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Will You Get What You Thought You Bought
By James E. Wilson Jr., Lawyer In your time of need will your insurance company deliver the benefits you thought you purchased? Insurance is a unique product. Consumers buy insurance to gain protection, peace of mind, and security against calamity. Insurance companies sell a promise: A promise to protect; that is, to pay benefits in the future, if and when a covered loss or accident occurs. A typical insurance purchase proceeds as follows: The consumer meets with an insurance agent and requests insurance; the agent recommends products; the consumer follows the agent's recommendations, completes an application, and pays the premium. The consumer believes he has purchased the benefits explained by the agent. Sometime later an insurance policy arrives by mail with a cover letter which includes a suggestion that the consumer read the policy. Most consumers do not read the policy, and many could not understand it if they did. Society recognizes the importance to the consumer and to society in general of the promised protection from financial ruin. Society also recognizes that consumers must rely upon an insurance company's integrity because most consumers have little if any experience handling insurance matters, while on the other hand the insurance company is wealthy, experienced, and sophisticated. Because of these factors, the law recognizes a special relationship between consumers and insurance companies, and imposes upon insurance companies a duty to deal in good faith and fairly with consumers. Along with the profits obtained from insurance premiums, insurance companies must accept the responsibility to follow the law and be fair and honest with their customers. When a consumer suffers a covered calamity, he has a right to expect his insurance company to promptly, fairly, and thoroughly investigate and evaluate his claim, and promptly pay all benefits. Insurance companies employ claim representatives to perform these functions. The job of the claim representative is to keep the promises made by the insurance company. The American Institute for Chartered Property Casualty Underwriters, and the Insurance Institute of America, two educational organizations serving the insurance industry, have written: "As professionals, claim representatives should use their position, knowledge, and expertise for their customers' benefit." Unfortunately, some insurance companies seek increased profit by underpaying their customers' claims. Some companies even reward their claim representatives if they reduce the amount paid on claims, including claims of their own customers. These schemes place claim representatives in the position of competing with customers for claim dollars, and this undermines claim representatives' integrity; it encourages claim representatives to look for ways to pay less, rather than use their position, knowledge, and expertise for their customers' benefit. The result is unfair denial, delay, and underpayment. These practices have not gone unnoticed. The Utah Supreme Court found: State Farm repeatedly and deliberately deceived and cheated its customers.... For over two decades, State Farm ... rewarded those insurance adjusters who paid less than the market value for claims. Agents changed the contents of files, lied to customers, and committed other dishonest and fraudulent acts in order to meet financial goals. ... State Farm's fraudulent practices were consistently directed to persons - poor racial or ethnic minorities, women, and elderly individuals - who State Farm believed would be less likely to object or take legal action. Nevada Supreme Court Justice Charles Springer, referring to Republic Insurance, wrote in an opinion: It is difficult to envision in the business world anything more repugnant than the picture of a group of corporate executives charged with the management of a giant insurance company sitting down to plan how the company can prosper by refusing to pay legitimate claims. Imagine: "First, we will take every claim and reduce it to sixty-five percent of what we think the claim is actually worth. Then, by delay, harassment, and intimidation we will force claimants to accept an amount lower than sixty-five percent of the claim's true value if possible. This scheme will work particularly well in cases where claimants are short of money and must accept inadequate compensation in order to survive." Although consumers should be able to rely upon their insurance company and its claim representative to go all out to provide maximum benefits, wise consumers accept personal responsibility for protecting their own interests. Consumers need to know and understand policy provisions, the protection the law provides, how to communicate with the insurance company, and where to go for help when necessary. If you have questions or concerns please call me. I am here to help. |