State Farm's Dirty Little Secret Part 2: Florida Circuit Court Releases Written Opinion on Residential Lines Reports Constituting Trade Secrets
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Last month, I wrote about State Farm's "Dirty Little Secret." After a non-jury trial, Florida's Second Judicial Circuit (Leon County) declared that data submitted by State Farm Florida Insurance Company ("State Farm") to Florida's Office of Insurance Regulation ("OIR"), as required by Fla. Stat. 624.424(10), constituted a "trade secret" under Florida law. The Circuit Court released its written opinion on May 2, 2016.

In the opinion, the Court first explained State Farm's burden for proving that the data contained in its Quarterly Supplemental Report ("QUASR") constitutes a trade secret. State Farm was required to prove by the preponderance of evidence that QUASR: 1) is information; 2) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and 3) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Determining that elements one and three were undisputed, the Court focused on the dispositive issue of whether QUASR data has value. Relying on testimony from State Farm's Vice President of Operations in Marketing, the Court found that the QUASR data has value, and thus meets the definition of a trade secret. The Court also considered OIR's affirmative defense of Latches, finding that OIR failed to prove prejudice caused by State Farm's delay in bringing the action.

Though OIR had argued that keeping the QUASR data confidential was not in the State's best interest, the Court explained that the Legislature had determined that trade secrets should be protected and kept confidential. The Court thus ordered that OIR be permanently enjoined from publicly releasing State Farm's QUASR data.

Neither State Farm's initial complaint nor the Court's opinion address the impact of such a finding on other insurers in Florida or the fact that State Farm may now have a strategic advantage over its competitors as it may still obtain its competitor's publicly filed data while withholding its own. It will be interesting to see if other insurers follow State Farm's lead and seek trade secret protection for their own QUASR data, and, how other Florida courts may analyze the legislature's policy of protecting trade secrets vis-à-vis the state's robust insurance code.

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