“Don’t complain about the snow on your neighbor’s roof when your own doorstep is unclean.”

Confuscious

 Policyholders guilty of insurance fraud need to be held accountable and pay a penalty. Who disagrees with that?

Barry Zalma noted the unfairness when some do not pay for breaking the law in Mercy to Insurance Criminals Aids & Abets The Crime

“We, as insurance fraud professionals must inveigh against those “merciful” judges and prosecutors who insist that a “white collar criminal” should not go to jail. The prosecutors and judges must know that insurance criminals are as more [sic] vicious and damaging to society than the armed robber who holds up a convenience store and is punished to the full extent of the law without mercy.”

I agree with Zalma that insurance criminals need to be punished.

But, I wonder what insurance companies would say if they had to pay more severe penalties for delaying claims payments or applying wrongful schemes to underpay claims?

I was at a conference some time ago in Philadelphia when insurance industry attorney, Steve Cozen was talking about the possible unconstitutionality of insurance companies having to pay punitive damages after breaking the rules of claims handling. I suggested that since they are stealing from the policyholders, if the rules were that the claims executives went to jail instead of paying punitive damages, there probably would be a lot less cheating against policyholders and the punitive damages argument would be moot. The insurance defense attorneys smiled and shook their heads at me—they knew I had a point.

From the policyholders view, the insurance company that fails to pay on time and denies benefits for various unfair reasons is not that much different from the bank robber or internet thief that takes money in a different manner. It is quite ironic that the insurance industry lawyers and spokespeople are not publicly calling for greater penalties for those acts by claims executive "white collar criminals." Maybe they think accountability works only one way.

  • Such a good point, Chip.

    There are people who literally die before their claim gets settled.

  • Nowdoucit,

    I was also taking a little “poke” at my colleagues on the other side by making this point.

    They pander to their clients about the terrible injustice of pro-consumer legislation and case law because if they did not, their insurer clients would not hire them. Yet, I have to agree with them–when policyholders commit insurance fraud, policyholders should be held accountable for their actions.

    When the “shoe is on the other fooot,” they argue that their clients do not deserve the same accountability. Indeed, Barry Zalma says that they need immunity.

    When will one of them say that their clients deserve stiff penalties for claims delay, outcome oriented investigations, mistreatment, and stronger consumer protections to prevent these problems?

    But, I am not holding my breath.

  • Gary Greenfield

    Good post, Chip!

    As it now stands, there are policyholders who have been trying to settle their Hurricane Wilma claim for over three years. If they have good representation, they may eventually get a fair settlement. But the way the game is rigged, there is no easy way to compensate policyholders for the enormous stress of living in (sometimes) highly compromised living conditions, because there’s no clause for “Pain and Suffering” in homeowner policies.

  • Great point indeed, jail them!

  • Terry Sershion

    Companies that breach their fiduciary responsibilities should be held responsible for those breaches.

    Doing these actions to first party customers, in my humble estimation, is violating their fiduciary responsibility. I can recall what I learned at the fiduciary responsibilities seminar in Saddlebrook NJ. I’d like to see some accountability for this via punitive or other damages (e.g. the bid rigging).

  • Gary and Dimitry,

    Some Bolivar residents and those in other venues have expressed enough frustration that I am certain some wouldn’t mind making the “accountability” personal rather than letting jail do the trick. When the wrong action is done to you, it becomes personal and hard to emotionally accept.

    Still, it is never right to take the law into one’s own hands.

    Hopefully, the available penalties and remedies will be sufficient to hold the wrong accountable and fairly compensate the wronged policyholders. This is what we aim to accomplish for our clients as I am certain all of my colleagues aspire.

  • Terry,

    Most claims adjusters are taught that they will be held responsible if they fail to act in good faith. Most good carriers will demote and terminate claims employees that fail to act this way. If the claims culture is right, problems just do not come up very often.

    When policyholders are harmed because of the failure to act in good faith, it just seems sensible to hold accountable those failing to fulfill the duties you noted. Otherwise, why have those rules in the first place if they can be broken?

  • shirley heflin

    I believe the penalties should be stiffer for insurance companies (i.e., jail time if their actions – “crime” – warrants it). However, the insurance companies have so much to hide behind – it’s like Warren Buffet said “…they have the money”).

    They can hire attorney after attorney and also hide behind their “corporation” status but, w/enough help from attorneys like you, Chip, even the “corporation” shield(s) won’t continue to save them from their wrongful actions in the future.

    SHIRLEY HEFLIN