Insurance Companies Are Manufacturers of Lawsuits
You have to understand something about insurance companies. They collect money in exchange for their
promise in a "policy" to make payment to you, the "insured" or an "injured person" or "claimant" and
then work very hard to try not to give the money back through payment of claims. Another way of looking
at insurance companies is as a "manufacturer" of lawsuits.
On one hand the insurance company, society and insureds benefit from a just policy of administration and payment of
claims, so that unjust claims are rejected and resisted, and just claims are paid in appropriate amount and without
undue delay. Premiums are lower as a result, and the insured, claimants and company benefit appropriately.
There are many instances, however, when insurance companies (often called "carriers" or "insurance carriers") find it
necessary, convenient or more profitable to tighten up on the administration, processing and payment of claims, with
the result that many thousands or hundreds of thousands or more of insureds and claimants are cheated out of money to
which they are entitled. These activities are done in bad faith.
Any one claimant or insured believing that the insurance company is wrong about a decision to reject a claim or deny
coverage usually chalk the experience off to a mistake by the bureaucracy running the insurance company. But this
conclusion is often wrong, because bad-faith denial of coverage and bad-faith denial of claims can also result from
the following policies or practices by, or financial condition of, a specific insurance company:
- Insurance company was hit hard by Katrina, asbestos or 9/11 claims, for example, and would be forced to go under
(i.e., declare insolvency and be taken over by the state Superintendent of Insurance) unless the insurance company
increases its rejection of claims and denial of coverage
- Insurance company is or is part of a publicly-traded company and the C.E.O. of the insurance company has enormous
pressure to increase the company's profitability each year or quarter, and does so by systematic tightening up on
its claim payment and coverage practices.
- Specific officers or managers of the insurance company have been offered financial incentives (such as huge bonuses,
stock options, a percentage of profits, higher-paying positions and other percs) to "encourage" the officers or
managers to cut back on payment of claims and increase their denials of coverage.
- Clear-cut liability exists under a medical coverage policy but the cost of treatment is so substantial that the company
feels that it has to deny coverage to be able to survive.
- All claims are denied, regardless of their merits, especially when the insureds as a group are considered by the
insurance company to be unable to pay for an attorney to fight the claim denial.
- Claims are bounced around between intake and approval, with substantial delays in payment, and failure of some
legitimate claims to be pursued, with the result of higher profitability to the carrier in the form of interest for a
longer period on the money actually paid out, and the retention of unearned premiums as to the amounts which should have
been paid on claims, but were not.
- The company twists the meaning of words and terms written by them in the policy and tries to get claimants to believe
that the policy does not cover the claimant's situation.
- Forcing a claimant to sue and then settling the suit for far less than the claim is worth because of the dire financial
need of the insured and the high cost of litigation; the carrier usually spends less in legal fees and expenses than the
cost of interest on the money that it improperly refuses to pay out, and settles for less than what it should have paid to
the claimant, so that the company is a net winner, and the insured and public are net losers.
This list of bad-faith practices is not exhaustive. Insurance company executives often receive huge annual salaries and
bonuses to figure out ways to cheat their policyholders and injured persons claiming under the policies.
4 Recommended Movies from the Past 25 Years that Point Out Some of These Continuing Bad-Faith Practices
- The Rainmaker (1997), starring Matt Damon and Danny DeVito (VHS copy selling for as low as $.75,
and a DVD for as low as $4.00, on half.com), in which the supposedly fictitious insurance
company had a company practice of denying all claims and forcing claimants to sue; fledgling
attorney Matt Damon (with non-admitted sidekick Danny DeVito) go up against the too-slick insurance lawyer played by
Jon Voight. The movie is highly recommended to give you an idea of why legitimate insurance claims or coverage can be rejected by some
carriers. Jon Voight received a 1997 Golden Globe nomination for best supporting actor; and the National Board of Review
nominated the film as best film for 1997.
- The Verdict (1982), starring Paul Newman and James Mason (VHS copy selling for as low as $.99, and a DVD
for as low as $2.35, on half.com), in which the supposedly fictitious insurance company
had a company practice of denying legitimate claims and forcing claimants to sue;
alcoholic has-been attorney Paul Newman goes up against the conniving, unethical insurance lawyer
played quite effectively by James Mason. The movie is highly recommended to give you another look at
how legitimate insurance claims or coverage can be rejected by some carriers, forcing claimants to sue, with the
economic power and illegal practices of the insurance company being difficult to overcome. Paul Newman was nominated
for an Academy award (and Golden Globe award) as best actor (best actor - drama) for 1982; and James Mason also received
an Academy and Golden Globe nomination for best supporting actor. The film received a National Board of Review nomination
for best film for 1982.
