Bad Faith Insurance Companies in Denial

September 8th, 2009. By janem

Last month Michigan voted to pass legislation that will keep them up to speed with 46 other states regarding bad faith insurance practices. Consumers will be protected from unfair and abusive insurance company practices by creating penalties for insurance companies that deny policyholders’ rightful claims, while holding CEOs and other corporate leaders accountable for boosting profits at the expense of consumers.

The plan is twofold: to protect consumers and whistleblowers–the insiders who can’t sleep at night knowing the companies they work for deny or delay legitimate insurance claims so that the company’s profits increase. According to Bloomberg News, whistleblower Jo Anne Katzman, a former claims adjuster with Allstate Insurance Company, said managers regularly threatened adjusters–they would lose their jobs if they didn’t deny enough claims. She also was ordered not to pay a claim she knew was valid. As well,  both Farmers Insurance and Allstate have employee incentive programs for adjusters who deny the most claims!

Naturally, insurance companies and their lobbying and public relations firms deny, deny. They launched radio attacks and automated phone calls against Michigan’s legislators who are trying to protect their residents against bad faith and wrongful denial insurance.

And bad faith bills have been introduced in 14 states and Washington, D.C., this year.

The National Association of Mutual Insurance Companies applauded the non-profit American Legislative Exchange Council  (ALEC) when it adopted a resolution in opposition to insurance bad faith legislation. So smart ALEC (sorry, couldn’t help myself) retaliated by going on about the advancement of free market, limited government principles and plans to conduct a policy making program uniting members of the public and private sector, according to their website.

And here’s the doozy: Paul Tetrault, NAMIC state affairs manager and a member of ALEC’s Civil Justice Task Force, said in a statement that while bad faith bills are typically described in “favorable terms” by sponsors, the resolution recognizes that such bills hurt consumers through increasing costs ultimately borne by policyholders… The resolution also stresses the way in which the threat of excessive bad faith liability can interfere with the proper functioning of the claims settlement process, hindering insurers’ ability to detect fraud, which can result in payment of meritless claims.”

Try telling that to the hundreds of thousands of people who have been denied legitimate claims.  Here are just a few cases that are considered bad faith insurance and practiced regularly by many insurance companies:

1. The insurance company does not investigate a claim in a prompt and timely manner.
2. A settlement is not offered within a reasonable amount of time once the investigation is complete.
3. A delay in any payments concerning a settlement.
4. The insurance carrier has not informed you of additional benefits.
5. Any type of fraud or harassment during the investigation on the part of the insurance company.
6. Concealing any facts from the insured is cause for insurance bad faith.
7. Not following the regular procedures within the claims manual.
8. Altering any form of the insurance policy without the knowledge of the insured.
9. Threaten not to pay unless the insured conforms.
10. Failure to evaluate damages within a reasonable amount of time.

As consumers, we must oppose bills like the one ALEC has proposed.

Tags: Bad Faith Insurance

This was posted on Tuesday, September 8th, 2009 at 11:42 am and is filed under Emerging Issues . Feel free to respond, or trackback. Read our comments policy.