The American Association of Justice, a trial lawyer’s advocacy group, ranked Allstate Insurance Company as the worst insurer for consumers. The group based its rankings on an evaluation of legal filings showing a pattern of greed, refusal to pay legitimate claims, and rewarding employees for claim denials. 

The AAJ says its rankings are backed by thousands of court documents produced during litigation against the insurer and complaints filed with state insurance regulators, the SEC and the FBI. Apparently in the mid-1990s Allstate contracted the consulting giant, The McKinsey Group, to help change its claim policy to one of “lowball” offers and systematic denials. 

The rest of the list includes:

2. Unum. Unum writes mostly disability policies. Unum faced sanctions in 48 states over its denial of disability benefits. The insurer settled out of court in 2005.

3. AIG. The world’s largest insurer, AIG, settled out of court for $1.6 billion in 2006 in multiple claims alleging corporate fraud and claims abuse.

4. State Farm. State Farm employed hardball tactics through the use of questionable engineering reports to deny claims from Hurricane Katrina victims.

5. Conseco. Conseco is in the business of long-term care insurance. Conseco’s delaying and stalling tactics proved beneficial to the insurer as most of the claimants died or gave up before receiving benefits.

6. Wellpoint. Wellpoint, a health insurance giant, routinely cancelled polices for pregnant women or the chronically ill.

7. Farmers. Farmers seems to be on the low end of consumer satisfaction surveys.

8. United Health. This health insurer pays extremely low reimbursements to physicians and is slow to pay on claims, compromising the health of its insureds.

9. Torchmark. Torchmark preyed on Southern policyholders for burial insurance. It routinely charged minorities more than white policyholders for the same policy.

10. Liberty Mutual. Another insurer that hired consulting firm McKinsey to develop aggressive tactics.     

All of these claims denials tactics proved useful in putting money in the pockets of these insurance companies. Over the last ten years, profits for the property/casualty/life and health insurance have risen by 30 billion dollars.

The insurance industry takes in over a trillion dollars in premiums per year; and it holds over 3 trillion in assets. CEOs for the top ten insurance companies earned between 8 and 9 million last year.     

A senior executive for the National Association of Insurance Commissioners reported that “insurance companies make money when they don’t pay claims.” Apparently, the strategy is “deny, delay and defend.” For companies like Allstate, adjustors are trained to avoid paying claims and are rewarded for low claim payouts with portable refrigerators and office pizza parties. Allstate CEO Jerry Choate admitted in 1997 “[t]he leverage is really in the claims side. If you don’t win there, I don’t care what you do on the front end. You’re not going to win.”

For a real eye-opener into the insurance industry, read the full report. The insurance industry is in dire need of reform. Allstate has enjoyed a return on profits double that of other S&P 500 companies. Meanwhile, its policyholders have suffered cancellations, no renewals and punitive loss-prevention techniques.

Lobby your congressperson for the following reforms. Many state have passed “Insurer Fair Conduct” bills that establish a private right of action against an insurer for the failure to act in good faith. Lobby your representative for a rate approval law that will require an insurer to have the insurance commissioner’s approval before raising rates more than ten percent. Lobby your representative in government for an insurance consumer advocate at the state level. 

Finally, be aware of what rights you do have as an insured and as a claimant on another policy. The law firm of Robert N. Katz can help in the claims process or with a bad faith claim against an insurance company. Contact us today for a free, private consultation.      

 
On Saturday afternoon, a second tornado claimed the lives of two victims in Bartow and Floyd County in north Georgia. That twister was five times wider and stayed on the ground longer than the Friday tornado. One victim was killed when her home was flattened; flying debris killed the other.

Spring is peak season for tornados. Most tornados occur in what is known as “Tornado Alley” which is the plains of the central and southern states – east of the Rocky Mountains and west of the Appalachian Mountains. The most frequently hit states are Florida, Oklahoma and Texas. Wind speeds vary from 100 to 300 miles per hour and most tornados are two miles long. Tornados come from the energy released in a thunderstorm. 

A tornado warning is issued when a tornado is spotted on the ground. According to the American Red Cross, if a warning is issued in your area, then you should:

1.      Go to a basement or low level of the ground;

2.      If you don’t have a basement, go to an inner hallway or closet;

3.      Get away from windows;

4.      Go to the center of a room and away from corners;

5.      Get under a heavy piece of furniture;

6.      Cover your neck and head;

7.      If you are in a mobile home, leave and find other shelter.

If you are outside, get out of your car, and duck in the lowest spot you can find like a ditch or gully. Most people are hurt from flying debris rather than the tornado itself.

The Institute for Business and Home Safety recommends that to protect your property from tornado damage, you should make sure your home meets the building code; install strong windows and doors and strengthen the roof through repairs and strong connections to the house.

After a tornado, the first thing you should do if you suffered damage is to take photographs of the damage, contact your agent, make emergency repairs as necessary and document every loss.

While most claims are settled to the satisfaction of the policyholder, you do have rights if you believe the insurance company has failed to carry out its obligations under the policy. 

In 2003, 71 policyholders with State Farm Fire and Casualty filed a class action lawsuit against State Farm for bad faith and breach of contract. The class action suit, led by plaintiffs, Donald and Bridget Watkins, claimed that State Farm intentionally denied or underpaid claims arising from tornado damage. The group claimed that State Farm employed outside consultant, Haag Engineering, to inspect brick and structural damage to their homes. They claimed Haag, because of its relationship with State Farm, was biased in assessing home damage.

In May of 2006, an Oklahoma jury awarded the Watkins $13 million for the claim of breach of contract and bad faith against State Farm. Punitive damages against State Farm accounted for $10 million of that judgment. In awarding punitive damages, the jury found that State Farm acted recklessly, intentionally and with malice in denying the claims. State Farm appealed. 

Similar claims against State Farm have arisen in Hurricane Katrina related claims. Claimants contend that State Farm uses a “one size fits all” engineering report. The engineering report contends that all the structural damage was caused by “storm surge” rather than wind damage. “Storm surge” would be an uncovered event.

If you believe that you might have a bad faith claim against your first party insurance company, then contact the law firm of Robert N. Katz for a free private consultation.