Insurance can sometimes sound like a mobster’s racket. You pay a big chunk of money regularly, hoping you never need to cash in the benefits. When you do, sometimes the insurance company fights tooth and nail to avoid paying you what you’re owed. Naturally, fights don’t happen all the time – if they did, no one would buy insurance. But when it happens, woe to the policyholder caught in the middle of that mess.
While insurance companies need to guard themselves against that possibility of some policyholders committing fraud, most are honest people who just want to be made whole. That is, after all, what insurance is supposed to do.
A car is wrecked, a house is destroyed, an accident happens, a storm or fire interferes with business operations. These events, already difficult and painful, are made exponentially worse when insurance companies refuse to provide benefits as promised.
How can they get away with that, you may ask?
Well, insurance, being a fundamentally legalistic product, is usually handled by people with a highly sophisticated understanding of the law. They know all the tricks available to them, including burying unsuspecting policyholders in red tape, throwing every possible legal claim they can think of at them in court, inventing questionable reasons for claims denials, and challenging discovery efforts.
With statisticians and other experts on their side, they also know exactly how much profit they can make out by rejecting or obstructing your claim, even with the addition of legal costs.
You may be wondering just how bad it can get when people are fighting an insurance company.
Unfortunately, I have to tell you: it’s pretty bad. Insurance companies can bury you in litigation, assert allegations that have nothing to do with your claim or the case, prevent you from accessing the information you need, and generally make your life miserable. Here is a sampling of some of the worst behavior by insurance companies that have come out in court recently.
Denial of coverage for cancer
There is enough bad faith in health insurance that it could be its own, very extensive, category. I’ll point out just one health insurance case that was so egregious that a jury tried to make an example out of the company.
A 54-year-old Oklahoma woman, suffering from a tumor in her head, was denied coverage for proton beam therapy, which was recommended by her doctors. The reasons she was given appeared apparent to her family, but they didn’t know what to do. Time was of the essence – the cancer would only grow and get worse. They mortgaged their house to come up with more than $90,000 for the treatment cost. The woman later died, but the battle continued with Aetna.
During a legal case, it was discovered that doctors at Aetna who were charged with reviewing cases were vastly overworked, some having to examine as many as 80 in a day. With such heavy caseloads, doctors often quickly denied treatment on a superficial basis without examining the situation more closely.
To a jury, the actions by the insurer, namely over-burdening the doctors, appeared purposeful as a means of evading coverage obligations. Jurors in Oklahoma found that Aetna breached its contract and acted in bad faith. They awarded a stunning $25.5 million in compensatory and punitive damages.
“We just thought it was a broken system,” one juror told an Oklahoma newspaper. “We wanted to send a message to Aetna to fix the system.”
Left high and dry after a hurricane
For years, the Doomsday prognosticators in meteorology had wondered what might happen if a monster hurricane spawned by hotter summers wandered north, remained strong and made a direct hit on Manhattan. The Eastern Seaboard had been struck before by hurricanes, but a major one hadn’t made landfall there for decades. In the meantime, the population and development swelled. It seemed to be a nightmare waiting to happen.
The predictions came true in 2012 with Hurricane Sandy. The sprawling storm wrought as much as $70 billion in damage, destroying thousands of homes, bringing a storm surge of 15 feet into lower Manhattan, flooding subway tunnels, closing the stock exchange, wiping away development on the Long Island coast and the Jersey Shore.
As bad as it was, things only got worse for many property owners. Hundreds received denials or very paltry payments for the damage. Many spent years battling insurers in court, while meanwhile struggling to find a place to live and put back together with their lives. One couple discovered an agent had failed to secure them flood insurance.
They were left with almost nothing after their house was destroyed by storm surge. Other homeowners discovered that insurance adjusters were systematically misreporting damage. Eventually, some received settlements, but many cases are still ongoing.
Buying the judiciary
Sometimes when fighting an insurer, things can get so frustrating and challenging. It can start to feel like the company must have rigged the system in its favor. Shockingly, one of the country’s largest insurance companies tried to do just that, in an unbelievably brazen fashion.
State Farm, the nation’s largest auto insurer, was in the throes of litigation alleging that it had breached contracts to customers by providing cheap, knock-off car parts rather than the real thing for repairs. Customers were alleging in the vast case that the insurer had engaged in that practice for at least a decade, from the late 1980s through the late 1990s. In a trial court in Illinois, State Farm was ordered to pay about $1 billion in damages.
While fighting to overturn that ruling, the insurer allegedly sought to put a friendly justice on the state’s supreme court. The company was accused of funneling money through intermediaries to a state judge’s election campaign. The judge, a Republican, was seen as business-friendly and likely to rule for the insurer.
State Farm later faced a civil racketeering case over the effort to rig the judiciary. The company agreed to pay $250 million to settle the case, without admitting or denying the claims of wrongdoing.