Is There Still Immunity With Immunity Letters from Law Enforcement?

On May 1, 2012, the North Carolina Court of Appeals issued its ruling in the case of N.C. Farm Bureau Mutual Insurance Company vs. Cully’s Motorcross Park, Inc.  The holding of the case is concerning for a number of reasons that will certainly impact any disclosures made by an insurer to law enforcement.  The decision will most certainly have a “chilling affect” on the discussions with law enforcement and the disclosure of information discovered by insurance special investigators during their investigation of reported losses.

Based upon the holding as issued by the court, it does appear that there are several “Practice Tips” that can be gleaned from the court’s decision.  These tips include the following:

  1. Limit contact with law enforcement officers to a simple inquiry regarding the status of the investigation.  Specifically, has law enforcement identified any witnesses or suspects during its investigation?  In the event of a reported theft/burglary loss, has any of the property reportedly stolen been recovered?
  2. Make sure that any “immunity letter” received from law enforcement contains the accurate information, i.e. date of loss, location of loss, name of the insured(s), and that the letter itself has a correct date on it.  (Oftentimes, an officer may use a previous letter as a “go-by” and forget to change the date at the top).  If any information in the immunity letter is incorrect, do not be afraid to ask for a corrected letter.  Also, document the request and whether you have to ask for a corrected letter.  This information itself may evidence that the insurance investigator is proceeding in “good faith.”
  3. If the claim is in litigation, any immunity letter should be forwarded to the claims/coverage counsel.  Counsel should respond to these requests.
  4. If the claim has been assigned to counsel for an examination under oath and/or coverage analysis, forward the immunity letter to counsel for response.  The insurer will benefit from this “extra layer” of oversight.
  5.  Prepare a letter of transmittal to law enforcement in response to its immunity letter.  This letter should be prepared even if the claim file documentation/information is being hand delivered.  This letter of transmittal will create a “memorialized record” of the requests and the meticulous attention to detail that the insurer and/or counsel has taken to confirm that no improper disclosures or “commentary” is present to be used against the insurer at a later time.
  6. If there is information in the claim file that suggests that the insured(s) may be guilty of other crimes (i.e. failing to properly file tax returns) and these crimes are unrelated to any potential insurance fraud and/or arson claim by the insurer, do not “highlight” this for law enforcement.  If law enforcement discovers this information on its own and pursues it, that is their decision.  However, if an insurance investigator brings it to the attention of law enforcement, the courts may construe that as the insurer initiating a criminal investigation against the insured(s).
  7. It now appears that malice may be inferred from other conduct performed by the insurance investigator/representative during its investigation of the claim.  For this reason, it is even more important to memorialize all activity with law enforcement in writing to serve as a record evidencing that the insurer acted at all times in “good faith.”
  8. Any “alleged act” committed by the insurance representative may serve as a separate cause of action against the insurer independent of any breach of contract claim.  This separate allegation may also be used as a basis for a claim for treble damages and attorney’s fees as an unfair or deceptive acts or practices as set forth in N.C.G.S. § 75-1.1.

A dangerous and disturbing part of the ruling is that the court recognized in a claim for malicious prosecution claim that one measure of damages was attorney fees incurred by the defendant.  While this may be an appropriate measure of damages in this type of claim, plaintiff’s counsel will most definitely use this as an attempt to “double dip” and claim that any attorney fees should also be trebled pursuant to N.C.G.S. § 75-16 despite the fact that attorney fees are not an appropriate measure of damages in a breach of contract claim.

This holding will most definitely direct insureds and their counsel into examining this area more closely in a potential “fishing expedition” to determine other possible causes of action against an insurer.  Simply put, if the insured cannot win a breach of contract claim, they may still have a claim for something said or done by the insurer during the investigation process without regard to the insureds’ concealment, fraud, and/or intentional act(s).  For this reason, enough emphasis cannot be placed on the recommendation that any requests by law enforcement be thoroughly discussed, including conference(s) with coverage/litigation counsel.

2017-10-16T19:38:12+00:00