Missouri Insurance Lawyer Blog

Despite the hundreds of millions of dollars insurance companies spend on advertising to make us believe that insurance comapnies will do the right thing, their actions speak louder than words. So I will be posting stories and verdicts of insurance company fraud, insurance company bad faith, unfair claims denials so that personal injury victims, and consumers can check the fact from the fiction.
For a start read about Allstate's Bad Faith, or about HMO claims denials.

HMO claims-rejection rates trigger state investigation -- latimes.com.

Here is an interesting story from the LA times. That means 20% of all claims made are denied, despite a diagnosis and a doctor's orders.

Given all the attention of the media and public on insurance related matters, I think this story is worthy of revisiting. A Missouri Appellate Court did not believe Allstate Insurance company's assertion that its failure to settle the claims of two car accident victims in a timely manner was not bad faith. Despite its slick commercials and claims of customer service Allstate's conduct spoke volumes about the way it handles claims. Allstate has long been viewed by Missouri personal injury lawyers as one of the worst when it comes to timely and fair claims payment.

The Allstate lawsuit stemmed from a car accident that occurred in March of 2000, when a truck driven by an intoxicated Wayne Davis Jr. collided with the subcompact car carrying Edward Johnson and his wife, Virginia. Both the Johnson's survived, but their medical bills came to at least $320,000.

The Johnson's initially agreed to settle for Davis' minimal insurance policy limits of $50,000, but Allstate did not respond until six months later. That was after the statutory 60-day limit for accepting had expired.

The Johnson's were forced to sue Davis, and he agreed to a judgment in excess of $5 million. However, the Johnson's also agreed not to collect on that judgment in return for Davis assigning to them of most of his claim against Allstate for its refusal to settle. The couple and Davis then sued Allstate in Jackson County Circuit Court, alleging the insurer had acted in bad faith when it did not respond in a timely fashion to the Johnsons' initial settlement offer.

Allstate defended itself by claiming that it lost the letter proposing the offer and responded late because it did not receive the Johnsons' medical records. Allstate, in like so many companies making insurance denials asserted that it was unsure the crash had caused the Johnsons' injuries, even though the couple had to be cut out of the wreckage, were life flighted by helicopter to the hospital and received care in an intensive care unit (ICU).

At the circuit court level, the jury did not accept Allstate's defense, and in November 2006, it found that Allstate had acted in bad faith. The jury unanimously awarded compensatory damages of $5.8 million plus 9 percent interest since the date of the judgment to the Johnsons. By a vote of 10-2, it also hit Allstate with $10.5 million in punitive damages.

Allstate appealed, but on Tuesday a three-judge panel of the Missouri Court of Appeals held that the jury's verdict was justified.

"Allstate's failure to recognize the severity of the Johnsons' injuries and the probability that the claim would far exceed Davis's policy limits; its failure to investigate the claim and respond to the demand in accordance with insurance industry standards and its own good faith claim handling manual; and its failure to advise Davis of the demand, his likely exposure for an excess judgment, and his right to retain counsel, are all circumstances supporting a reasonable inference that Allstate's refusal to settle was in bad faith," Judge Paul Spinden wrote in the panel's decision.

UNH UnitedHealth Settles With New York Attorney General Over Database Unit.

UnitedHealth stacked the deck its own insureds in order to skimp on paying claims of the sick and injured. Insurance policies are contracts. Contracts are promises and insurance companies make a promise as a fiduciary when they take premium dollars for the performance of a promise to pay in the future. This story sheds some light on how private insurance companies game the system to cheat policyholders.

Missouri insurers report that more than 20,000 vehicle thefts were reported in the state last year, nearly half of them in St. Louis and Kansas City. Total losses are estimated at more than $140 million.

The five most commonly stolen vehicles in Missouri are the Dodge Intrepid, Ford Taurus, Pontiac Grand Prix, Dodge Stratus and Oldsmobile Cutlass.

