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Running MVRs for Commercial Auto Clients

Author: VU Faculty

Should an agency run motor vehicle reports for commercial clients?

ANSWERS:

No. It is usually against privacy laws to do so. My understanding is the carrier cannot even provide them. The customer can obtain these easy enough. Don't get in the middle of that potential quagmire.

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It depends on who the agent is giving the reports to. If you're giving them to the insurance carrier, you are operating within the Fair Credit Reporting Act (FCRA). If, however, you're giving them to your insured, you MUST be following FCRA guidelines. In addition, most MVR company contracts PROHIBIT you from giving reports to any third party other than the insurance company.

DON'T DO IT!!

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Yes, if it's for the underwriter. No, if it's to determine employment. If the insured is trying to determine whether to hire the driver, let the insured order the MVR. They will probably have to get the driver to give them permission to order the MVR. This is probably subject to the Fair Credit Reporting Act or the Driver Privacy Protection Act. Be aware of Federal Laws.

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No. This is a violation of the FCRA.

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I think it is highly unadvisable. I would no more send an MVR on an employee to a commercial client than I would send his/her medical records or bank records. See these VU articles:

http://www.independentagent.com/Education/VU/Agency%20Management/Procedures/Privacy/EdwardsFCRAMVR.aspx

http://www.independentagent.com/Education/VU/Agency%20Management/Procedures/Privacy/EdwardsMVRLegal.aspx

http://www.independentagent.com/Education/VU/Agency%20Management/Procedures/Privacy/EdwardsMVRForm.aspx

Same advice for CLUE on HO:

http://www.independentagent.com/Education/VU/Agency%20Management/Procedures/Privacy/EdwardsMoldCLUEFCRA.aspx

http://www.independentagent.com/Education/VU/Agency%20Management/Procedures/Underwriting/FacultyCLUE01.aspx

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That is an agency decision. Just make sure the driver signs the Fair Credit Reporting waiver for the agency / employer to use the information as part of the employment operations for your insured.

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According to Fair Credit Reporting Act, agents may order MVRs only as it relates to the underwriting of insurance. If your insured/employer is thinking of hiring someone and wants to know if they are eligible for coverage, you may order an MVR and then tell the insured/employer that the driver is “eligible" or “ineligible." You may not share the MVR with them or let them know what is on the record (why they are not eligible). Some agencies have a practice of having the driver sign a release to share the information; it is not recommended that you do this. Do this puts the agency under the definition of a “credit reporting agency" and many other regulations must be followed – including but not limited to: Giving information/brochures with steps to take if information should be corrected. Also, the practice is not permitted by most MVR vendors where agencies obtain this information.

Lastly, there is a possibility that your E&O policy may not cover you if legal action results from your actions as a credit reporting agency. It is best to avoid the practice and instead coach your commercial customers as to how they can order MVRs themselves.

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Maybe, sometimes. It depends on what agreements you have with the clients and with the insurers writing the policies. Ask you E&O carrier this question and if the answer is yes, ask the insurer how to best do this without violating privacy laws.

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Do you mean ethically or legally? As long as the drivers agree in writing and no privacy laws or contractual agreements are violated. The best answer is to have the insured require the individual provide the MVR directly to the insured. You don't want to be accused of making any recommendations about drivers.

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Here is what we have been giving out.

SECOND QUESTION OF THE WEEK

Member QuestionOur agency often gets requests related to who can and cannot see an MVR and where our agency stands if we receive such MVRs and make some kind of determination to our customer as to the employability or insurability of a given person. Can you tell us what the current situation is and what we can and cannot do?

