entitled to the requested documents. The court also found that the insured’s reasonable expectations could not override the terms of the contract where, as here, those terms were unambiguous. With respect to the insured’s argument that the insurance company violated the duty of good faith and fair dealing, the court found that the duty extended only in making its information demands and handling the requested information—it did not justify imposing new contractual terms.
Maloney Lauersdorf Reiner frequently advises clients in insurance claim investigations, including the requirements associated with the duty to cooperate and compliance with the duty of good faith and fair dealing. Please contact us with any questions regarding this case or any other matter you see addressed on the website or in the Insurance Coverage Blog.