Delay Deny Defend: Why insurance companies don’t pay claims and what you can do about it.
We were honored to be contacted by the good folks at the Penguin Group’s Portfolio Publishing a week or so back. They inquired if we’d be interested in reviewing a new book by Jay M Feinman on the insurance claims process titled Delay Deny Defend. Professor Feinman is a Distinguished Professor of Law at Rutgers University School of Law who shares an interest in how insurers handle their claims with your (mostly) humble moderators here at Slabbed. According to the book’s website, “Feinman is a well-known expert on contract law, tort law, insurance law, and legal education. His scholarly work, including more than fifty scholarly articles, has been widely cited in the academic literature and by courts, including the United States Supreme Court.”
Lets begin with the accompanying press release:
Over the last two decades, insurance has become less of a safety net and more of a spider’s web: sticky and complicated, designed to ensnare as much as to aid.
Author and insurance expert Jay Feinman explores how these trends developed, how the government ought to fix the system and what the rest of us can do to protect ourselves.
In the book Dr Feinman chronicles many of the systemic abuses of policyholders many of which we have covered through time here. A few of the more interesting points Dr Feinman makes:
- Auto insurance company spies who infiltrate church support groups to prove accident victims faked injuries.
- Claims Adjusters who receive cash incentives to reduce the amount paid out on each claim.
- Katrina claims adjusters receiving their 2 day training at a Burger King before being given a ladder and notebook computer.
Of course it was his chapter on Hurricane Katrina that immediately drew my interest. Before I share the contents of the chapter I’d like to take a second to highlight what is not is in it. First off there are no fanciful Grand Unified Theories that attempt to tie the policyholder cases to Dick Scrugg’s subsequent criminal behavior. Lecky King is correctly identified as a female (vagina dentata)….well not really the last part and the insurance industry’s bad behavior is front and center where it belonges As I read the chapter I was briefly overcome with emotion as I saw tangible proof people are listening and do get it:
Slab cases were the most hotly disputed, even giving their name to the blog called slabbed, which expresses the frustration of Gulf residents by defining “slabbed” as “blown down, knocked down, or just down”.
Two of the journalists that we admire the most on Slabbed for their work reporting the events here, The Sun Herald’s Anita Lee and The Times Picayune’s Rebecca Mowbray are also credited by the author. Professor Feinman breaks down the 5th circuit’s mishandling of anti concurrent causation in Leonard and cites examples of the inconsistent legal stances taken by insurers most notably State Farm. Again we see the post Katrina hatchet jobs such as Mike Chaney’s deeply flawed, unsupported conclusions contained in his State Farm Market Conduct Exam and the Department of Homeland Security’s OIG report on claims dumping laid bare for the world to see. The chapter concludes with a quote from an Anita Lee’s story on Chaney’s whitewash market conduct exam from local attorney Joe Sam Owens:
‘If I didn’t know he was the Commissioner of Insurance, I would have thought he worked for State Farm.” And Owens may only have been premature in his remarks. Lee Harrell, the deputy commissioner of insurance who oversaw the examiniation of State Farm, left shortly after and joined Baker, Donelson, Bearman, Caldwell & Berkowitz, a law firm that represented State Farm in Katrina issues.
Finally Professor Feinman presents an appendix which lists resources for policyholders. It lists the usual all-star cast including David Berardinelli, author of From Good Hands to Boxing Gloves: The Dark Side of Insurance, Law Professor Jeffrey Stempel’s Litigation Road: the Story of Campbell v State Farm, The National Association of Insurance Commissioner’s website, our friend Amy Bach over at United Policyholders, and Robert Hunter over at the Consumer Federation among others. In the section keeping up to date we find Professor Feinman shares our affinity for Chip Merlin’s blog and Sam Friedman’s blog. He also lists a blog called Slabbed:
Detailed, often entertaining commentary on disaster insurance issues, particularly on the aftermath of Hurricane Katrina.
