Fair dealing with insurance companies.

hand-819279_1280Fair dealing with insurance companies.

One of the more frequent topics I find myself involved with as a civil litigator is not just the actions or inactions that cause an accident, but the actions of an insurance company and the claims representatives who handle injury claims.

It might seem obvious, but the less an insurance company has to pay to claimants, the more profit it has. As someone who pays insurance premiums, I am sympathetic to the argument that the less claims made against my policy (or policies in general) the less my insurance is going to cost. But is that really true? Do insurance companies pass on the savings to insureds? What do insurance companies say to their shareholders about this?

In a letter dated February 25, 2012, to Berkshire Hataway shareholders (of which GEICO group of insurance companies is a major asset) Chairman Warren Buffet advised:

 Our insurance companies continue their delivery of costless capital that funds a myriad of other opportunities. This business produces “float” – money that doesn’t belong to us, but that we get to invest for Berkshire’s Benefit. And if we pay out less in losses and expenses than we receive in premiums, we additionally earn underwriting profit, meaning the float costs us less than nothing. Though we are sure to have underwriting losses from time to time, we’ve now had nine consecutive years of underwriting profits, totaling $17 billion. Over the same nine years our float increased from $41 billion to its current record of $70 billion. Insurance has been good to us.

As my Dad used to say when there was not much to be said; “welp, there ya go.”

Now don’t get me wrong, a business should be able to make a profit. But I don’t think the average American let alone just the average person on this planet really has an idea of how much $17 billion is. Lets put it this way. If you just had one year of the 9 year profit boom or, about $2 billion ($2,000,000,000.00); you could spend a million dollars every day for five and a half years.

Here comes the obligatory buy me a boat reference

Well, with all that money, you would hope that when you have a claim they will treat you fairly, right? You might want to read the Sherrill v. Farmers case and then tell me if you still believe that. In case you want the TL:DR version ( that’s shorthand for too long didn’t read for non millenials) Sherrill, a former Farmers Insurance adjuster alleged she was fired because she didn’t follow Farmers policies including:


  1. Contacting claimants within 24-48 hours of an accident and then making in person contact.
  2. Requiring Adjusters to settle a certain percentage of bodily injury claims within 60 days for $1,500 or less.


The New Mexico Court of Appeals said whether these Farmers procedures are against public policy is a question for a jury and as of this post, this case is still pending.


You might be wondering, “what is wrong with contacting a claimant within 24 hours?” Well, what if they are in the hospital? What if they are still in pain? What if they need money badly due to medical bills and don’t know their rights? The strange thing is, the New Mexico legislature thought of those questions too and actually prohibits taking statements or negotiating settlements when a person who has been injured and under the care of a person licensed to practice the healing arts within 15 days of the accident.   Check out the statute yourself https://law.justia.com/codes/new-mexico/2006/nmrc/jd_41-1-1-ee21.html

But nonetheless, you might get a call within 24-48 hours from the date of your accident wanting to know what happened because an adjuster’s job may depend on it.

So, if your own insurance company isn’t going to look out for you when you’re hurt, who is? That’s why there are personal injury attorneys. Most personal injury attorney’s work on a contingency fee basis. What a nice dynamic. Unlike insurance, which the less they pay you the more they get; generally the more you are compensated, the more I am compensated. I truly hope you never need an attorney. I will find another line of work when no one needs attorneys. But until the financial incentive for insurance companies sticking it to claimants, including their own insureds, is removed, I’ll be holding their feet to the fire.

A Little Hassle Might Be Worth it

This scene from Tommy Boy came to mind recently while I was shopping for car insurance.  Periodically, I shop around just to make sure I am not paying too much.  15 minutes or less right?  Well, not really.  After submitting your information to multiple different companies and looking at your 6 month quotes, you then become inundated with phone calls, emails and even snail mail all trying to get you to switch to a ‘better’ insurance.  For me it all comes down to price.  I understand what I am paying for and what the insurance company is obligated to do.  It’s a contract.  I pay x, you will pay y if I am involved in an accident.  It should be that simple.  But with over 500 billion dollars at stake worldwide, the auto insurance industry is anything but simple.

So one of the selling points of one of the companies I spoke with was that I would be satisfied with my claim.  In fact, it was guaranteed.  Never mind that they quoted me more than double the 6 month premium of a national auto insurance company.  Doesn’t matter that the quote was hundreds more than my current insurance State Farm, which I am more than happy with. (just want to make sure I’m not paying too much)  Didn’t I care about my potential claim experience?  Didn’t I want a guarantee that I would be happy with it?  No.  Let me explain.

At that point I was fed up.  They called me, asked me all the info they already had (I submitted it online), wanted to know how much I was currently paying, and then kept trying to sell me their services without giving me a quote.  They drive a hard selling technique. So, I responded in kind.  I told him I knew he didn’t want to waste his or my time.  I didn’t care about the fluff or frills of the policy.  If they didn’t  hold up their end of the bargain, well, I was an attorney and I would sue them.  So, just tell me how much it costs.  Too much.  Now I knew why he was selling the ease of making a claim with them rather than the price point.

But that got me thinking, are people willing to pay more just so they don’t have as much of a hassle when making a claim with their car insurance?  Clearly, some people might.  Is that a good thing?  Not according to research done by insurance companies.  What do you mean Mr. FitzPatrick?  Well,  according to the results of a 1999 study from the Insurance Research Council, on average those represented by an attorney received 3.5 times more in auto accident settlements.  Im not the only lawyer who knows this.  When do people get an attorney involved?  Usually when its a hassle to get a payout.  Based on the study, if my claim experience isn’t satisfactory, and I hire a lawyer, it’s more likely that I will get a larger settlement? So, really, shouldn’t I pay less to have a hassle free claims experience?  I wish I had thought of that when I was on the phone.

So, I say get the insurance that makes it really difficult for you to have a positive claim experience.  Maybe it is a little self interested, because then you will give a lawyer like me a call.  But maybe its in your best interest because then you might get an attorney, and, on average, you are then more likely to get a larger settlement.