10 Lessons from my Decade as an Insurance Attorney & Claims Examiner
By Richard Rizk
Introduction
In a far and distant land, I defended and shut down the very insurance claims you and your clients battle every day. From 1990 to 1996 I worked as Nationwide Insurance and Wausau Insurance in-house counsel. In that role I defended workers’ compensation claims, slip and falls and car accident injury claims. From 1996 to 2000 I supervised and negotiated resolution of environmental claims and litigated cases nationally from Nationwide’s satellite home office in suburban Chicago. Since then, I have switched to the side of righteousness and justice representing and litigating and resolving personal injury and insurance companies in Oregon and Washington state. Along the way, I have learned many valuable lessons and insights, I share 10 with you here.
Lesson #1
Many Claims examiners just don’t care
Garden variety claims examiners and in-house trial attorneys simply don’t give a rip whether claims are accepted, denied or simply blown off. Front line claims examiners are cogs in the insurance machine. Claims folk biggest concern is staying employed and not being bitched at by superiors. Most are grossly overworked, underpaid and treated like dirt. Some hate insurance companies more that you do. Claims examiners I know resent mundane insurer red tape that ties hands. I choose to make life easier for them by providing nicely packaged, factually and legally supported demands. Follow that tact and you probably won’t need to litigate. Do claims homework for them. Then, watch adjusters to do what you want–PAY THE CLAIM!
Lesson #2
Insurers would rather settle than make bad law
Some cases present an issue that would rock the insurance world if litigated and the insurer lost. All lawyers should litigate those cases but few will.
Here’s a common scenario: You represent child, little old lady, a disabled vet or some other sympathetic client in a plaintiff friendly jurisdiction. The case presents a seminal issue that would be a game changer with a favorable decision on the key issue. Insurer will offer large to avoid paying gargantuan in the big picture. The sad truth is, because of the money offered, most “big issue” cases will settle and never see the light of day.
Don’t do that. In that circumstance, I inform my client that the case presents a unique opportunity to shut down insurers from messing with similarly situated plaintiffs down the road. The client could be a hero of justice. It happens.
When litigating such a case, I set my ego aside. Instead, I consider enlisting colleagues to help. I expect big insurance will be well armed and fight like heck. If the matter will truly change law, flag waiving true believers will happily help–some for free.
Lesson #3
Insurers fear jurors
See that person in the courtroom back corner in a trench coat, wearing sunglasses while quietly taking notes? She’s the claims examiner for the defendant. Insurers want to be invisible. Insurers don’t want jurors to know anything about insurance. Why? Because they know that a large percentage of jurors have been messed with by an insurance company. That’s what insurers do. Think about it. Retired people are the group least likely to have an excuse to get out of jury duty. And, older people tend to have more health and disability insurance claims. Health and disability claims are subject to ERISA, an extremely unfair and draconian group of laws that strongly favors insurers. The takeaway: whenever possible name an insurance company as a defendant. Press bad faith buttons watch insurers squirm as old ladies beat down the adjuster with an umbrella like on Laugh in.
Lesson #4
Insurers hate other insurers
My most enjoyable moments on the dark side came after successfully setting up another insurer for bad faith. In the environmental claim context, frequently policies issued by several insurers are triggered in a single claim. Realizing the duty to defend is quite broad (any chance of coverage triggers defense duty in many states), the insurer I worked for would defend our insured polluter even when a pollution exclusion probably barred coverage. Other insurers with time on the risk simply blew off the duty to defend sitting back while we paid full freight.
That’s not fair. What to do? Set the bait. In exchange for paying full freight on defense, we would purchase a defendant insured’s rights against non-defending insurers. Then, convince the non-defending insurer to contribute toward defense by paying us, another insurer defense dollars the bad insurer should have paid its own customer in the first place. Trap door slams shut. An insurer’s payment of defense dollars to someone other than the insured (who is owed and denied defense), is clear bad faith. Strange as it seems, I then worked for an insurance company doing the work of a plaintiff’s firm.