While certain upstate cliques thought they had ignored us to oblivion something else was happening. The people that have literally defined the issues on the national level were tuning in. We’re both very proud and humbled to be mentioned in the same breath as Robert Hunter, David Berardinelli, Chip, Amy and even my main man Sam. Nowdy for the issues we cover I think I’m safe saying we are the preeminent policyholder blog in this country bar none. Nowdy, Bam Bam, Belle and many others too numerous to mention deserve this recognition for making slabbed possible. We’ll have more from Professor Feinman in another post. Meantime for the Slabbed Nation and Crooks in Gucci Suits everywhere rest assured…….
sop
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February 12, 2010 at 6:10 pm
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Delay Deny Defend: Why insurance companies don't pay claims and … Insurance just to Me
February 12, 2010 at 6:22 pm
Is there a link for “keeping up to date”
nowdoucit
February 12, 2010 at 9:27 pm
No you have to buy the book Nowdy. I’ll make certain you see our complimentary copy.
sop
sop81_1
February 12, 2010 at 9:46 pm
ALLSTATE INSURANCE COMPANY’S BEST KEPT UGLY SECRET
Car Hits Twelve-Year Old Girl While Standing On Sidewalk
Our daughter was injured as a pedestrian in a serious car accident while standing on a sidewalk with a friend when an underinsured driver jumped the curb while making a left turn and hitting our daughter straight on, flying her up in the air where she landed on top of the car hood and was slammed to the ground as the car continued on driving down the road without any regard to our daughter’s well being. We learned from her doctors that she had sustained a brain injury resulting in cognitive impairment in addition to other physical injuries. Directly after the accident, she had to relearn simple math and forgot how to walk home from school as one of many examples. The accident occurred in 1997, and she has made substantial progress through great effort on her part and a relentless desire to get back what she had lost in the accident.
Allstate Denies Injury
Allstate contended that we had fabricated our daughter’s injury and we had convinced her that she had suffered a brain injury despite medical testimony to the contrary. Despite Allstate’s lowball offer of $15,000 to settle our daughter damage claim, the arbitrator awarded our daughter $1.4+ million dollars in damages for the injuries she sustained. Although Allstate represents that you are in “Good Hands,” they offered only $15,000 on a $1,400,000 injury under our Uninsured Motorist coverage. During the arbitration proceeding, Allstate was even able through their crafty lawyers to get their own expert to change his testimony whereby he had written a prior report that indicated that my daughter had suffered a closed-head injury and had suffered some degree of unconsciousness as a result of being hit by a vehicle as a pedestrian. Again, my daughter was hit by a vehicle, thrown on the vehicle’s hood, and was slammed to the ground as the driver drove off down the street without any regard to hitting my daughter. The Allstate expert changed his testimony during the arbitration hearing by indicating that my daughter did not suffer a loss of consciousness, which is often a material element in supporting a brain injury, since the force of a car hitting a pedestrian did not necessarily constitute sufficient force to render such an injury. These facts alone should speak volumes about what I consider Allstate’s deceptive insurance practices in denying claims to their own customers. This is precisely why Allstate has one of the lowest ratings of all insurance companies in the United States.
Inadequate Insurance Coverage
Although I was advised repeatedly that the Personal Umbrella Policy that I purchased in the amount of $1,000,000.00 applied to my daughter’s injury under the Uninsured Motorist provisions, Allstate prevailed in subsequent lawsuits through the appeal process, after we had won two prior verdicts, by convincing a jury that no such coverage ever existed with respect to Allstate’s Umbrella policy. Allstate never offered such protection although they advised me on several occasions it was my fault for not reading cover to cover my lengthy policy with more loop holes than Swiss cheese. Instead of $1,250,000 of protection, we only had $250,000.
