Protecting Yourself From Individual Liability
May 12, 2012
PRESENTED BY:
DAVID O. BRINK, ESQ.
SMITH & BRINK, P.C.
350 GRANITE STREET, SUITE 2303
BRAINTREE, MA 02184
DIRECT: 617-657-0120 CELL: 617-593-4180
DBRINK@SMITHBRINK.COM
Materials Prepared By:
David O. Brink, Esq.
Melissa C. Bruynell
___________________________________________________________________________________________
Massachusetts
Michigan
New York
Pennsylvania
Rhode Island
New Jersey

Individuals working for corporations may be
sued!
◦ Example: Tilman v. Brink, 74 Mass. App. Ct. 845
(2009)

It is possible for the accuser to become the
accused!

Why Are SIU Investigators Normally Protected
From Individual Liability?
◦ A legal relationship called agency is formed when
an employee works for an employer, permitting the
“agent” (SIU Rep.) to represent the “principal” (the
Insurance Company) in business dealings with
“third-parties” (insureds/claimants/witnesses, etc.).
◦ Known as the “agent of the disclosed principal”
Rule.

Where a third party knows that the
insurance company exists and that the
employee works for the insurance company
(as is almost always the case), the insurance
company CAN BE liable on a contract, and the
employee is GENERALLY NOT LIABLE.

HOWEVER, there are several exceptions to the
general rule that “agents” are not personally
liable:
◦ A)
The parties to the contract intended the
insurance employee to be personally liable;
◦ B)
When the person working for the insurance
company was not an employee, but was an
“independent contractor”;
When the employee’s conduct was not within
the scope of authorized employment.
◦ C)
 When the employee was on a “detour,” a small
deviation from the scope of authorized employment,
he or she IS NOT personally liable; however, when the
employee was on a “frolic,” a major deviation from the
scope of authorized employment, he or she CAN BE
personally liable;
◦ D)
Serious criminal acts; and,
◦ E)
Intentional Torts
 including: assault, battery, conversion/trespass to
chattels (intentional taking of the property of others),
trespass to land, false imprisonment, intentional
infliction of emotional distress, etc.

In other words, there are certain traps that
insurance employees can fall into, exposing
themselves to personal liability.

Insurance company employees face stringent
criminal and civil penalties if they do not
follow protocol when accessing criminal
record information.


Massachusetts has very specific rules concerning
the circumstances under which Criminal Offender
Record Information can be released.
Specifically, unless the requestor fits into very
narrow categories, mainly involving screening for
employment or housing purposes, or has
authorization from the individual whose criminal
record is being released, the requestor is only
eligible to receive the limited information
available under “Open Access.”


Massachusetts Regulations provide, “A nonlaw enforcement requestor shall not request
an individual’s CORI without that individual’s
authorization, except when requesting Open
Access to CORI.” (803 CMR 2.23).
The information available under “Open
Access” is more limited than that available
under requested or standard access.


Proper procedure when requesting an Open
Access to CORI is to file a paper submission
stating the name and birth date of the person
whose record is being requested by first class
mail.
Full automation of the CORI request system is
anticipated in the future.

Massachusetts has enacted statutes providing
stringent civil and criminal punishment to
violators of these procedures.
◦ Pursuant to M.G.L. c. 6, § 177, an offender is liable
for actual damages, and in the event of a willful
violation, between $100 and $1000 in exemplary
fees in addition to attorneys fees.
◦ Pursuant to M.G.L. c. 6, §178, for each offense, an
offender may be punished by up to one year in the
house of corrections and up to $5000 in fines.
◦ A corporation may be liable for up to $50,000 in
fines.

A violation of Civil Rights in the handling of
an insurance claim can expose an insurance
employee to significant civil liability.

Not only can a Civil Rights violation subject
an insurance company employee to individual
liability because it falls under the category of
intentional torts and also possibly severe
criminal acts, but it can expose that
employee to treble damages under M.G.L. ch.
93A.

For example, in Ellis v. XXXXX Ins. Co., 41
Mass. App. Ct. 630 (1996), an employee of
the insurer allegedly made racially motivated
comments and performed racially motivated
acts while investigating a claim. The
Massachusetts Appeals court found that racial
harassment during the investigation of an
insurance claim was a triable issue and
reversed summary judgment for the
defendants.



Federal Statute, 18 USCS § 2510, established
criminal penalties for “wiretapping” and other
privacy violations.
Massachusetts Criminal Statute, M.G.L. c.
272, § 99 is a two-person consent law which
makes recording a conversation without the
consent of all parties illegal.
A violator may also be liable for civil damages
to the aggrieved party.

Misdemeanor criminal statute Massachusetts
General Laws, ch.175, § 181.