IIAI's Answer - There are many different issues that impact the accessing and releasing of motor vehicle driving records: the Financial Modernization Act, the Fair Credit Reporting Act and the Federal Driver Privacy Protection Act. First, we suggest the agency review the contract language of the providers (vendors) of these reports for any possible restrictions (this is extremely important as contractually they may limit you even more than the law). There are two primary legal limitations on the ability of an agent to disseminate MVR information. The Federal Fair Credit Reporting Act (FCRA) applies to insurance agents when utilizing the MVR as a source of underwriting information. Under the FCRA agents are required to disclose to the insurance client that the MVR is being obtained. The law requires you to disclose how the consumer can obtain a copy of the MVR if they want to verify the information. If the agent follows these procedures, the agency does not need written permission as long as the practice is disclosed and the information is only utilized for the underwriting of insurance. Further, the agent will not be considered a credit reporting entity under FCRA. The law does not permit the agent to share this information with a third party such as a commercial insurance client concerning their employees without written permission of the employee. If the agency did provide the information to a third party they are deemed by law to be a credit-reporting agency, and as such, are required to follow all the restrictions of the FCRA. But, the Federal law does not allow agents to access the MVR's or credit reports when there is no underwriting reason for doing so. Therefore, it is hard to develop a case where it is legally not a problem for the agent to share this information with outsiders. If a commercial client calls and asks the agent to run an MVR on a potential new employee the agent may not offer the service if the agent does not write the auto insurance covering the employees under the employer's auto policy.

Before you think you've got this all figured out, don't proceed too quickly. Now, the contract that the agency has entered into with the MVR or credit-scoring vendor (i.e. ChoicePoint) enters into the picture. Most (we don't know of an exception) of the MVR and credit score providers have become concerned about unauthorized dissemination of MVR's and for that reason have contractually prohibited the agent from sharing the information. The typical contract states that "reports may not be resold or transferred to any other person." Penalties for doing so are indemnification of the vendor for legal and regulatory penalties as well as termination of the contract. Other penalties could be enforced against the agent if they violate the FCRA; they include a $2,500 fine per violation. In addition, a consumer can commence a lawsuit and seek punitive damages, attorney fees, other costs and damages. Remember, if these reports are used for other than underwriting (insurance purposes), an agent's E&O coverage likely will not apply.

BOTTOM LINE: Agents would be wise not to offer disclosure of MVR's, Credit Scores and other consumer information to any third party. The agency should develop a Privacy Policy to assure they stay in compliance with the law. If your agency has commercial clients who would like to receive MVR's, you must ensure you are in compliance with the FCRA requirements and the vendor contract. Often a better solution is to suggest that commercial clients who want the MVR's for employment purposes access the MVR vendor directly.

Key Items to Remember When Utilizing MVR's and/or Credit Scores in the Agency

  • The agent must have a legitimate reason for obtaining the reports. They must be directly related to the underwriting of insurance.
  • Never give out report information to a third party. In other words, do not obtain information simply as a human resource service for your client. They need to go directly to the vendor themselves.
  • If you are going to provide disclosure for insurance purposes to a client, have a written policy providing for the requirements of compliance by the employer.
  • Do not charge for any MVR reporting you are doing.
  • Read your MVR and Credit Scoring Vendor Contracts. Read carefully and follow the "use restrictions and confidentiality" sections.
  • Seek legal advice when in doubt.
  • Advise commercial customers that they must be in compliance with FCRA when accessing MVR information themselves.
  • Review your E&O coverage before disclosing report information. Remember, most E&O policies protect you only for insurance purposes (i.e. human resource protection is not included).

To read more on this issue, the Big "I" has two great articles posted on the Virtual University and they can be found by going to the following links: Furnishing MVRs…Legal But Not Permitted, http://www.independentagent.com/Education/VU/Pages/home.aspx, and Warning: Furnishing MVRs to Insured's Could be Hazardous to Your E&O Policy!, http://www.independentagent.com/Education/VU/Pages/home.aspx.

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An article I wrote:
 
MVR Sharing
A Dangerous Practice
By David Thompson, CPCU

Commercial employers in the process of hiring employees who will be driving company vehicles routinely contact their insurance agent to have the drivers added to the Business Auto Policy.

