THE REAL CAUSE OF THE LITIGATION CRISIS – INSURANCE COMPANIES
Susan Clarke was on her way to visit an elderly personal services client in Northern Virginia when she was struck from behind during rush hour, pushing her into the car in front of her. The cars were not extensively damaged, but her seat back did collapse in the collision.
Susan’s low back was sore, but she had a history of low back strains and did not think she was badly hurt. After several days of bed rest, hoping the back pain would resolve, she awoke in extreme pain. Her doctors eventually diagnosed a herniated disc. She treated conservatively and was significantly better within 8 months. She incurred about $4,500 in medical bills.
She tried to resolve the claim with State Farm without a lawyer. State Farm refused to even talk with her about settlement, claiming that the rear-end crash was her own fault and that her herniated disc was pre-existing condition.
NOVEL FEE ARRANGEMENT
Susan came to me for a consult. I evaluated her case as being worth $15-20,000 in settlement. I explained that it was too expensive for a lawyer to try such a case and that she should make another attempt to settle on her own. She asked State Farm to simply pay her medical bills. The insurance giant refused. Susan’s case is typical of modest injury claims.
Once or twice a year for the past decade or so, I have agreed to help people like Susan for no fee. Instead, the client agrees that when the case resolves, they will take a portion of the settlement and make a donation to Legal Aid, which provides civil legal help to the poor. Typically, the case is a small case that I would not normally take; liability is clear; but the damages are modest. The client gets appropriate recovery for a small injury; Legal Aid gets a modest donation; and I sleep well at night.
After State Farm refused to even discuss settlement with her, Susan came back to see me and I agreed to help her in exchange for a voluntary donation. In every Legal Aid case I have done before Susan’s case, the insurance company settled the case without trial once they knew a lawyer was involved and was serious.
Susan’s case did not follow the pattern. Indeed, State Farm went out of its way to increase the cost of the case and trial to try to punish Susan for taking it to trial.
Susan had a history of prior back problems, which was a blessing in a backhanded way, as she had an MRI that provided a snapshot of her back before the crash. We sent her prior MRI and a post-crash MRI to Dr. Charles Citrin for evaluation. Dr. Citrin is a neuroradiologist whose sole job is to interpret MRI and x-rays of the back. He often testifies for insurance companies and I expected that if he found causation, State Farm would resolve the case for its proper value. Dr. Citrin is conservative and states his mind, so it seemed clear that if he found causation, the insurance company would agree that the herniation was caused by the crash.
Dr. Citrin opined that it was not a close call – the comparison of the MRI clearly demonstrated that the herniation was caused by the crash. It simply did not exist in the earlier MRI. Despite the clear opinion of its own preferred doctor, State Farm offered less than $2,000 to settle the case (It cost Susan more than $2,000 simply to have Dr. Citrin take the second MRI and compare it to the older film).
JACKING UP THE COSTS
Even though my fee was a donation to Legal Aid, Susan still had to pay out of pocket costs, such as court reporter fees and expert costs. The insurance company went out of its way to make those costs as high as possible. Because State Farm claimed that the crash was Susan’s fault, I had to depose both the defendant and the driver in the lead car, who had subsequently moved to South Carolina. The costs of the depositions exceeded $1,000. State Farm denied that any of Susan’s medical bills were caused by the crash, so she had to designate Dr. Citrin to testify at trial and pay him to take a day off work to talk to the jury, which cost her over $6,000. State Farm hired another of its favorite doctors, Robert Gordon, to opine that Dr. Citrin misinterpreted the MRIs and that the earlier MRI was identical to the post crash MRI, so we had to depose Dr. Gordon at a cost of about $1,500.
During the deposition of Dr. Gordon, he revealed that insurance companies pay him over $200,000 a year for his testimony favoring them and have done so for more than two decades. In the past 5 years, he has testified live in court 66 times – 100% for the defense and 100% opining that the plaintiff was not hurt as claimed. State Farm aggressively resisted providing the documentation that would reveal precisely how much State Farm itself paid Dr. Gordon, although a 1099 from another case indicated that in 2009, State Farm itself paid him over $212,000. State Farm’s efforts to suppress the scope of Dr. Gordon’s entanglement with State Farm cost Susan hundreds of dollars in additional costs.