The insurance group says vehicle owners can deter thieves by locking the doors, closing all windows, putting packages and valuables out of sight and parking in a residential garage. For vehicles parked outside, turning the wheels sharply to the right or left makes it difficult for thieves to tow.

The Business Week recently reported, Louisiana Insurance Commissioner Jim Donelon "said Monday that he'll support legislation to give the state's 'insurer of last resort' immunity against certain lawsuits, a proposal that could retroactively negate the firm's payout if it loses its appeal of a $95 million class-action. Donelon said he'll back such a bill in 2010 to protect Louisiana Citizens Property Insurance Corp. against lawsuits -- past and present -- that seek financial damages for failure to pay claims on time." Citizens "is appealing a ruling that the state-backed firm must pay $95 million to 18,573 policyholders because their Hurricane Katrina claims were not settled quickly enough." Donelon also intends to push for legislation "that would give the firm immunity against the requirement that a party post a bond while appealing a court's ruling."
Apparently, Donelon believes that insurance companies can break the rules, be held accountable in court and then should let of the hook for the "public good." Insurance companies that don not pay claims promptly, and fairly are in violation of industry standards and the law. Donelon should focus on forcing companies to pay legitimate claims timely and fairly. Instead he will insure there is an insurance company of last resort that does not have to follow the rules or pay claims fairly. Wow Jim great job!

Missouri has taken a stand against texting while driving as reported on the Missouri Injury Lawyers Blog story, entitled Missouri Legislature Moves to Curb Car Crashes Caused by Texting.
Now national legislation is being considered at the federal level. As reported in Insurance News Net Nationwide Insurance has announced that it will support this national effort. As reported by Insurance News Net,
"There is a growing body of research and evidence that suggests a ban on texting while driving will save lives and make our roads a safer place to drive, said Bill Windsor, Nationwide's Safety Officer."
Clearly a ban on texting while driving will prevent personal injuries and deaths. Can there be any doubt that a driver should not be driving down the road texting? Driver inattention is the largest single cause of crashes on our roads. Let's discourage people who believe that they can text and drive by making it illegal everywhere.

Roy Rogers once said an insurance policy is one page that tells you what insurance you have and 50 pages that tell you why it does not apply in your particular situation. The 50 pages that take coverage away are called exclusions.
Exclusions are the insurance companies way of narrowing the risk they have accepted under the contract. For example if you have a policy of insurance on your car, but the situation that arises falls within an exclusion you bear the risk of loss and not the insurance company. In a recent post entitled Don't Believe The Hype You Are Not Friends, I made the point that all you get from insurance is the written contract. The nice sales pitch and fuzzy promises on TV give way to the hard realities of what's written in the insurance contract when its time for a claim.
If the insurance company denies your claim, it is usually because of exclusion. By way of example consider a common exclusion in a personal auto insurance policy, the business exclusion, which takes coverage away if your vehicle is used in a business instead of personal use. Even if you have your car insured for liability and you are in a crash and hurt someone you won't have any coverage if you were using a personal auto on business. Fortunately exclusions in the policy must be phrased in clear, plain and unambiguous language. If the insurance company claims that exclusion applies it is their burden to prove that it applies. So to protect yourself read your policy carefully to see what is covered before you need to make a claim.