Typically, the commercial insured will provide the agency with the new employee's driver's license number, so that the agency can run a motor vehicle report (MVR). Some agencies have the practice of faxing the employer a copy of the MVR, especially in situations where the employee's driving record does not meet the underwriting guidelines of the Business Auto Policy. In other instances, the agency might call the employer to discuss problems with the MVR. Some agencies even engage in the practice of routinely providing MVRs to their commercial customers. Before an agency engages in the practice of sharing MVRs with others it's important to consider the impact of: 

  • The federal Fair Credit Reporting Act
  • The MVR vendor contract
  • The agency E&O policy

Fair Credit Reporting Act

The federal Fair Credit Reporting Act (FCRA), which applies to all “consumer reports," including MVRs, CLUE reports, credit scores, and many other types of information on individuals, has very strict guidelines on what is legal regarding the use of such reports.

Under the FCRA, an employer is well within their rights to require that a current or prospective employee provide or make available a wide variety of personal information such as an MVR, credit report, criminal background report, etc. At the same time, the employee is granted significant safeguards regarding the access and use of such information for employment.

When any consumer report will be used for employment purposes, the employee or prospective employee must first give written permission for such information to be obtained by the employer. When the employer requests this information from a “consumer reporting agency" (CRA) such as Equifax, Experian, TransUnion, ChoicePoint, etc., there are certain federally-mandated documents and procedures which must accompany the transaction between the CRA and the employer. For a detailed report on this, see the Federal Trade Commission (FTC) report, “Using Consumer Reports – What Employers Need To Know," available on the FTC website - www.ftc.gov. Suffice it to say, the paperwork required between the employer, employee, and CRA is voluminous.

An insurance agency that pulls an MVR only in conjunction with “the underwriting of insurance," as prescribed in the FCRA, Section 604, does not need written permission to obtain the MVR. Therefore, when the commercial insured/employer sends a request to the agency to pull the MVR on a new employee in conjunction with adding the employee as a driver under the Business Auto Policy, the agency can do so without the written permission of the new employee.

In addition, to inform a commercial insured that a new driver does or does not qualify as a driver for underwriting purposes seems to be a part of “the underwriting of insurance."

However, most experts believe that if the agency shares the specific contents of an MVR with the employer, via fax or phone, the agency is no longer “underwriting insurance," but is now acting as a “consumer reporting agency," and must follow all the steps and procedures required under the FCRA.

Therefore, if the agency chooses to furnish MVRs to commercial insureds on their current or prospective employees, they may legally do so, if they follow all the requirements of a “consumer reporting agency" under the FCRA. Again, the paperwork between the agency and commercial insured is extensive and federally mandated procedures must be followed exactly as prescribed. While not intended to be a complete analysis of the massive amount of paperwork required, below is a summary of what is required under the FCRA if an agency furnishes MVRs to commercial customers.

  • The agency must make certain that the MVR vendor contract allows the agency to share MVRs with others. (This is discussed in more detail later in this article.)
  • The agency provides the employer with the FTC document “Prescribed Notice of User Responsibilities." This must be provided only once per employer.
  • The agency obtains a document signed by the employer stating they understand the FCRA and will comply with it. Debate exists over whether this document is required only once or with each MVR request. The safest approach is to require the employer to provide this to the agency with each request. The employer must sign this document.
  • With each MVR request the employer provides the agency with a document signed by the employee or prospective employee authorizing the employer to obtain the MVR. This document must contain only such permission and the permission cannot be part of another document such as an application for employment.
  • The agency obtains the MVR and provides it to the employer, along with the three-page FTC document “Appendix A – Prescribed Summary of Consumer Rights."
  • The employer has further responsibilities. If the MVR contains adverse information which may effect the decision to hire or promote, the employer must provide further notices. A “Pre-Adverse Action" letter is required initially when the employer provides the employee with a copy of the MVR and “Appendix A – Prescribed Summary of Consumer Rights." After a period of time (three to five days) the employer must then provide the employee with the “Adverse Action" letter. Should the employer fail to take these steps it's possible that the agency could be named in any suit the employee may elect to bring against the employer. This would be due to the fact that the agency was the source of the MVR and was serving as a “Consumer Reporting Agency" when they supplied the MVR to the employer.