Umbrella Policies and Uninsured Motorist Protection-Buyers Beware
When I purchased my Personal Umbrella Excess Liability Policy from Allstate Insurance Company, I was advised that the $1,000,000 million of additional Umbrella was in addition to my underlying $100,000 of Uninsured Motorist coverage, which was later increased to $250,000, as well as to my bodily injury portion. Subsequently, when I asked to increase my Uninsured Motorist coverage, I was advised by Allstate that all I had to do was simply increase my Umbrella from $1,000,000 to $2,000,000, which I did in order to protect my family in the event one of us were injured by an uninsured or underinsured motorists. Uninsured motorist coverage can be obtained at very little expense, and the protection to one’s family is of most importance due to the high number of uninsured and underinsured motorists in the State of California. This is precisely why certain insurance companies do not advise their insureds to get additional uninsured motorist protection, since they do not want to pay large claims for injuries sustained by an uninsured or underinsured motorist.
California Law
California only requires by law that a driver carry a minimum of $10,000 of bodily injury coverage per person. For example, the woman who hit my daughter was only required by law to have $10,000 in insurance to cover my daughter’s injuries which were in excess of $1.4 million. An umbrella policy offers substantially more liability protection in amounts of $1,000,000 or more at very little additional cost. In my situation, at the time I believed I purchased the polices, I only had $100,000 in Uninsured Motorist coverage when I was led to believe I had an additional $1,000,000 of coverage on top of that.
The uninsured limits were eventually increased to $250,000 only because Allstate now required higher underlying limits for the Personal Umbrella to apply. The Allstate agent testified in court that Allstate would never advise you to obtain more uninsured motorist protection once you met the minimum of underlying coverage for the Umbrella to apply since he would never advise you that the Umbrella did not apply (“sneaky”), again leaving their insureds subject to substantial risk and exposure if hit by an underinsured motorist.
Under California State law, an insurance agent is not required to advise their customers that they should obtain increased uninsured motorist coverage nor are they required to advise them that their particular Umbrella Excess Liability policy is not linked to the uninsured motorist portion. However, certain insurance companies doing business in California offer an umbrella excess liability linked to the uninsured motorist protection, such as Farmers Insurance Company. State Farm Insurance Company used to link the two but stopped doing so in 1996. I contacted a State Farm insurance agent on January 21, 2010, and asked if the two were linked, and she indicated she was not sure but would contact her underwriter and get back to me, whereby she was informed that State Farm no longer offered Umbrella protection linked to the Uninsured Motorist protection as of 1999. I then asked her what the maximum of uninsured motorist coverage one could obtain through State Farm, and she did not know off the top of her but after looking at one of her policies she indicated $250,000, which is not adequate in my opinion. When an Umbrella Policy purchased from Farmers Insurance Company (at least as up to a year ago when I last checked), the insured is offered an option of having the umbrella tied to the uninsured motorist portion by checking a box.
However, Allstate has no such election or coverage. It is also possible to go outside of the “Good Hands” Allstate Company and obtain a stand-alone umbrella policy which is linked to the uninsured motorist coverage.
Our Agent Mike Baldwin Goes Outside of Allstate to Get Protection
Not Offered by Allstate
In fact, our agent with Allstate, Michael Baldwin, did exactly that — he went outside of Allstate and obtained such an Umbrella policy from State Farm that was tied to the Uninsured Motorist policy in order to protect his family. He admitted in a court of law that he never advised any of his clients over his 20-year career with Allstate that (1) the Allstate Umbrella policy was not linked to the Uninsured Motorist coverage, and that, (2) an insured can go outside of Allstate to obtain an inexpensive Umbrella policy that was in fact linked to the Uninsured Motorist coverage as he did. When I obtained an Umbrella policy, he had already gone out of Allstate to obtain such protection for his family that was never offered to me, since he testified that it would have been too confusing for me to understand this concept and this would be a recipe for disaster. The recipe for disaster were not having Umbrella protection for my daughter’s injuries, a concept that totally escaped Mr. Baldwin. I had referred Mike Baldwin numerous clients including my mother and other friends. I also lectured at his church on estate tax matters. I considered Mike a friend but he concealed this information from me. He indicated that he did not have a duty or a moral obligation to tell me. He also admitted in a court of law that during his 20-year career, none of his customers ever asked whether the Umbrella was tied to the Uninsured Motorist coverage.