It's amazing how many times I have clients injured in a car crash tell me that that thought they had "full coverage." In Missouri there are minimum state requirements for insurance coverage, but these minimums are very far from full coverage. When your only instruction to an agent or insurance company is that you want full coverage you are leaving your financial protection to chance. Missouri law requires that auto policies have liability insurance coverage of $25,000 per person and $50,000 per accident, and the same limits for uninsured auto coverage. There is no legal requirement to have underinsured motorist coverage, medical payments coverage, accidental death, or extended benefits coverage.
Underinsured coverage offers protection from drivers who injure you but do not have enough coverage to cover your injuries. Medical payments coverage pays for medical bills you incur as a result of being injured by a vehicle related incident, if you are killed this coverage pays all or part of the face amount of the benefit depending on the policy. Accidental death provides additional coverage should you die in an auto related incident. Extended benefits coverage pays lost wages if you are off work from an auto related incident.
If you want full coverage you would purchase all of this coverage to insure that you are truly protected. You also need to purchase insurance limits that make sense for you given your financial circumstances. I suggest that your minimum limits should be no less than $100,000 for liability insurance, uninsured motorist, and underinsured motorist. $10,000 in medical payments coverage and accidental death is adequate if you have adequate health insurance and life insurance. If you have significant assets or income then you should purchase higher limits to protect yourself and your family.

The South Florida Business Journal (8/27) reported, "Florida's insurance commissioner on Wednesday issued a final cease and desist order to three companies found to be engaged in the unauthorized sale of insurance products." The companies, Peck & Peck, Depawix Health Resources, and Green Cross Managed Health Systems, were found to have marketed "group and individual health insurance plans to small businesses and individuals, both directly and through licensed and unlicensed insurance agents, under the guise of selling an employment opportunity with Depawix." The cease and desist order said, "Green Cross calls itself a managed health system that purportedly provides health insurance to Florida consumers by placing them in part-time jobs with Depawix as a tester of the Green Cross process of medical care." The order also stated that employees were "paid a certain amount of money each month, much of which is kept by Depawix to pay for insurance coverage."
As reported in recent blogs here on the Injury and Insurance Blog, Missouri and Illinois have also recently taken pro policyholder positions by preventing an insurance company who did not follow fair claims practices. While this is good, there is still much work to do, and Insurance Commissions must do a better job of stopping unfair insurance company practices involving sales and claims.

Insurance Commissioner Steve Poizner of Californiar said he'll fight the sale of a portion of the State Compensation Insurance Fund for $1 billion." In the story original reported by the AP, Poizner stated that the State Compensation Insurance Fund "is the insurer of last resort for employers to provide compensation to workers who get injured on the job. Selling a portion of the business or taking money from its assets violates the state's constitution, Poizner said. He warned the sale would drive up insurance premiums for construction firms, farms and other small businesses."

The insurance company will have a contractual right to control the defense, but no right to prevent the insured from retaining their own counsel. Therefore, it is the wise policy holder who receives a reservation of rights letter, that immediately hires personal counsel to handle not only the issues emanating from the reservation of rights letter, but to keep tabs on and participate in the defense being put on by the insurance company.

The reservation of rights letter also implicates the relationship between the insurer and its' policyholder with respect to the cooperation clause. Insurance companies expect that their insured will abide by the cooperation clause in the policy which mandates that policyholders provide information and comply with reasonable requests of the insurance company in order to evaluate the claim and provide a defense. Once a policyholder receives a reservation of rights letter, the policy holder may not be sure how to proceed or what is required under the cooperation clause. Fortunately, well established contract principles instruct that the policyholder's obligations under the cooperation clause are conditioned upon the insurance company's performance of its own contractual obligations. Therefore, where an insurance company interest diverge from the interest of a policyholder, the policy holder's duty to cooperate logically only runs to the defense of the claim which could terminate liability for both the insured and the insurance company. Such duty to cooperate should not run to the insurance company and the issues raised concerning insurance coverage.

The conflict can be heightened further if the insurance company completes its investigation and decides to rely on its reservation of rights and file litigation against its insured to declare that there is no insurance coverage. Fortunately, Missouri policy holders have the right to reject the insurance company's reservation of rights. This is a valuable right, because it forces the insurance company to choose whether they wish to fight the battle with their own insured, or if they will honor their contract, defend the case and fight liability and damages against the person suing their insured. This right serves policy holders by preventing insurance companies from putting off performance they have contractually obligated to perform, and subjecting the insured to a conflict of interest in which the insured is obligated to cooperate with someone who is looking to dump them and avoid their contractual responsibilities.