By the time of trial, Susan had spent more than $10,000 in costs simply to counter the defenses that State Farm insisted it was going to present to the jury. A week before trial, State Farm raised its offer to $5,000 – and that was the most it ever offered.
In opening, State Farm’s lawyer told the jury that Dr. Gordon would refute the doctor “plaintiff’s counsel hand-picked for her” and would testify that she was not hurt at all in the cash. He also promised the jury that the Defendant would testify that Susan was following too close and hit the car in front of her before she was struck.
Although State Farm knew I was receiving no fee, it repeatedly insinuated that the case was manufactured by a “greedy plaintiff’s lawyer” because I sent Susan to Dr. Citrin for evaluation. The second time he did this, the Court allowed Susan to re-take the stand and explain to the jury the fee arrangement.
After forcing Susan to prove her medical bills; forcing Dr. Citrin to testify live; and requiring testimony of the South Carolina man in the lead car that the crash was caused by the Defendant, State Farm abandoned its threatened defense evidence and did not call Dr. Gordon to testify. It also abandoned any testimony by the Defendant that Susan hit the car in front of her before he struck Susan.
The jury returned a verdict for the Plaintiff for $25,000, slightly more than I thought the case should have settled for, but certainly within the reasonable range of a proper amount to compensate Susan for her injuries. But it cost Susan almost $14,000 in costs to force State Farm to take responsibility. Although Susan did not pay my legal fees, I spent tens of thousands of dollars in time to prepare and try the case. Presumably, State Farm spent a similar sum. A Fairfax judge, clerk, bailiff, and other court personnel wasted two full days hearing the case and seven citizens were forced to take two days out of their lives as jurors to force the insurance company to take basic responsibility.
Susan has a pending a bill of costs and expenses s to try and recover some of the expenses she incurred because of the insurance company’s tactics. But, she will still have to pay most of the costs out of the verdict. She still plans on making the donation to Legal Aid, which will leave her with little net recovery. As a footnote, Dr. Citrin plans to donate $2,000 of his fee to several of his favorite charities, including St. Jude’s and Doctors without Borders.
State Farm is threatening to appeal the verdict.
WHY DO INSURANCE COMPANIES BEHAVE LIKE THIS?
Insurance companies make their money by taking in premiums and not paying claims. The simple truth is that the fewer claims they pay, the higher their profits. They know that if they make the process difficult, unpleasant and expensive, they will discourage people (and their lawyers) from pursuing legitimate claims. Susan, for example, simply could not have taken the case to trial if she had to pay a lawyer to pursue the case.
Beginning in the 1980s, the insurance industry appears to have embarked on a systematic campaign to vilify those seeking compensation for injury or loss and to make recovery of losses are difficult as possible.
Some industry leaders train adjusters to make low offers and if accepted, treat the claimant nicely, but if the claimant requests full compensation to “bring out the boxing gloves.” A training power point attributed to Allstate, for example displays an alligator with the caption "Sit and Wait." The slide advises that adjusters can discourage claimants by delaying settlements and stalling legal proceedings.
Insurance companies defend these tactics by claiming that if they paid claims such as Susan’s, premiums would go up. This is stupid-talk. In 2006, casualty insurers, of which Sate Farm is the largest, reported profits of $73 billion. This was an increase of 49 percent over 2005 profits. The industry raked in these historic profits in the wake of Hurricane Katrina. Of course, the insurance industry’s abuses of claimants in that disaster were a model of how not to treat customers. In 2008, State Farm itself amassed $5.463 billion in profits. These profit margins belie any legitimate reason to deny proper claims.
Until the public understands that the tort reform “movement” is in reality a slick marketing campaign designed to vilify people seeking legitimate compensation for injuries caused by others, the insurance industry will have the cover it needs to routinely delay, discourage and deny responsibility for paying proper claims.
Insurance companies are like bookies – you lay your money down and make a bet with them. They take your money and take your bet. If your side of the bet comes to pass, they are supposed to pay out. In Atlantic City, there are consequences when a crooked bookie does not pay his bets. It is time to hold the insurance industry to the same standards and any other bookie.
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Copyright © 2009 Blankingship & Keith, PC.
All Rights Reserved, Reproduced with Permission.