- Erin Brockovich (2000), starring Julia Roberts with Albert Finney (VHS copy selling for as low as
$.75, and a DVD for as low as $4.25, on half.com); based on a true-life story about corporate poisoning of the water
supply of a small desert community
and a lawsuit which ends in such a way as to justify the awards heaped on the film and its star and other actors; the
movie is highly recommended as a real-life story illustrating the use of the courts by persons liable for destroying
lives to prevent (or try to prevent) adequate monetary recovery for damages, and to try to force injured claimants to
settle for far less than they are entitled to under law. Julia Roberts numerous awards as best actress (Academy, British
Academy Awards, Broadcast Film Critics Association, Golden Globe, L.A. Film Critics Association, National Board of
Review, Screen Actors Guild), the film itself received various best-film nominations (including an Academy nomination) and
won the American Film Institute's award of being 1 of the 10 best films for the year; and Albert Finney was nominated
four times for best supporting actor and won the award in one of such instances (Screen Actors Guild). Director Stephen
Soderbergh received 6 nominations for best director and won in 4 instances (L.A. Film Critics Association, National Board
of Review, National Society of Film Critics, and New York Film Critics Circle). You really should see this film if you
- A Civil Action (1998), starring John Travolta and Robert Duvall (VHS copy selling for as low as $.75, a
and a DVD for as low as $2.50, on half.com), in which a lawyer with ideals takes on two powerful corporations
(Beatrice Foods and W. R. Grace) for toxic poisoning of the drinking water in Woburn, Massachusetts, causing
8 families to be stricken with leukemia. As you might expect, the corporations and their insurance carrier use
the courts to try to avoid liablity; the plaintiffs' lawyer has a very tough time indeed, an expected
consequence of the litigation tactics used by the defendants, their lawyers and the insurance
company. The movie is highly recommended to give you an idea of how legitimate insurance claims
or coverage are resisted through litigation (to increase the profitability of the insured corporations and their
insurance company and lawyers). Robert Duvall won best supporting actor from Screen Actors Guild and an
Academy nomination for best supporting actor. Conrad L. Hall received an Academy nominaton for best cinematography.
"Bad Faith" Activities by Insurance Carriers
You should understand that insurance companies have an obligation to pay legitimate claims promptly and in a proper
amount, and that it is in "bad faith" and illegal for an insurance company to delay, deny or discount legitimate claims
willingly (or in "bad faith").
The Bad Faith Insurance website, at Bad-Faith Insurance Website
gives its opinion that the 3 top bad-faith insurance companies are State Farm, Allstate and Hartford; and that the best 3
insurance companies (the "good-faith" companies) are Chubb, Allianz and Amica.
Remedies or Options You Might Consider
Here is a (partial) checklist I could use for someone who consults with me about an insurance company's failure to
pay a legitimate claim. Let's assume the claim is for an expensive treatment for a medical condition, and that the
policy clearly indicates that there is coverage, and that the treatment is accepted by the medical profession.
- Write a letter on my legal stationery to the C.E.O. of the insurance company demanding that he/she make appropriate
payment, with reference to various issues or concerns that seem to be used improperly to reject the claim or deny coverage.
- write a letter to the State Superintendent of Insurance describing the problem and asking for his/her help in getting
the insurance company to pay the claim, or to investigate why the claim is not being paid to my client and perhaps 10,000
- Write a letter to the state Attorney General saying pretty much the same thing.
- Write a letter to the local county prosecutor requesting that he/she investigate the matter for criminal fraud and
convene a grand jury, and that the client would be willing to testify;
- start a publicity campaign by the issuance of press releases to local, national and industry media
- Hire a public relations firm to get publicity (including show appearances) to try to generate action by
government regulators against the insurance company.
- Complaint to the Courts and get others similarly situated to complaint to the courts that the insurance company is not paying
on legitimate claims; years ago, the New York Courts dealt with this problem with one specific insurance company by having
one judge set aside for the one insurance company and its hundreds or thousands of cases and then forcing the company to
trial in multiple cases as the same time until it became too costly for the insurance company to try that many cases at the
same time, and the company started settling a much higher percentage of the claims.
- Use internet and other sources (perhaps advertising) to try to find other persons insured by the same insurance
company who are having the same difficulty, and gather evidence which you can show to your attorney.
- Find other persons similarly situated who can join with you as named plaintiffs in the lawsuit. Note: I generally do
not recommend that a client commence a class action. All too often, the client (and named plaintiff) in a class action
winds up with very little, and the attorneys who bring the class action wind up with much more than the members of the
class. On the other hand, class actions are often necessary and may well represent the only way that some problems can be
addressed, when the amount at stake is so small that nobody would bring suit to recover such small sum, and the wrong-doing
corporation or insurance company will keep the ill-gotten gains in absence of a class action. For your information,
California has a class action law which appears to be far better for the public than the laws of any other state.
- Commence a lawsuit against the carrier, and make allegations (if supportable) about their unlawful practices and
demand punitive damages, plus the actual damages you have suffered, together with costs, interest, out-of-pocket
expenses of the litigation and attorneys' fees.
Consultation - No Fee, No Obligation
My initial discussion is without charge.
To make an appointment to discuss your problem with me, please call me at 212-307-4444.
Attorney Carl E. Person