Lesson #5
Claims folk hate to testify
Claims examiners investigate and house a treasure trove of information. Why not subpoena the claims examiner to trial if he has goods helpful to your case? In nearly every case I have done so a settlement was just around the corner.
Lesson #6
Bad faith is personal
Over my four years in environmental claims, once I was accused of a bad faith claims practice. My boss wasn’t upset and the claim was resolved but I was upset at the time.
A bad faith allegation sets off sirens and smoke alarms. Unless you are ready for WW III, quietly set up a bad faith claim without using those words. I usually write in terms of the insurers duty to its own insured, rather than overtly threatening “bad faith”. Here’s an example of set up language I like: “As you know x insurance company’s primary obligation is to its own insured, company y. X has a duty to make reasonable efforts to settle this case within policy limits. So far x has offered zero to us. We are concerned that x may be placing its own interests ahead of the interests of y. Should this case proceed to trial and we obtain a judgment in excess of policy limits, we will cooperate with y in any subsequent action it may have against x insurance company for failing to take reasonable steps to try to settle within policy limits. We humbly suggest that x take steps to protect the interests of y by tendering its policy limits before August 1 when we will file suit. After suit is filed, we will no longer be willing to settle within policy limits. Please share this letter with y, your insured so y will know x insurance company has unnecessarily placed y’s assets at risk.”
Lesson #7
Insurers do care about cost of defense
Have you ever heard a claims examiner say…” We don’t consider the cost of defense in evaluating a claim.”? It’s a lie.
If insurers really didn’t care about the cost of defense, why do they argue with defense counsel about each dollar spent?
I was once a defense dollar hatchet man. I remember going to Cleveland to audit files of a defense firm we hired. The firm was scared shitless. Sam the partner for the firm was willing do anything to avoid the wrath of the hatchet. The truth is insurers treat outside defense lawyers very poorly. Insurers work defense lawyers hard, make them take claim folk out to dinner at expensive restaurants then cut the attorney bill in half. All the defense lawyer has to say is “thank you sir, may I have another”.
Lesson #8
Reserves are made up B.S.
As a claims attorney I was asked to set reserves on each case, but given virtually zero training on how to do so. We would constantly seek information from claimants about claim value but the raw data was usually too general to accurately predict claim value.
Now as a plaintiff’s attorney I find it comical that claims still expect me to provide useless information so the insurer can reserve its claims. I have not worked for an insurance company for 16 years, yet claims believes it’s my duty to provide updates? I didn’t care about meaningless reserves then. I certainly don’t care about meaninglessness reserves now.
Lesson #9
Tax ID reveals all
Some insurers ask for the attorney tax ID # as a prerequisite for opening a claim. In asking for the tax id the claims person might say it is needed in order to make eventual payment on the claim. That’s true, but it’s not why the tax is sought. Tax ID is a useful tool the insurer uses to gauge the attorney’s past results. So don’t get excited when the adjuster asks for your tax id.
Lesson #10
Surveillance when you least expect
In my 6 years as an insurance claims lawyer, I recall one case where surveillance yielded fruit. More often surveillance simply shows how an everyday person performing everyday tasks. Congratulations insurance company my client walked to the mailbox and drove to the store to get food.
Most insurers realize that paying geeks to sit in a white van to drink coffee for hours at a time at $350 an hour is not a good investment. Then in some conference room probably somewhere in Indianapolis, a beam of light shined down on an insurance company executive. “I’ve got it! Rather than search out the claimant, let them come to us!” After that moment insurers all over the world set up cameras at IMEs and at insurance company office and parking lots to catch unsuspecting claimants lift too high, run too fast or otherwise demonstrate abilities inconsistent with claimed injuries. For this reason, avoid scheduling mediation or arbitration at insurance company offices. Total awareness equals perfect paranoia.
