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Bad Faith Insurance, Unreasonable Claim Denial

Most Americans have experienced difficulties in filing and collecting claims from insurance companies. Some insurance companies deny claims for the flimsiest of reasons or make unreasonable demands on policy holders in order to prevent having to pay. At Rappaport, Glass, Greene and Levine, we believe that an insurance policy is a binding contract that goes both ways. Insurance companies that delay payment or offer unreasonably low settlements are engaging in bad faith insurance practices and not living up to their end of the bargain. Rappaport, Glass, Greene and Levine can give you the legal support you need to keep Big Insurance from taking advantage to you.

Insurance is not a business that runs on altruistic principles. Despite all the advertising, jingles, and marketing campaigns to the contrary, the primary concern of an insurance company is to make money. It’s a business, and according to the sharpest investment analysts in the country, business is booming.

“I think the industry did fantastic [during the first half of 2004], and my expectation is that we’ll see more of the same in the second half.” – Chris Winans, senior Property/Casualty analyst, Lehman Brothers

“Underwriting margins should remain good and, in fact, likely improve modestly because price increases have been exceeding claims inflation for the most part.” - Jay Cohen, Merril Lynch.

But despite an estimated $3 TRILLION in yearly revenues, insurance companies present a more modest and downtrodden face to the general public. Insurance companies routinely raise premiums every year, claiming that lawsuit abuse is leading them down the road to bankruptcy. A news item from 2004 is an example of a typically alarmist and misleading statement:

8% of medical malpractice awards now exceed $1 million (double the amount from five years ago). (Health Tracking, The Medical Malpractice ‘Crisis’: Recent Trends and the Impact of State Tort Reforms, January 21, 2004)

That sounds expensive, until you consider that insurance companies have been increasing the cost of malpractice insurance premiums by an average of 10 per cent a year since 1999. Even with 8% of verdict awards exceeding $1 million, payouts to plaintiffs are miniscule compared to the billions insurance companies are demanding from hospitals and doctors each year in “protection” money.

With profits being their primary goal, it’s no surprise that private citizens encounter difficulties in collecting promised insurance benefits. By simply denying 2% of their claims every year, the average insurance company could conceivably pull in an extra $1 billion in profits. If they think you won’t put up a fight, why wouldn’t they put you into that 2% category?

When an insurance company either refuses to pay a claim or makes an effort to pay less than what is required, this falls squarely under the category of Bad Faith Insurance. There are several insurers that honor their obligations to pay for damages, and do so in a prompt and consistent manner. But for every decent insurance company that takes care of the needs of its policyholders, there is another that will do whatever it takes to protect the bottom line.

Since most insurance companies can’t come right out and deny your claim immediately, there are a series of standard tactics that are designed to wear you down, make you give up, or have you agree to accept less than what you are legally due.

Paper Review or Doctor’s Second Opinion

State Farm and Allstate have used this tactic to give an air of legitimacy to claims denials. The process involves sending medical records to a so-called “independent” physician who will review the records to determine if there are any pre-existing conditions or conditions that might have anything to do with the accident. In the case of State Farm, the “physicians” were not actual doctors, but writers with a database of stock answers to be applied on a case-by-case basis. In other cases, if a doctor is used, he or she rarely sees the patient but relies entirely on the records of the case for a diagnosis. This failure to perform an adequate investigation can prove disastrous for policyholders.

“Nuisance” or “Cost of Defense” Settlement

An insurance company will occasionally offer you a settlement that looks impressive, but when you compare the number being offered to the amount of costs that you will build up due to medical bills, property damage and lost wages, this can actually hurt you in the long run. A settlement invariably comes with a waiver that forfeits any further claims that you might have. The desperation of policy holders is what insurance companies are both waiting for and counting on.

Delay of Treatment

An insurance company can refuse to pay trips to specialists or delay the availability of funds for the treatment, thus exacerbating the condition and causing the victim extreme and unnecessary hardship. Another tactic in this vein is to suggest cheaper, less effective methods of treatment. Accepting this less effective alternative can bolster the insurer’s argument that they have lived up to their end of the contract.

Biased Investigation Tactics

If there is a substantial amount of money at stake, insurers will often hire private investigators or “experts” to look into your case, often with the intent of uncover damaging information.

Unreasonable Documentation

Insurers will often demand records and documents from policy holders that are practically impossible to obtain. Car maintenance records from before the policy holder’s purchase of the vehicle, medical records dating back decades or documentation that is irrelevant to the claim of the insured have all been used to delay payment.

It is very easy to be intimidated by your insurance company. They have years of experience, tried and true methods, and, most importantly, lots of money and time. They have all the resources they need to wait you out. You have bills to pay, and you might have a family to support, and sometimes it feels like accepting what they offer you will be the best way to move on with your life. But as intimidating as they may be, you should always remember that an insurance policy is a binding contract that goes both ways. You lived up to your end of the contract by paying your premiums every month. At RGG&L, we know when an insurance company isn’t living up to the terms of the contract, and we can help you get what you have every legal right to expect.

Library for Bad Faith Insurance, Unreasonable Claim Denial:

Insurers Systematically Overcharging Customers [PDF]
Description: Big insurance has been systematically overcharging customers and underperforming on filed claims.
Bad Faith Insurance Practices Laid Bare
Description: Allstate would rather defy a judge and pay $25,000 a day than have their bad faith practices made public.
Differences and Similarities: Katrina and The San Diego Wildfires
Description: Will the victims of the San Diego wildfires be treated as badly by insurance companies?
Filing a Claim: Organization is Everything
Description: Tips for filing a claim with your insurance company.
Keep an Eye On Washington State
Description: Washington State put a good law on the books.
CLUE: Insurance Database That Hurts Homebuyers
Description: There is an insurance database called CLUE that is used to help insurers determine risk. Unfortunately, they also use it as an excuse to drop homeowners for no reason.
State Farm: Taking Their Billions and Going Home
Description: State Farm has announced that they will no longer be writing new homeowner policies in the state of Mississippi. The reason? They might have to actually live up to their end of the bargain.
Class Bias: The New Insurance Rate Calculator
Description: Major insurance companies have been using new data and statistics to determine rates for policyholders. The good news is that it doesn't have very much to do with your driving record. The bad news is that it has everything to do with where you went to school and how much money you make.
Insurance Company Contact Information
Description: Insurance companies can be hard to get in touch with when you have a claim to file. Rappaport, Glass, Green and Levine are pleased to present you with contact information for every major insurance company operating in the United States today.
Progressive Insurance: Art for Profit's Sake
Description: Progressive Insurance is the proud owner of a collection of American Art that is worth hundreds of millions of dollars. You should remember that the next time they nickle and dime you on a claim.
"Judicial Hellholes:" Another Smear Campaign by the ATRA
Description: The American Tort Reform Association has made much about “frivolous lawsuits clogging up our judicial system.” But is it “frivolous lawsuits” that jam our courts, or the multi-million dollar contract disputes of the industries that fund the American Tort Reform Association?
"Frivolous" For You, "Justice" For Me: The Harsh Education of Senator Trent Lott
Description: A U.S. Senator that was a proponent for Tort Reform received a very harsh lesson in insurance company methods when his beach house was destroyed by Hurricane Katrina.
Insurance Companies Deny Auto Theft Claims, Reality
Description: Insurance companies are routinely denying auto theft claims on the basis that they dont believe that there is anything wrong with a flawed anti-theft technology.

The Law Firm of Rappaport, Glass, Green and Levine investigate.