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Insurance Bad Faith

CONFUSING INSURANCE PROVISIONS SHOULD NOT DEFEAT CONSUMER CLAIMS

     The insurance industry is one of the wealthiest industries, owning several trillions of dollars in assets, earning average profits of over $30 billion annually, and paying its CEOs more than any other industry. One would think that an industry possessing such massive wealth would deal fairly with the common person. The experience of many consumers, however, show that the industry actually engages in tricks, sometimes unethical behavior, even outright bad faith, in order to deny legitimate claims.

     These turbulent economic times have not left the insurance industry immune. In fact it is desperately trying to recoup its losses. For the millions of consumers out there, this will likely mean rate hikes, more claim denials, more delays, and generally more tricks. Consumers should also expect the provisions in their insurance policies to get more confusing and difficult-to-understand.

     Confusing consumers is the insurance industry’s first line of defense against claims. It is easier for adjusters to deny or delay claims if the policyholder did not understand what was covered and excluded in the policy to begin with. In trying to make sense of insurance contracts, one State Supreme Court concluded: “Insurers generally are attempting to convince the customer when selling the policy that everything is covered and convince the court when a claim is made that nothing is covered.”

     Even though more than half of the states in the country have enacted “plain English” laws for consumer contracts, many persons still do not fully understand their insurance coverage. For example, many people still believe that if a new car is totaled a few weeks after it was purchased, that the insurance company will pay for full replacement. In fact, insurance companies will deduct for depreciation, leaving the policyholder to pay the remaining thousands owed on the car loan. Similarly, 7 out of 10 homeowners believe that their homeowners insurance will pay for the full cost to rebuild a home destroyed by a natural disaster or fire and will fully reimburse the cost of lost personal belongings. However, insurance companies “cap” the amount they pay and will deduct for depreciation when assessing damage.

     Despite all these horrid scenarios, these insurance tricks can be exposed for what they are and consumers can prevail on a claim. Consider the following true-to-life stories of consumers we represented:

     1) In a life insurance case, we helped an 85 year-old Filipino widower whose 84 year-old wife died when she fell from the stairs at home in the Philippines. Accidents leading to deaths are compensable under the policy. However, the insurance company refused to pay the insurance benefits and argued that the wife died of an illness, a cause of death that is not covered under the policy. The company plainly ignored photos showing the wife’s injuries from the fall.

     2) In a homeowners insurance case, a Filipino retiree’s house was damaged by a crane that crashed through his roof and left his house exposed to the elements. A sudden accident like this is clearly covered under the policy. However, a few days later it rained heavily and soaked the interior of the home, causing mold damage. The insurance company denied coverage saying that the damage was not caused by the crane accident but by water, which was not covered under the policy.

     3) In another homeowners insurance case, an earthquake damaged a hillside home, whose foundation was supported by underlying caissons and beams. Luckily, the family had earthquake insurance. However, the insurance company refused to pay the costs of rebuilding the foundation despite clear evidence that the damage was caused by an earthquake. The company’s denial of the claim was based on an esoteric provision in the insurance contract which provides that “everything under ground” is not covered.

     It was only after our law firm vigorously litigated the above cases that it was established that the consumers were entitled to their respective insurance benefits. These life stories show that insurance companies will interpret technical language in the policies in such a way as to avoid paying a claim.

     The consumer needs the diligence of ants and the patience of saints to prevail. More importantly, they need advocates who know what to do in order to fight for them and protect their rights.

© Law Offices C. Joe Sayas, Jr.