Insurance Companies Have Upper Hand in Lawsuits

A few days ago, Anderson Cooper in his 360° blog covered the tactics of insurance companies when presented with claims.

Put yourself in the driver's seat of this accident. You are heading down the street when a truck comes out of nowhere and slams into the right side of your car. The damage to the vehicle is obvious: dents across the passenger door.

You are hurt too, thought it's not obvious how much: a slight cut above your eye, an ache in the neck.

Your doctor says your spine was injured, you have soft muscle tears, and the pain in your neck mostly likely is whiplash.

It's going to need therapy, she says, and some time off work to heal. And in the end it's going to cost you $15,000 in medical payments and another $10,000 in lost wages, because you took so much time off work.

But when you send the $25,000 bill to the insurance company of the person who hit you, the insurance company says it's only going to pay you $15,000. You can take it or leave it.

What do you do?

That's what producer Kathleen Johnston and I have been investigating for the last 18 months -- accidents most of us don't pay attention to, the fender-benders we pass by without even slowing down. In part, we looked at how Allstate handled the claim of one woman, Roxanne Martinez. Her car was hit in Santa Fe, New Mexico. Her medical bills and lost wages added up to $25,000.

Allstate offered $15,000 to settle. Roxanne Martinez didn't know what to do.

CNN had a parallel report on hardball insurance tactics in what we in the law practice call "low impact" auto accident cases.

Oklahoma County has one of the very lowest average jury awards anywhere in the country. I can't find the report on the internet, but I have seen it. Insurance companies have the upper hand in any litigation, for the following reasons:

1. The plaintiff has the burden of proof to prove first, liability; then, assuming he has proved liability, damages. This is especially difficult in "he said-she said" traffic light cases, where there are usually no witnesses (because people rarely stop).

2. The Rules of Evidence prohibit mentioning that a defendant has insurance at all (to prevent unfair prejudice).

3. Even when you show clear liability the jury may decide that you didn't really get hurt. Juries will often react like the ones in the CNN story referenced above:

Taylor was not as fortunate when her case went to trial.

The Indiana nurse was rear-ended by a State Farm employee driving a State Farm car. Damage to her car was minimal but she suffered herniated disc and muscle tears.

Taylor racked up medical bills and lost wages amounting to about $15,000. The company offered her $2,000.

"I was just very insulted," she said.

She sued, but three years later a jury came back with a judgment for her of only $1,500.

The jury didn't believe she could be hurt in an accident in which the vehicle had barely a dent.

Three jurors told CNN photos of the two cars involved in the accident -- enlarged and prominently displayed by the defense -- played a huge role in their decision.

And one said they assumed Taylor had already been compensated by the insurance company and was just trying to get more money.

It is not unusual in these kind of cases for a jury to think just like this. Many times, we will try to use mediation before going to trial, but my experience has not been that fruitful.


4. Even if you get hit cleanly in the rear, the defendant will often simply claim that you pulled in front of him and slammed on the brakes. (I saw this defense in a high-impact rear-ender case where the defendant was driving a dump truck full of sand. The case, as far as I know, is still pending. It has been in litigation for several years.)

5. The long period of time that it takes to get to a jury trial often lends itself to the delay tactics talked about in the Anderson Cooper blog entry. Oftentimes, the plaintiff, when poor, gets sued by the medical providers for the medical bills. The stress of having to deal with collection calls, lawsuits, loss of job due to the collection calls at work and other stresses pressure individual plaintiffs to settle for less than what they probably deserve.

There is good and bad on both sides, but right now in our history, insurance companies have the upper hand in the public square. They have managed to convince the majority of the public that virtually every lawsuit is just a scam. From the CNN report referenced above:

The cases, CNN found, illustrate a carefully developed strategy to make the victims look like they are trying to defraud the insurers.

But documents CNN obtained indicate profit, not fraud, is the reason companies decided to play hardball in small accidents.

For Allstate and State Farm, according to documents obtained by CNN, the strategy was developed in the mid-1990s with the assistance of consulting giant McKinsey & Co.

Looking for a way to boost profits, McKinsey focused on soft-tissue injuries incurred in minor crashes.

While the McKinsey documents -- numbered in the thousands -- are under seal in courts around the country, CNN saw several of them during a court hearing in Lexington, Kentucky.

Playing off Allstate's signature slogan, one document recommends the insurer put boxing gloves on its "good hands" for those who insist on going to court.

The strategy, according to former Allstate and State Farm employee Jim Mathis, relies on the three D's -- denying a claim, delaying settlement of the claim and defending against the claim in court.

"The profits are good, and as long as the community, the public allows this to occur, the insurance companies will get richer and people ... will not get a fair and reasonable settlement," Mathis said.

I remember talking with the named lawyer for a very successful and large insurance defense firm this last year. He admitted in private that the injury awards -- even in clear-cut cases -- was far too small. But, he said, the problem is that the juries just don't give out high-enough awards in Oklahoma. "Oklahoma is just too conservative of a state when it comes to personal injury awards."

One other thing, it is important to understand the legal distinction between your own insurance company -- which has a legal duty of good faith to you -- and an opposing insurance company, which does not have a duty of good faith to you. Your own insurance company must deal with you fairly. That doesn't mean they will, but you have more remedies in the law if they don't. The stories above don't make the distinction very well.

The answer is to somehow convince the public (the pool where juries come from) that even small impact auto accidents can lead to injuries, and that a plaintiff with any injury -- no matter how small -- is entitled to compensation from the tortfeasor.