If The Insurance Company is in Bad Faith -Think you’re In Good Hands? Think Again.
Not long ago, CNN investigative reporters uncovered damning evidence against major insurance companies such as State Farm and Allstate, which are profiting immensely by underpaying injured car accident victims, many of whom were unrepresented by a personal injury lawyer. The money the insurers were denying car accident victims would otherwise pay for the victims’ doctor visits, lost wages and rehabilitation. However, new strategies adopted by the insurers include making take-it-or-leave-it offers that often don’t even cover a fraction of the victim’s expenses.
CNN reported that when a vehicle driven by Roxanne Martinez was hit by a large SUV, she suffered damaging spine injuries. Her medical bills quickly accumulated, and she thought Allstate, the insurer of the other driver, would pay for her injuries.
Three years later, after expensive doctor visits, CT scans, x-rays and a host of medical problems, Roxanne was still fighting with Allstate. The company finally offered her $15,000, a sum that did not even cover her medical expenses, much less her pain, mental anguish of not knowing whether she would be able to afford her treatment, and loss of enjoyment of life. She fought Allstate and convinced a judge to find that Allstate violated New Mexico’s unfair claims practices act by offering substantially less than the amounts later awarded by a jury; by not attempting to make a prompt, fair and equitable settlement of a claim in which fault was clear. The court further found Allstate liable for malicious abuse of process in an attempt to delay or extort Martinez into accepting less than the full value of what was owed. The court awarded punitive (punishment) damages to deter Allstate from abusive claims practices in the future.
Allstate’s delay and wear down the victim tactic is a typical insurance company strategy used to increase profits. CNN’s year-and-a-half investigation into the insurance industry found that if you are injured in a minor accident, major insurance companies will often challenge your claim, drag you into court and take years before making a reasonable offer. Often, they will not make a reasonable offer at all, instead only offering an amount significantly less than your claim is worth.
Industry insiders say this results in 80-90% of injured accident victims accepting what the insurance company offers instead of fighting. Why would an insurance company, especially one that you trust and have paid significant amounts of money in premium over the years, act with such reckless disregard toward you in the event you are injured? Simple. Insurance companies profit more if they pay you less (multiplied by thousands of injury claims).
Neither Allstate nor State Farm would discuss the investigation’s results with CNN. However, Jim Mathis, a former insurance company insider, told CNN: “As long as the public allows this to occur, insurance companies will get richer, and people will not get a fair and reasonable settlement. Period.”
The math behind the insurance company’s strategy is simple. Take $1,000 off of one thousand claims and you’ve essentially made one million dollars. Do this with every claim over a number of years, and you’ve made billions of dollars.
Insurance companies achieve this cost-cutting through a process known as the “Three Ds”:
- Deny the claim.
- Delay the claim.
- Defend their denial of the claim.
When the insurer only offers “smaller, walk-away settlements,” often made years after the actual accident occurs, bills have already added up and people are afraid that they won’t get any money for their claims. They fear they will be stuck paying the bills themselves. Thus, preying on the fear of car accident victims who wonder if they will ever recover at all for their accident, insurance companies intentionally scare the victims into accepting an unjust settlement.
One judge told CNN that many insurance company lawyers have confided in him that they want to settle many of these minor impact cases, but the insurance companies won’t allow them to. The insurance companies would rather fight every claim even though that often means not giving their own paying customers the money they need to heal and get back to their lives. A lawyer for Allstate said that the company’s strategy was to drive lawyers who represent victims out of the insurance industry. The company tried to accomplish this by making the act of fighting a claim “so expensive and time-consuming that lawyers would start refusing to help clients.”
Source: Insurance Companies Fight Paying Billions In Claims, published 2/07/07 on Anderson Cooper 360 Blog, accessed 2/08/07 via www.cnn.com; Roxanne Martinez, et al v. Allstate Insurance Company, No. D-0101-CV-200400963, First Judicial District Court, County of Santa Fe, State of New Mexico.