The reason that no customers ever asked this question is that the belief that such coverage under an Umbrella policy applies equally in a situation, that if the insured, someone or if someone in their family is injured, the Umbrella protection applies. Even insurance agents are under this mistaken belief as are attorneys, judges, as well as the average consumer. Even the attorney that was representing me in the court action with over 30 years of insurance litigation experience was not aware that his Umbrella and Uninsured Motorist protection were not linked until he took my case and checked with his insurance company. After checking with his insurance company, he immediately went outside of his insurance company to obtain an Umbrella policy for only a couple hundred dollars a year in premiums that was in fact linked to his Uninsured Motorist.
Dirty Secret
This is one of the dirtiest secrets in the insurance industry, and Allstate is one of the worst offenders and has one of the lowest ratings among attorneys who represent clients against Allstate for denial of claims. I strongly advocate that the law in the State of California as well as other states and perhaps even under federal law should be changed whereby an insurance company that does not offer Umbrella protection linked to the uninsured motorist provisions should be required to advise their customers that they can go outside that particular insurance company to obtain such a policy at very little expense and without terminating any of the insurance coverages with the primary insurance company. A better solution would be to require all insurance to offer Umbrella policies tied to Uninsured Motorist protection.
The Personal Umbrella policy which was sold to me protects everyone in the world for injuries caused by me but my family are the only ones in the world who are not protected under this same policy to the extent I protect total strangers. This is so hard to believe that my family happens to be the only ones outside the Umbrella. The ordinary consumers as well as sophisticated individuals are not aware of this serious potential gap in insurance coverage.
We believe that Allstate’s conduct over a substantial number of years is despicable and immoral. We strongly advise the California Insurance Department change the laws in California to protect other insureds from the same fate that we suffered under the “Good Hands” of the Allstate Insurance Company.
Allstate Decreases Insurance
When I first met Mr. Baldwin to discuss my insurance needs, I had three times the uninsured motorist coverage then, than I had when I walked out of the meeting with Mr. Baldwin. Although he testified in a court of law that he never decreases the insurance coverage of an insured when he reviewed their existing coverages, he subsequently decreased mine by two-thirds of what I had in place before the meeting.
Although I was teaching income tax and financial planning at UC Berkeley, at the Graduate School of Finance level, attending the graduate law degree program through NYU law school in taxation, and working as a tax attorney for a sophisticated East Bay law firm, Baldwin stated in a court of law, but only after being prepped by clever Allstate attorneys after his deposition, which went poorly in my opinion, when he made no such claim that I was incapacitated to make any insurance decisions on behalf of my family and that my wife had to make all of the insurance decisions on my behalf.
He further testified that we declined any increased uninsured motorist coverage because my wife wanted to save $18. My wife was not even involved in discussions regarding our insurance needs since she was taking care of our two small children at the time. His testimony that I was incapacitated to make such a decision on behalf of my family clearly is without merit and a complete fabrication of the truth. This is further evidence that Allstate will go to any length to win a case in blatant disregard of the truth in my opinion.
Change Hands – Change the Law
We believe that the testimony of Mike Baldwin as well as Allstate’s egregious actions in this case, should serve as the “Poster Child” and “Poster Company” for reform of the insurance laws in the State of California as well as on a federal level. Join me in making this a reality and forever changing the insurance laws so that when an insurance company represents that you are in “Good Hands” that you are in fact in “Good Hands” with all fingers attached and without serious gaps in coverage which they do not disclose to you. Please check with your insurance company to be sure that you have adequate insurance protection as well as having an Umbrella policy tied to your Uninsured Motorist protection. If necessary, change hands. We would never want anyone else to suffer the same fate that we experienced by not having adequate insurance protection for our daughter’s injuries due to lack of disclosure as well as misrepresentation, in my opinion, on behalf of an unscrupulous insurance Company.
http://www.youtube.com/laylafanucci2
layla fanucci
February 12, 2010 at 11:06 pm
This is a very unfortunate situation for the writer. However, most personal umbrella policies do not provide uninsured or underinsured coverage. The reason is simple, the umbrella policy is an extension of the insure’d underlying libility limits. The is what is called a “third party” coverage to protect the insured against large liability claims. UM/UIM coverage is “first party” coverage which provides coverage for the insured.
