COMPUTERIZED RECORDS: NEW E&O CONCERNS?
Over the last few years, the Independent Agency System has focused on the role of automation in the agency and marketplace. Emphasis has been placed on adapting office environments to automation, expanding utilization, and improving technology. Now that we've had a chance to step back and take a breather, a new concern has risen. In E&O court cases, will computerized records be looked upon differently than the old paper files? With today's emphasis on litigation, this a frightening-and expensive-prospect.
ACORD was asked to conduct research on whether the legal rules have changed with the emergence of automation. Researchers discussed these issues with recognized industry E&O experts and authorized its legal representative, Steptoe & Johnson of Washington, D.C., to review pertinent court cases, particularly the admissibility of computerized business records as evidence. It's interesting to note that their legal review and recommendations are more positive and calming for the insurance industry than the consensus of industry experts.
This summary presents the results of the Steptoe & Johnson research. The review includes legal precedents and requirements for maintaining computerized records and points out the legal differences from paper records.
Conclusions in Legal Review
Steptoe & Johnson found that the courts generally regard computerized records to be as reliable as paper records. In fact, federal and state courts have tended to relax the requirements for authenticating and admitting computer records into evidence. However, these requirements, as will be described later, differ from those for paper records. Other conclusions:
1. Federal and state courts maintain a high degree of consensus about standards for the admissibility of computerized business records. There are some differences in how these standards are construed, but the variances are largely in interpretation, not substance. The courts recognize the widespread use of computer systems in American businesses, and realize that to disallow the records would preclude access to a voluminous amount of evidence.
2. To expedite the trial process, the courts do not require a number of computer experts, or 'foundation witnesses,' to support the admission of the record. The burden of proving the admissibility of the records is often no more laborious than for paper records.
3. Computer records are perceived by the courts as no less reliable than paper records. In fact, judicial decisions have tended to view machines as more reliable than the human hand.
One obvious difference between paper and computer records is that it's easier to alter or delete electronically stored information without leaving physical evidence of tampering. Thus one would think that the courts would be concerned over the possibility of fraudulently manipulating data and would be interested in existing security systems. However, computer security has not been of great concern unless the opponent in the case has produced evidence of improper manipulation. In most jurisdictions, no initial burden is put on the proponent of the records to show security.
Another issue one might believe important to the courts is the design performance and reliability of the hardware and software systems. However, testimony on the technical features of systems is seldom viewed as a condition for admissibility.
The courts' primary concerns have been the accuracy of input procedures in processing. While these concerns are no different from those applicable to paper records, the specific testimony needed is generally broader in scope and detail. Any employee having knowledge of the procedures to create and use the record can be a qualified foundation witness. It is more important for the witness to have direct familiarity with the entry process than to have detailed knowledge of the inner workings of computers. Also, as with paper records, it must be shown that the business relied on the computer records' accuracy.
What are the differences between paper and computer records for the admission of evidence? Primarily, proof of written procedures to verify accuracy of information is required. Also, testimony about the nature and reliability of the computer program used to process data is necessary if the information has been not just stored, but also processed and summarized. Proof of database quality-control procedures may be the most important factor in admitting computer records. Also, the proponent of the record must allow his or her adversary the opportunity to inquire about the accuracy and reliability of the records before the trial.
Guidelines For Admissibility Of Computer Records
The admission of computer records is governed by the 'business records' exception to the hearsay rule. Basically, the exception holds that as long as the information in the computer record is input by a person with knowledge of the event recorded in the regular course of business, at or near the time of the event recorded, the computer record will meet the essential requirements of the courts.
This exception has been adopted in four forms: Federal Rule of Evidence 803 (6), Uniform Business Records as Evidence Act (Uniform Act), Federal Business Records Act (Federal Act), and the common law 'shopbook' rule. The Federal Rule of Evidence 803 (6) is followed by all federal courts and more than half of the state courts. It expressly provides for the admissibility of 'data compilations,' including computer records. The other three acts/rules are supported by a smaller number of states. Little difference exists between Rule 803 (6), the Federal Act, and the Uniform Act as they pertain to computer records.
In most jurisdictions, computer printouts are admissible if the witnesses presenting them can attest to the following requirements:
1. The recorded information was input into the computer in the ordinary course of business, for business purposes, at or near the time of the event recorded.
2. The business relied on the records' accuracy.
3. The information recorded was input into the computer by a competent person who had a business duty to input the information accurately.
4. The person inputting the information had personal knowledge of the event recorded or obtained the information from someone who had such knowledge.
5. The system and procedures for recording and retrieving the recorded information was reliable, including; (a) the input procedures used to record the information and methods for verifying the accuracy of the data as input (for example, checks for transposition errors); and (b) the procedures used to maintain and retrieve the inputted information and methods for verifying the accuracy of the processing system.
The key for meeting these requirements is to establish that your agency has standard procedures for entering, processing, retrieving, and testing the accuracy of data stored in the computer. This means written procedures and policies that, if litigation ensues, can be used as contemporaneous evidence of the accuracy and reliability of the computer records. Since effective use of computer systems requires such standardized procedures in any event, it should not be difficult for members of the Independent Agency System to meet the requirements for admissibility of computerized records.
ACORD's survey has attempted to summarize the major recommendations and findings of its legal counsel. The complete text of the review, including a detailed explanation of each of the four forms as they pertain to hearsay evidence, along with an extensive citing of several court cases, is attached.
Reprinted with permission from ACORD, 1988. To obtain an order form for the complete legal review, fax your request to ACORD, (914) 620-3600.