When Insurance Companies Get Ugly!

INSURANCE COMPANIES THE GOOD,THE BAD, & THE UGLY

1. Insurance agents are really nice. Otherwise, they wouldn't be able to sell you any policies. The same is true for claims adjusters. Otherwise, they wouldn't be able to settle any claims. It is important to distinguish these nice individuals from the company itself. The purpose of an insurance company is not to be nice, but to make money for its stockholders. The truth is, your insurance company is not your friend. It is a business, and like most other businesses, their primary concern is their bottom line. If the welfare of their customers happens to align with the insurance company’s profit motive, great. If not, the insurer will do what it can to avoid paying on a claim -- even when that claim is legitimate and covered by the policy.

2. One common tactic insurance companies take is to dispute how the property got damaged. Depending on the terms of the policy, not every form of damage a building or other piece of real estate can sustain may be covered. The insurance company might try to claim that your property was damaged by a non-covered event, despite what really happened.

3. Or the company might accuse you of fraud. For example, if your house is damaged in a fire, the insurance company may accuse you of arson, or of exaggerating the extent of your losses.

4. It is unlawful for an insurer to engage in unreasonable delay; to put their financial interests ahead of the financial interests of the policyholder; or to lowball (underpay) claims. They cannot use deception, in sales or claims handling. They cannot compel an insured to hire an attorney in order to be paid. They must be fair to their policyholders. The violation of any of these standards is a violation of the duty of good faith which the law imposes on insurance companies. It exposes the carrier to significant damages.

5. Don’t stand for delaying tactics. Punitive damages are the only thing that prevents insurance companies from engaging in even more outrageous bad faith conduct than they already do. If a given insurance company has, let's say $100 million, in valid claims , it knows that its investment profits on this money alone will likely exceed $15 million per year. It also knows that if it delays, long enough, many insureds (particularly if they have lost substantial assets or property) will substantially under-settle their claims. If they have died during the delay, the company may never have to pay. Therefore, instead of just paying out the money to policyholders to whom it is owed, an aggressive insurance company can keep much of the money owed, and can earn even more back on investments made during the delay period. So that little, or none of the actual money owed is ever paid. Some insurance companies use third party management services that claim to work on behalf of the insured but really help insurers lower their indemnity with lengthy claims management processes in which they act as the buffer between the insurer, the contractor and the insured often requesting contractors NOT contact insured policy holders!

Insurance companies really worry about being sued because the rarity of punitive damages awards that actually stick, makes it very important that such an award be appropriate in light of the conduct and wealth of the particular insurance company.

6. Take 4%, or 5% and apply it to an insurance company with a net surplus of $800 million, the punitive award comes to $40 million. There are few $40 million or more punitive damage awards upheld against insurance companies. But a $300,000 or $400,000 cap would be. They would continue with business as usual, because the illegal profits would be greater than damages threatened

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7.The prospect of punitive damages can give you as the Insurance consumer, important leverage to encourage an insurance company to treat you honestly. That is what punitive damages are for, to make an insurance company think twice before ignoring the law. Even those who know the least about insurance law may happen to wind up in the hands of a lawyer who, after subpoenaing the claims file, and fighting through fifty or so depositions, obtains the evidence necessary to ask a jury to set an example. This fact can be helpful for you to know when trying to negotiate a fair claim settlement on your own behalf.