It is clearly important that an insurance policy holder understand the full ramifications of denying reservation of rights. If a policy holder denies a reservation of rights, the policy holder has the obligation to simply reject and proceed on their own or they could offer the insurance company the opportunity to continue its performance if the insurance company will withdraw the conditions leading to the reservation. Although individual policy holder situations vary, the choice to reject the reservation of rights is often the soundest choice for policy holders faced with a reservation. This is particularly true if the policy holder or their counsel has acted to appropriately limit claims brought by the plaintiff through the use of an alternative settlement arrangement. If, of course, settlement is not a viable alternative with the plaintiff, then the rejection of the reservation of rights would leave the policy holder with the obligation to defend itself as best it could and then sue for recovery of its costs and any indemnify from its insurer. However, because of the perceived conflict of interest that a policy holder may feel, an adequately financed policy holder may still choose this opinion as the best choice rather than by defended by an insurance company who is ultimately seeking to break its obligations.

Where settlement with the plaintiff is possible, such may be achieved by using a covenant not to sue or by complying with the provisions of Missouri Revised Statute Section 537.065 which allow the contracting parties to limit the collection of their suit to specified assets. Depending upon the nature of the allegations in the petition, the strength of the liability, and the extent and nature of damages suffered by the suing party, such restriction assets may include the policy or the policy in other specified assets. Other specified assets should be included if there is a potential for a bad faith claim for failure to settle a bad faith claim against the insurance company arising out of their handling of the claim or litigation. Nonetheless, a straight rejection or a rejection with an offer to allow continuing performance to an insurance company may provide just the remedy a policy holder needs to a reservation of rights letter.

Where the best interests of a policy holder are served by outright rejection of the reservations they should do so unequivocally and then proceed to defend the suit themselves or enter an appropriate settlement arrangement with the plaintiff to fully protect their own interests.

Where the policyholder is willing to accept the performance of the insurer if the insurer withdraws the reservation of rights, then the policyholder should make the insurer aware of this fact and give the insurance company a deadline within which to meet the demand. Failure of the insurer to meet the demand will result in a rejection of the reservation. It is also advisable that a policyholder who indicates a future willingness to accept performance should inform the company that if such performance is not undertaken by the insurance company within the time period, that a settlement or other arrangement with the claimant will be forthcoming and it's likely that the insurance company will be sued for breach of coverage, garnishment or bad faith as may be applicable to the particular fact situation involved. Such direct threats often motivate an insurance company to rethink their position, particularly if the liability is defendable, or their coverage position is weak.

Despite the distress associated with receiving a reservation of rights letter, policy holders can come out ahead when they receive reservation of rights letters. The key is taking control of the situation by hiring independent counsel, in appropriate situations rejecting the reservation of rights, taking control of the defense, preventing and where appropriate entering settlement agreements that protect the policy holders interests and shifting the conflict from a policy holder facing lawsuits from both the injured party, and its insurance company to absolving itself of both lawsuits and allowing the injured party and the insurance company to become the combatants. This process allows the policy holder who purchased the insurance coverage to obtain their ultimate desired goal when they purchased the insurance, to protect their assets and transfer risks, while at the same time allowing both the aggrieved party and the insurer to fight the battle of coverage at a later date.

Chris Faiella is a personal injury in Missouri with the law firm of Tatlow, Gump & Faiella, www.tgflaw.com

