As discussed in my post The myth of widespread “frivolous lawsuits”, the auto insurance industry and large corporations have mobilized a massive publicity campaign to create the false perception that there are scores of “frivolous lawsuits.” The real travesty, rarely exposed to the light of day, are the “frivolous defenses” and other schemes practiced regularly by insurance companies, and the attorneys and experts to whom they pay huge sums of money to avoid their responsibility to fairly compensate injured people. These frivolous defense practices are to “deny, delay and defend.”
Despite the platitudes expressed by insurance companies in advertisements, where they brand themselves “the good hands people” or “a good neighbor,” they have one and only one purpose – to make as much money as possible. The way insurance companies make money is simple, by paying either nothing or as little as possible on any claim. What is fair or right is of no consequence.
Insurance companies have the financial resources to spend any amount of money in order to manufacture a defense to any claim. The U.S. insurance industry takes in over $1 trillion in premiums annually. It has $3.8 trillion in assets, more than the GDPs of all but two countries in the world (United States and Japan). These resources are used to discourage injured people from pursuing the full compensation they are owed. Unfortunately, the insurance companies know that most lawyers don’t have the resources or dedication to defeat these tactics. They can afford to pay or lose a limited number of cases, knowing that their bottom line won’t be affected due to the sheer volume of claims they handle. If the vast majority of cases are either settled for less than full value or not pursued at all by injured people who succumb to these improper tactics, the insurance companies will make huge profits in the long term.
The most common tactic is to simply deny valid claims, no matter how reckless the insured defendant acted. The insurance company attempts to shift blame to the injured party or denies there was any injury. Invariably, liability is denied throughout years of litigation, and then admitted immediately prior to trial. The defense lawyers will imply that the innocent plaintiff is to blame for “dragging everyone into court.” Unfortunately, the plaintiff’s lawyer cannot tell jurors the real reason they were forced to take time off work to hear the case – because the insurance company chose to deny, delay and defend without regard to liability or fair compensation.
Even in cases where liability is begrudgingly accepted, the insurance company will make an insulting lowball offer and then delay reasonable settlement as long as possible, forcing time-consuming and expensive litigation. Although the the law requires payment for all losses and harms, the initial settlement offer is commonly less than the out of pocket expenses incurred, such as medical bills and lost wages. The offer will not account for any pain and suffering. The negligent party is required by law to pay for all of the following “pain and suffering” damages caused by their negligence: past and future physical pain, mental suffering, loss of enjoyment of life, disfigurement, physical impairment, inconvenience, grief, anxiety, humiliation, and emotional distress. These harms and losses are almost always the most severe, but the insurance company will refuse to compensate for them as required by law.
If the injured party refuses the lowball offer, then the case will be defended, sometimes taking years. When the case finally reaches trial, the defense will focus on calling the plaintiff a liar who is faking or exaggerating their injuries, playing on the false impression the insurance industry has created through multimillion dollar advertising and public smear campaigns. Unfortunately, the public has been conditioned to believe this propaganda and juries therefore often fail to fully compensate a deserving plaintiff for all of their harms and losses.
A comprehensive and exhaustive investigation of insurance companies by the American Association for Justice (AAJ) details the disturbing and consistent practices of insurance companies to avoid paying legitimate claims. The AAJ analyzed “thousands of court documents, SEC and FBI records, state insurance department investigations and complaints, news accounts from across the country, and the testimony and depositions of former insurance agents and adjusters.”
Allstate, the so-called “good hands people,” was singled out by the AAJ as one of the worst insurance companies in America, due to its “concerted efforts to profits over policyholders.” The AAJ cited this statement by a senior executive at the National Association of Insurance Commissioners (NAIC), the group representing those who are supposed to oversee the industry: “The bottom line is that insurance companies make money when they don’t pay claims.” Allstate’s CEO Thomas Wilson is quoted as stating Allstate’s mission: “our obligation is to earn a return for our shareholders.”
The AAJ found that Allstate privately instructs agents to employ a “boxing gloves” strategy against its own policyholders, noting that a former Allstate adjusted admitted: “We were told to lie by our supervisors – it’s tough to look at people and know you’re lying.” The AAJ found that companies like Allstate had training manuals explaining how to avoid payments, awarded portable fridges to adjusters who denied the most claims, and threw pizza parties to shred documents.
The AAJ documents Allstate’s policy to boost profits through a combination of lowball offers and hardball litigation. The “boxing gloves” approach used by Allstate is known by its employees as the “three D’s”: deny, delay and defend. The AAJ cites a powerpoint slide used by Allstate, which depicted an alligator and the caption “sit and wait” – used to emphasize that delaying claims increases the chance that the claimant will give up. Also cited was the admission of an Allstate agent that this would make claims “so expensive and so time-consuming that lawyers would start refusing to help clients.”
According to the AAJ, internal documents show that Farmers Insurance Group improperly denies claims by incentives including (1) gift certificates and pizza parties to adjusters who meet goals, such as low payments and the rates at which they are able to dissuade claimants from retaining an attorney; and (2) employee performance reviews and pay raises based on their ability to meet claim payment goals. The AAJ cites the case of Ethel Adams as an illustration of a frivolous denial of a claim by Farmers:
The 60-year-old Washington State woman was involved in a multi-vehicle accident that put her in a coma for nine days, left her with devastating injuries, and eventually confined her to a wheelchair. Incredibly, Farmers denied her claim, reasoning that the driver at fault had acted in a moment of intentional road rage, and thus the crash was not an accident. The company’s denial caused an outcry, and Farmers Los Angeles headquarters was flooded with calls and emails from angry policyholders threatening to boycott the company. Farmers only caved when the Washington State Insurance Commissioner threatened the company with legal action.
The tactics of “deny, delay and defend” are meant to discourage injured parties and their attorneys from either filing a lawsuit at all, or from pursuing the claim through litigation and trial. Insurance companies know that it will take approximately two years for the average case to go to trial, and a trial will cost the plaintiff’s attorney thousands of dollars in costs alone (i.e. depositions, experts, jury fees, and more). Depending on the nature of the case, costs in personal injury cases range from $10,000 to hundreds of thousands of dollars (or even seven figures). Almost all lawyers, including Dinsmore & Sandelmann, charge a contingency fee (percentage of the recovery) in personal injury cases, and advance the costs of the litigation, which means that a legal fee and costs are paid only if there is a recovery for the client. Some lawyers do not have the financial resources to pay the costs necessary to obtain full compensation for their clients. That has never been an impediment at Dinsmore & Sandelmann.
The only way to defeat these frivolous defense tactics is by litigating cases aggressively through trial, and if necessary, any post-trial motions and appeals. The injured victim must have an attorney with the skill, experience, and resources to invest the time and money necessary to defeat these tactics. If such aggressive measures are taken, the frivolous defense will ultimately be exposed in every case. At Dinsmore & Sandelmann, we never let our clients fall victim to the “deny, delay defend” schemes. We do whatever is necessary to obtain full and fair compensation for our clients. Because we handle only a select number of cases, we are not required to settle any case due to a limited capacity in attorney time or the financial resources money needed to prosecute the case vigorously. Ultimately, the insurance company will either capitulate to pay what is owed, or be commanded to do so by a jury.