Sample forms described above are located on FAIA's web site at the llink below. FAIA does not endorse the practice of supplying MVRs to third parties and in fact strongly recommends against it:

http://www.faia.com/education/edlibrary/pdfs/faircredit.pdf

MVR Vendor/Provider Contract

While the practice of an insurance agency furnishing MVRs to commercial insureds on their current or new employees can be legal under the FCRA if all of the paperwork procedures are followed, virtually all sources from whom the agency obtains the MVRs expressly prohibit the practice. Following are excerpts from the contracts of two MVR providers that many insurance agencies use.

MVR Company A: "The Consumer Reports provided by Company A are for the sole and internal use of the Insurance Agency, and may not be resold, sub-licensed, delivered or displayed in any way or used by any third party. Insurance Agency certifies that it shall order, receive, disseminate and otherwise use the Consumer Reports in compliance with all applicable federal, state and local statutes, rules, codes and regulations. Insurance Agency agrees to indemnify and hold harmless Company A from any and all damages, costs, judgments and expenses."

MVR Company B: "All reports, whether oral or written, will be kept strictly confidential; except as provided by law, no information from reports will be revealed to any person except the subject of the report. No information will be requested for the use of any other person, agency or organization except with the written permission of Company B. Reports may not be resold or transferred to any other person. The unlawful ordering or use of consumer reports can subject you to criminal and civil penalties in accordance with both federal and state laws."

Recently, one of the largest MVR Companies in the nation sent this memo to all insurance agency customers:

"It has recently come to our attention that some insurance agencies may be furnishing MVRs obtained for commercial underwriting purposes to the commercial insurance buying customer.

Please be aware that the consumer reports you obtain from us may not be used beyond the purpose for which they were ordered and cannot be sold or given to parties outside the ordering insurance company or insurance agency.

Allowing an employer to receive an MVR that was provided to you for commercial underwriting purposes would be a violation of law as well as a violation of your agreement with us."

Thus, most MVR providers do not permit the practice of an insurance agency furnishing MVRs to commercial insureds on their current or prospective employees.

The Agency E&O Policy

Most E&O policies provide coverage for “insurance professional services." While each situation is unique and no determination of coverage can be made without all the specific facts of a particular situation being known, most insurance professionals agree that providing MVRs to clients as part of an employee screening program falls outside the coverage area of the E&O policy. That means when/if the agency gets sued or fined because proper procedures weren't followed to the letter of the law, there may be no coverage under the E&O policy.

Several agencies have reported that they routinely obtain MVRs for their commercial customers as a “value added service." In fact, one agency stated, “We have one person whose full time job is to pull MVRs for commercial customers. We are not prepared to stop this practice." Another agency reported, “We run 800 MVRs a month for our customers and there is no way we will stop doing it." Agencies who engage in the practice of providing MVRs to parties other than the insurance company assume a greater risk of civil suit and federal federal, and they must realize that there may be no insurance coverage, including defense costs, for such suits and fines.

Summary

  • The practice of sharing MVRs with third parties may be permitted under the FCRA when all of the proper procedures are followed.
  • Most MVR vendor contracts expressly prohibit sharing MVRs with third parties.
  • The agency E&O policy may not provide coverage for an agency that is sued or fined over the MVR sharing issue.
  • The best course of action for an agency is to tell commercial insureds that they must obtain the employee's MVR on their own; that keeps the agency completely out of the loop.
  • Legal experts recommend that agencies include guidelines about this issue in their employee handbook, or agency operations manual.

This article contains copyrighted material from Edwards & Associates in Atlanta, Georgia as well as the Independent Insurance Agents of Louisiana and is used with permission.

6/4/04 David Thompson 

Last Updated: September 27, 2019

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Alexandria VA 22314
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fax: 703.683.7556
email: info@iiaba.net

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