Life Insurers To Sue Vermont On Privacy Rule

By Jim Connolly

NU Online News Service, Jan. 8, 1:40 p.m.EST?The American Council of Life Insurers will file suitto overturn privacy regulations that are in place in Vermont, anattorney for the trade group said today.

Victoria Femia, ACLI senior counsel-litigation, said the suitwill be filed in Washington County State Superior Court during theweek of Jan. 14.

Other life insurance, property & casualty and healthinsurance entities have expressed interest in joining the suit,although no definite commitments have been made, Ms. Femiaadded.

She said the suit will address the legal authority of ElizabethCostle, commissioner of the Vermont department of banking,insurance, securities and health care administration, to putexisting regulations in place.

In particular, Ms. Femia said that the suit will challenge theopt-in provisions for non-affiliates sharing consumer information,contending that there should be an opt-out provision.

An opt-in provision requires insurers to get policyholders'permission to share information. An opt-out provision, on the otherhand, would require a party whose information is being shared tospecifically request that such information not be shared.

The suit will also contend that Vermont's privacy regulationgoes beyond what is required in the Gramm-Leach-Bliley FinancialModernization Act of 1999.

The opt-in provision is currently required for non-affiliatessharing information such as credit worthiness and personalcharacteristics.

The department has said that in making its privacy regulationsit is trying to establish standards similar to those the staterequires for banks.

Affiliates would be required to operate according to the federalFair Credit Reporting Act, which says affiliates can share somedata such as name and contact information. However, for informationsuch as credit-worthiness and personal characteristics, an opt-inwould be required. Other states have an opt-out provision.

Depending on the backlog on the court's dockets, the case couldtake a year to move through the judicial process, Ms. Femiasaid.

Ms. Femia said that the decision to file a suit could be takenin other states. She said, because of its size and importance,California will be watched particularly closely by the ACLI as itestablishes privacy guidelines.

The decision to sue is based entirely on the ACLI'sunderstanding of Vermont laws and not on any personal disagreementwith regulators, Ms. Femia noted.

In fact, the ACLI is now in contact with the department to seekguidance on how to meet the requirements of the regulation, JackDolan, an ACLI spokesman said.