Articles Posted in Insurance Bad Faith

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From the Insurance Companies perspective, the answer is simple- there is no reason for them to pay.

My clients are universally surprised to learn that under ERISA the only thing you can sue for are the unpaid LTD benefits. There is no claim for emotional distress, or pain and suffering. There is no claim for bad faith or anything else. The vast majority of Long Term Disability claims are governed by a federal law (ERISA) because they are part of an employer provided benefits package.

I regularly hear tragic tales of financial devastation. Clients are unable to pay their bills, are losing their cars and their homes. Clients are forced to rely on their friends and families and the charity of strangers.

Guess what? The insurance companies could care less. You see, the LTD insurer gets to review your claim and decide if they want to pay or not. If they decide they don’t want pay your claim, they simply deny your application and hope you give up. If they approve your claim, then they have to pay and in turn make less money. Every dollar they pay on your claim is a dollar less of profit to line their pockets.
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In testimony presented to Congress, the Washington Post recently reported on the testimony of Cigna Insurance’s former VP, Wendell Potter who said insurers “make paperwork confusing because ‘they realize that people will just simply give up and not pursue it’ if they think they have been shortchanged.”

Referring to the industry’s objection to changing its business, Potter said he “worries ‘that the industry’s charm offensive, which is the most visible part of duplicitous and well-financed PR and lobbying campaigns, may well shape'” insurance reform in a way that is more beneficial to Wall Street than to “average Americans.”

This “charm offensive” reminds me of those terrific Allstate commericals where the good looking gentleman says “Your in good hands with Allstate” after some vaguely disturbing scenario is played out in the background. Man, who wouldn’t want to be in Allstate’s hands. Unfortunately, when it comes time to pay a claim many of my client’s feel like Allstate laced up some boxing gloves to cover those “good hands.”

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Michigan residents injured in auto accidents beware of Auto Insurance tactics.

According to the sworn testimony of a representative of State Farm Insurance it appears that the company paid millions of dollars to a consulting firm to analyze and modify its claims handling practices in the mid 90s. According to the recent testimony of former State Farm employee Robert Butler in the case of Armisted v. State Farm (No. 2:07-cv-10259, Hon. Arthur J. Tarnow) in the US District Court in Detroit, State Farm implemented the ACE program. An integral part of this program was to “capture opportunities.” Those “opportunities” happened to include the indemnity payments made to people who were insured by State Farm in Michigan when they were injured in a car accident. State Farm determined that there was the opportunity to capture millions of dollars annually in payments for PIP benefits.

Mr. Butler confirmed during his testimony that State Farm determined that it was settling too many cases. Accordingly, it appears to this writer that State Farm then decided that more claims should be forced into litigation in order for State Farm to “capture” the potential “opportunities.” In Michigan alone State Farm concluded the potential “opportunity” included about $30 million dollars a year in indemnity payments. Mr. Butler confirmed that the ACE program was a nationwide initiative.

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As reported in the Houston Chronicle Great American Insurance Company is trying to avoid paying claims for the deaths of multiple people killed in a fire in an office building by arguing that their deaths were actually caused by smoke inhallation which is “pollution.” This despite the fact that the policy undoubtably provides coverage for loss caused by fire.

The attorney for several of the families described the insurance company’s efforts to avoid responsibility as shocking. “It’s an extraordinary effort by an insurance company to avoid paying on a contract for insurance” Not surprisingly, the insurance company and its legal representative had “no comment.”

This is another classic example of the lengths to which an insurer will go to avoid responsibility. Profits over people.

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Insurer-AIG has sunk to a whole new level.

Iraqi war veteran Andrew White returned from Iraq after spending two years protecting American Soldiers by removing IED’s. His brother was not so fortunate-He was killed in combat.

So Andrew decided to take out a life insurance policy naming his parents as the beneficiaries when he saw the financial hardship related to his brother’s death. AIG was happy to issue him a life insurance policy and accept his premiums (which it increased because he was a smoker).

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I hate to pick on Allstate again, but they have really had some big problems lately.

The much maligned insurer, Allstate, recently agreed to a 28.5% rate reduction for all of its California residents. Apparently, in order to avoid the potential of having to pay a huge amount in refunds to its customers, Allstate agreed to the rate reduction.

According to the LA times article, a number of Allstate’s customers were still angry despite the rate reduction because they have been paying too much for too long. Apparently, the rate cut is worth about $250,000,000 million dollars for the consumers.

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Allstate recently settled a bad faith lawsuit where it had been held in contempt of court for refusing to produce documents pursuant to a court order. Allstate began racking up $25,000 in fines per day when it refused to follow the Judge’s order to produce the documents.

Apparently, Plaintiff sought internal Allstate documents supposedly showing how the company set up a claims payment system in the 1990s that low-balled clients and allowed Allstate to make huge profits.

Because a confidential settlement was reached it is not clear how much of the $7,000,000 fines were actually paid. Allstate claims that it was appalled when it learned last year that it was being threatened with contempt. Once again, one wonders how Allstate is able to operate in this manner and remain profitable.

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Another bad faith verdict against Allstate is upheld by the Missouri Court of Appeals reported the Kansas City Star. This time it looks like it is going to cost Allstate a cool sixteen million dollars. Apparently, Allstate failed to respond to a demand in a case where its insured caused a head on collision leaving the two claimants in the hospital for 35 and 40 days respectively.

According to the article Allstate first tried to argue that it never received the demand. When that didn’t work Allstate tried to argue that it wasn’t sure that the crash had actually casued the injuries. Neither the jury nor the Court of Appeals was buying that story. I am not sure, but maybe because the claimants had to be cut out of the wreckage and were flown by helicopter to the hospital and received intensive care.

It certainly makes this writer wonder just how much money Allstate has that it can get hit in the pocketbook like this and keep doing what it is doing. Maybe Allstate is spending all its money on those commercials with that distinguished looking actor trying to convince everyone that “you are in good hands” instead of settling meritorious cases?

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Long Term Disability Insurer, Unum Provident, appears to be complying with the terms of the Multi-State Regulatory Settlement Agreement according to Eric Dinallo, the New York Insurance Superintendant.

In November 2004 Unum, the Department of Labor and a number of states entered into a settlement agreement requiring Unum to pay a $15 Million dollar fine and reassess thousands of claims as a result of Unum’s unfair claims handling practices.

Recently, an examination of Unum’s reassessment practices determined that Unum appeared to be complying with the terms of the Regulatory Settlement Agreement. More than 23,000 claims have been reassessed with 41.7 % resulting in reversal with a payout of over $676 million dollars in additional long term disability benefits.

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“That Smells Bad” said Justice Scalia as he described disability insurer-MetLife’s conflict of interest.

The US Supreme Court heard Oral arguments last week in Glenn v. Metlife. This is an important decision for all disability claims governed by ERISA. The Supreme Court examined how Metlife’s inherent conflict of interest–as both the entity which determines eligibility and then must pay those claims–should affect a reviewing court’s analysis.

The Justices clearly recognize the problem. Metlife had to determine whether Wanda Glenn was disabled. Metlife helped Wanda Glenn get social security disability. Metlife got repaid most of its money when Wanda Glenn was paid social security disability. Then Metlife decided Wanda Glenn was no longer disabled and cut off her long term disability benefits. The lower Courts determined Metlife’s decision was not supported by the evidence and Metlife’s inherent conflict of interest was a factor.