A person may be sued for DEFAMATION
when he publicizes language concerning the
plaintiff which tends to adversely affect his
reputation, and thereby actually causes
damage to his reputation.
In other words, making statements about
claimants, witnesses or insureds to third
parties, orally or in writing, which harm their
reputations, can expose employees of an
insurance company to individual liability.

Defamation actions are divided into two
categories:
◦ 1) Slander; and
◦ 2) Libel.

Libel is the written publication of defamatory
statements, whereas slander is the spoken
publication of defamatory statements.


In Carter v. State Farm Fire & Cas. Co., 850 F.
Supp. 2d 946 (S.D. Ind. 2012), a $14.5 million
verdict was awarded against the insurer where
the Court found that an insurance company
employee was guilty of both libel and slander for
accusing a claimant of committing fraud.
An older case held an insurer vicariously liable
for an investigator’s slander of a claimant
because the investigator implied that the
claimant had been involved in various crimes
when speaking with the claimant’s neighbors.

Is a person practicing law when he or she
conducts an Examination Under Oath?
◦ (…no, but you need to be careful.)

Massachusetts criminal statutes not only
prohibit disbarred former attorneys from
practicing law and non-attorneys from
holding themselves out as attorneys, but
more relevantly, prohibit any non-attorney
from “solicit[ing] or procur[ing] from any such
person or his representative, either for
himself or another, the management or
control of any such claim, or authority to
adjust or bring suit to recover for the same.”

Massachusetts General Laws, Ch. 221
◦ Section 41. Attorneys—Discipline—Penalties on
Disbarred or Unauthorized Attorneys and for
Soliciting Law Business
 Criminal misdemeanor statute M.G.L. ch. 221, § 41
states, in relevant part, that violators “shall be
punished for a first offence by a fine of not more than
one hundred dollars or by imprisonment for not more
than six months, and for a subsequent offence by a
fine of not more than five hundred dollars or by
imprisonment for not more than one year.

Insurance employees must take care not to
give the impression to claimants, insureds
and witnesses that they represent them or
can provide them with legal advice with
respect to their insurance claims.
A first offence is punishable by as much as
$100.00 in fines and six months in prison.
◦ Subsequent offences are punishable by as much as
$500.00 in fines and one year in prison.
◦

Insurance company employees may be
exposed to personal liability for instituting
criminal or civil matters with improper
motive, as doing do can fall under the
intentional torts of Malicious Prosecution and
Abuse of Process.


Today, Massachusetts courts also recognize
Malicious Prosecution where the Defendant
instituted civil proceedings against the
plaintiff with malice, without probable cause
and where the proceedings terminated in the
plaintiff’s favor.
Maxwell v. AIG Domestic Claims, Inc., 460
Mass. 91 (Mass. 2011)

Malice may be inferred from the absence of
probable cause, but may also be found
through an improper motive, such as
“vexation, harassment, annoyance, or
attempting to achieve an unlawful end or a
lawful end through an unlawful
means.” Beecy v. Pucciarelli, 387 Mass. 589,
594-595 (1982).


Abuse of Process is the use of legal process “to
accomplish some ulterior purpose for which it
was not designed or intended, or which was not
the legitimate purpose of the particular process
employed.” Caroll v. Gillespie, 14 Mass.App.Ct.
12, 26 (1982).
Abuse of process is a 'form of coercion to obtain
a collateral advantage, not properly involved in
the proceeding itself, such as the surrender of
property or the payment of money.'” Vittands v.
Sudduth, supra, quoting Cohen v. Hurley, 20
Mass. App. Ct. 439 (1985).


Insurance companies and their employees
have been sued for Malicious Prosecution and
Abuse of Process on several occasions.
For example, the Rhode Island Superior Court
denied an insurer’s motion for summary
judgment on an Abuse of Process count
where the insurer was involved in a fraud
sting of the plaintiff, which led to his arrest.


The Massachusetts Supreme Judicial Court found
that the elements had been established for a
showing of Malicious Prosecution against an
insurer where the insurer filed a third party
medical malpractice suit with significant evidence
that the suit was not meritorious.
The U.S. District Court in Pennsylvania found an
insurer’s instruction to counsel to issue
subpoenas and take depositions to allegedly
harass a medical provider and allegedly attempt
to drive it out of business met the elements for
abuse of process.

Personal Umbrella Policy
◦ 1. Insuring Agreement:
 … b) personal injury for which an insured becomes
legally liable due to one or more offenses listed under
the definition of personal injury to which this
insurance applies.
 Damages include prejudgment interest awarded
against the insured.

Personal Umbrella Policy (cont.)
◦ …8. Personal injury means injury, other than bodily
injury, arising out of one or more of the following
offenses:
 a. false arrest, detention or imprisonment, or
malicious prosecution;
 b. libel, slander or defamation of character or
 c. Invasion of right of private occupancy, wrongful
eviction or wrongful entry.
If you have any questions or would like more
information, please feel free to contact us.
David O. Brink
dbrink@smithbrink.com