![](3D"Insurance_bad_faith_blog_files/image002.jpg")
Auto insurers play hardball in minor-c=
rash
claims.
By Drew Griffin and Kathle=
en
Johnston
CNN htt=
p://www.cnn.com/2007/US/02/09/insurance.hardball/index.html.
ATLANTA, Georgia (CNN)
-- If you are injured in a minor car crash, chances are good that you will =
be
in the fight of your life to get the insurance company to pay all the medic=
al
costs you incur -- even if the accident was no fault of your own.
That's what CNN discovered in an 18-month investigati=
on
into minor-impact soft-tissue injury crashes around the country. Those are
accidents in which there is little damage to the vehicle and the injuries to
people are not easy to see by the naked eye or conventional medical tools l=
ike
X-rays.
Since the mid-1990s, most of the major insurance comp=
anies
-- led by the two largest, Allstate and State Farm -- have adopted a tough
take-it-or-leave-it strategy when dealing with such cases.
The result has been billions in profits for insurance
companies and little, if anything, for the public, according to University =
of
Nevada insurance law professor Jeff Stempel.
"We can see that policyholders individually are
getting hurt by being dragged through the court on fender-bender claims, an=
d yet
we don't see any collateral benefit in the form of reduced premiums even for
the other policyholders," Stempel said.
"So I think now we can say to continue this kind=
of
program is in my view institutionalized bad faith."
If you have never heard of the strategy, it's because
insurance companies don't want you to know that they are paying out less and
less for minor crashes even while their profits soar and your premiums cont=
inue
to rise.
But after a review of more than 6,000 company documen=
ts and
court records, interviews with a dozen people nationwide, including former
company insiders, and conversations with accident victims, the picture is
clear: If you challenge the offer by some insurance companies you will be l=
eft
with no option but to go to court, where you will be dragged through the
wringer.
Expensive,
time-consuming
In an affidavit in a New Mexico case where Allstate is
being sued, one of the company's former attorneys said the strategy is to m=
ake
fighting the company "so expensive and so time-consuming that lawyers
would start refusing to help clients."
Shannon Kmatz, a police o=
fficer
and former Allstate claims agent, said company employees were encouraged to=
get
rid of claims quickly and cheaply and even offered accident victims as litt=
le
as $50, telling them to take it or leave it.
Both Roxanne Martinez of Santa Fe, New Mexico, and Ann
Taylor of West Lafayette, Indiana, saw the practice firsthand.
Martinez suffered neck and back injuries when she was
sideswiped by a driver insured by Allstate.
After three years, the company finally offered her $1=
5,000
-- a little more than half of what she needed for lost wages and medical bi=
lls.
She went to court, and four years after the accident =
a jury
awarded her $167,000 plus interest.
"It's kind of hard when you are thinking they are
going to leave you broke. ... That was very stressful," she said.
Taylor was not as fortunate when her case went to tri=
al.
The Indiana nurse was rear-ended by a State Farm empl=
oyee
driving a State Farm car. Damage to her car was minimal but she suffered
herniated disc and muscle tears.
Taylor racked up medical bills and lost wages amounti=
ng to
about $15,000. The company offered her $2,000.
"I was just very insulted," she said.
She sued, but three years later a jury came back with=
a
judgment for her of only $1,500.
The jury didn't believe she could be hurt in an accid=
ent in
which the vehicle had barely a dent.
Three jurors told CNN photos of the two cars involved=
in
the accident -- enlarged and prominently displayed by the defense -- played=
a
huge role in their decision.
And one said they assumed Taylor had already been
compensated by the insurance company and was just trying to get more money.=
Profitable
strategy
The cases, CNN found, illustrate a carefully developed
strategy to make the victims look like they are trying to defraud the insur=
ers.
But documents CNN obtained indicate profit, not fraud=
, is
the reason companies decided to play hardball in small accidents.
For Allstate and State Farm, according to documents o=
btained
by CNN, the strategy was developed in the mid-1990s with the assistance of
consulting giant McKinsey & Co.
Looking for a way to boost profits, McKinsey focused =
on
soft-tissue injuries incurred in minor crashes.
While the McKinsey documents -- numbered in the thous=
ands
-- are under seal in courts around the country, CNN saw several of them dur=
ing
a court hearing in Lexington, Kentucky.
Playing off Allstate's signature slogan, one document
recommends the insurer put boxing gloves on its "good hands" for =
those
who insist on going to court.
The strategy, according to former Allstate and State =
Farm
employee Jim Mathis, relies on the three D's -- denying a claim, delaying
settlement of the claim and defending against the claim in court.
"The profits are good, and as long as the commun=
ity,
the public allows this to occur, the insurance companies will get richer and
people ... will not get a fair and reasonable settlement," Mathis said=
.
Both Allstate and State Farm declined requests for
interviews.
In an e-mail, Allstate wrote it did not believe it wo=
uld
"have any real opportunity of being successful in getting you (CNN) to=
do
a balanced report."
State Farm wrote: "We take customer service seri=
ously
and seek to pay what we owe, promptly, courteously and efficiently, and we
handle each claim on its own merits."
The company also said, "Any attempt to generaliz=
e that
State Farm adopted consultant recommendations as other insurers is just pla=
in
wrong."
A company spokesman sent an additional e-mail, saying=
that
the company did work with McKinsey to improve claims handling but State Farm
stopped using the McKinsey program in 1999.
Robert Hartwig, president=
of the
Insurance Information Institute, told CNN insurers do not have a strategy of
blanket denial of claims. He also said strategies to limit expenditures on
minor-impact crashes are needed to fight fraud.
Hartwig specifically singled out lawyers who he claims make a
living on car accident victims, saying those lawyers are upset because
"the gravy train is over." (CNN)
I believe the “Three-D” strategy (deny, d=
elay,
defend) is a tool for abuse by greedy insurance companies seeking to increa=
se
profits at the expense of accident victims. It flies in the face of their unde=
rlying
legally imposed duty of “good faith and fair dealing” in settlement of claims. Nowhere does the Three-D strategy =
embody
fairness.
When I fight back, as in the Gensler case, juries del=
iver
six or seven figure verdicts, says Jim Avery. Bad faith is an entirely different
ballgame, and it is not for the meek.
We regularly spend six figures prosecuting these claims, and have go=
tten
big results. In Gensler v All=
state,
for example, we got a ‘take it or leave it’ offer of $22,500 be=
fore
trial. The other driver had a
$50,000 policy with Allstate, who claimed that was the “most we could
get” if we “spent thousands going to court.” “The jury delivered the verd=
ict,
and we collected $1.1 million on a $50,000 policy” Jim Avery (who tri=
ed
the case to a Jefferson County jury).
“But I have news for you, its not just ‘auto’ cases
and its not just ‘minor’ injury cases. Bad faith seems to have become the
insurance industry motto.”
See the Gensl=
er v.
Allstate Insurance Company story in the Rocky Mountain News, March 13,
2002.
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