An insurance policy is a contract and therefore subject to general principals of contract law. Missouri law allows a contract to be reformed when by reason of fraud or mutual mistake the written contract does not express the actual agreement of the parties to the contract. Mills v. Camerson Mut. Ins. Co., 764 S.W. 2d 244, 249 (Mo. App. 1984). In cases of mistake the mistake must be mutual, but that does not mean the parties have to agree that the mistake was a mistake of both parties as long as the evidence shows that both parties were in fact operating under a misapprehension of fact or law, or bot. See State Farm Mut. Ins. Co. v. McGuire, 905 S.W. 2d 150 (Mo. App. W.D. 1995).
In essence what this legal doctrine allows is a showing that there was an joint objective or purpose arrived upon by agreement between the parties, but that the expression of that agreement in the written contract is flawed. The proof required for reformation is clear, cogent and convincing evidence. However, where the litigants present conflicting evidence about the actual agreement, a Missouri court is free to sort out the conflicts which only need be supported by competent and substantial evidence. CMI Food Services v. Hatridge Leasing, 890 S.W. 2d 420 (Mo. App. W.D. 1995).

There are a variety of ways that this theory can help policyholders who have been left out in the cold without coverage. The theory can help not only where the policyholder and company make a mutual mistake but also where a mistake occurs between an agent and an insurance company, because legally the policyholders mistake is being a party to the erroneous policy. If you are in a situation where you thought you had insurance coverage and your insurance policy does not reflect your understanding of the agreement at the time the agreement was made, don't give up. The insurance company is not the final word on justice.

When your premium is due insurance companies expect you to timely pay your premium.  If you don't they will stop providing coverage.  What happens then when they owe you money for a claim?  A common experience among claimants is that insurance company's drag their feet when it comes to claim payments.  If this has happened to you there are some useful things you should know about.
In Missouri, if you are making a claim on your own policy, the insurance company has to comply with regulations that require a timely response, a decision on your claim and an explanation of your claim. If the insurance company says it needs more time to gather facts they must regularly update you with the status of their investigation. To learn more go the Missouri Department of Insurance web site.

This is a two part blog covering some things Missouri policyholders involved in a personal injury claim and who receive reservation of rights letters from their liability insurance company should understand. There is some good news, a reservation of rights letter means the insurance company is offering to pay your defense costs, but the bad news is that the insurance company is reserving its rights to deny coverage and sue you the policyholder or insured to obtain back the defense costs expended. Insurance companies often send reservation of rights letters to their policyholders because their broad duty to defend is implicated by the filing of a petition against their insured. Because the duty to defend is broader than the duty to indemnify there is a possibility the insurance company may be contractually obligated to pay for the defense even if it is not eventually required to pay for any liability alleged. In addition by asserting a reservation of rights letter, a company can undertake a defense and investigation of the claim and coverage at the same time and preserve its rights to disaffirm coverage without precluding itself from asserting defenses to the coverage at a later date, and managing their exposure to bad faith claims. Generally speaking to avoid waiving defenses, the letter will identify every possible coverage defense. Depending upon the individual facts, the doctrine of estoppel and/or waiver may prevent an insurance company from later asserting a defense that it failed to include in its reservation of rights letter. Unfortunately, reservation of rights letters are favorable for insurance companies, are fraught with danger for the policyholder. The mere issuance of reservation of rights letter indicates that there is a conflict of interest between the policyholder and the insurance company. This conflict of interest alone would advise that a policyholder should hire an independent attorney to represent them and not rely on the attorney appointed by the insurance company to provide a defense. Attorneys hired by insurance companies are often financially dependent upon the insurance company and that they receive much of their work from the company. While appointed defense counsel may diligently represent your interest in the alleged lawsuit, it is difficult to believe that that counsel can ignore their own financial interest, and give independent advice on your dispute with the insurance company. Most defense insurance counsel will defend the allegations in the lawsuit, but advise that you should hire personal counsel on the coverage issues. Unfortunately, there is often interplay between the allegations of liability and the triggers for coverage which are in dispute between the policyholder and the insurance company which lead to conflict of interest issues with insurance defense counsel. Bottom line, you should hire an independant lawyer to protect yourself. In part II, we will discuss the right of control, the duty to cooperate and the right to reject the reservation of rights. Chris Faiella is a personal injury lawyer in Missouri with the law firm of Tatlow, Gump & Faiella.