There obviously was disagreement about what the insured was or was not advised. The court obviously did not find for the insured. Those who were not in the courtroom for every bit of testimony cannot logically pass a judgement on the findings of the court.
Supsalemgr
February 13, 2010 at 6:17 am
We are going to post somemore on perils and policyholders being underinsured Sup. The under insured driver has personal exposure for the excess loss but somehow I doubt he had any assets for the Fanuccis to attach.
Most people do not realize it until it is too late but uninsured motorists coverage is one of the most important coverages to carry. Ms Fanucci had it and the dispute goes to the coverage limits rather than the coverage itself. Regardless of the outcome of the case this is a heart wrenching story.
sop
sop81_1
February 13, 2010 at 6:40 am
Sop, agreed that UM/UIM is a very important coverage and unfortunately too many prople either reject the coverage entirely or decline to increase their limts.
When I was working in MS it was common for most people not to raise the their Underinsured limits. Why, the cost had gotten very high in MS. The reason for this is there were so many uninsured and underinsured drivers in the state. The cost was also inflated due to the “stacking” of those limits. That means if an insured had two cars the coverage was doubled which was not the intent. I do not know what the current system is.
Where I currently work it is common for insureds to carry the same limits as their liability limits. The cost is relatively low as the state does an outstanding job of enforcing the financial responsibility laws for carrying liability insureance.
Supsalemgr
February 13, 2010 at 7:57 am
Sup my Mom was one such person who thought she could save a nickle by eliminating that coverage. In today’s post McKinsey world that was the opening Nationwide used to attempt to screw her after one of their insureds ran a stop sign. They would have made it stick too had she not had a son who essentially provided the benefit of that coverage while she waiting almost 3 years for her day in court. Had Nationwide been fair up front they would have been out of pocket for around $15K. After the jury got done it was more like $50K net of fees.
For every person like my Mom I suspect there are 95 that take pennies on the dollar because they have no choice.
You don’t buy that coverage anymore because there are lots of uninsured drivers running around. You buy it because (unless you are wealthy) it is the only way to insure a level playing field if an insured driver causes an accident like happened to momma Sop.
sop
sop81_1
February 13, 2010 at 12:28 pm
Sop,
Thanks for the mention and the kind words. Everyone at Slabbed deserves all the accolades you can get.
Just to let your readers know that Katrina is part of the story but only the tip of the iceberg, if I can mix meteorological metaphors. Delay, Deny, Defend tells the story of how the claims process has been transformed into a profit center for insurance companies, contrary to their promise and obligation to pay claims promptly and fairly. Players range from mega-consulting firm McKinsey & Co., which consulted with Allstate and other companies, to the GEICO gecko, symbol of the emphasis on price over service. The Katrina story is reflected in the problems with homeowners insurance for ordinary claims, and the book also discusses devices for stonewalling or lowballing auto claims and the exaggeration of the problem of insurance fraud. It also offers suggestions for consumers on how to pursue claims successfully and for regulators, lawmakers, and judges on reforms that are needed.
Be clear that the book is pro-insurance, not anti-insurance. Insurance is a great social and financial device, but it needs to really give policyholders the security they expect and deserve.
Jay Feinman
Jay Feinman
February 15, 2010 at 7:16 pm
Thank you Jay and will have more on it in the days to come. My favorite adjuster story involves a stripper turned adjuster. Will be be touring in support of the book? We’d love to have you on the coast as our guest.
sop
sop81_1
February 15, 2010 at 7:49 pm
2 days of training at Burger King? Based on my experience deposing well over 20 Katrina adjusters I would say that is an insult to Burger King.
NRB
March 29, 2010 at 8:25 am
Title: The `gloves’ come off in book about Allstate
Link: http://blogs.chron.com/lorensteffy/2008/09/the_gloves_come_1.html
http://www.youtube.com/laylafanucci2
layla fanucci
April 28, 2010 at 12:20 am