Think robbers would want to turn over their secret plans and motives so their victims could discuss how they were ripped off and figure out among themselves what they could do to obtain justice from the robbers?

The Colorado Supreme Court upheld an Order that American Family should turn over claims procedure manuals and other internal documents which allows other policyholder attorneys and claimants to review the discovery.1 I filed an amicus brief on behalf of United Policyholders supporting the disclosure and made the following argument:

Insurers. . . .seek non-sharing protective orders to maintain advantages over their customers who do not have the same financial resources. Often, they seek to prevent policyholders from sharing the documents with attorneys who represent others in cases against them with similar allegations. Keeping such attorneys isolated from each other means they may not realize that their clients have viable claims. When they do file suit, their attempts to obtain discovery remain relatively ineffective, their discovery costs remain high, their ability to vet matters is hampered, and judges repeatedly must rule on the same objections about the same evidence and discovery. Insurers may seek protective orders to force plaintiffs to expend substantial costs during litigation and keep similarly situated counsel from sharing analysis and information gleaned from similar discovery procedures. In the uneven playing field of financial resources, higher litigation costs have a more detrimental impact on policyholder plaintiffs.

The truth is that courts should start recognizing that policyholders have as much interest in how their insurance carriers carry out claims decisions as insurance claims departments have in hiding practices. After all, if insurance claims managers are acting honestly and in good faith, why shouldn’t insurance companies turn it all over? What do they have to hide?

Instead, insurance companies allow their attorneys to hide the truth anyway they can. The most common method is through arguments that these claims practices and claims programs are "trade secrets." Why should the incentive plans to lower claims payments be "trade secrets?" Why should the law allow dishonest players required to act in good faith to claim that wrongful methods of competition should ever be hidden? If we allow insurance companies to engage in this behavior and then hide it legally, it promotes the absurd position of public policy encouraging dishonest behavior by insurance companies.

The question posed at the top of this post is "why aren’t insurance companies proud to turn over these documents and publicly show them if they help their customers?"

Claims processes are not like the secret recipe for Coke, Kentucky Fried Chicken, or the trick play that my Tampa Bay Bucs will probably blow this Sunday. I would suggest that every claims manager that turns these over does so because he knows they rip-off their customer.

If the rule were that internal claims programs and incentives to pay more or less of claims employees are routinely turned over as much as claims files are turned over in most states, a lot of the bad practices would become transparent and stop. Why shouldn’t the law reflect this public policy?

How about the insurance defense attorneys who read this blog respond with a defense or objection to this public policy?

…probably because you agree but are paid to argue the alternative.

Positive Thought of the Day

Truth never damages a cause that is just.
            —Mahatma Gandhi


1 In Re Rumnock v. Anschutz, No. 16SA38, 2016 CO 77 (Colo. Dec. 5, 2016).

  • shirley heflin

    Dear Chip:

    It’s been 5 days since you published this Post and not one Defense Attorney provided an objection as to why pertinent claim documents should not be produced. In fact, nobody for the Insurer qualified this stance.

    Frankly, I think the “silence” speaks volumes! There is no excuse as to why insurance companies should hide anything from the people paying for coverage. A Claims Manual should merely recite the activities of a claim – from beginning to end. It should not contain notes and plans on how to deprive the insured of total payment, however, it does or there would be no resistance or balking in producing same.

    Finally, the biggest degradation comes when the insurance company hires an Attorney to hide their claims manuals. The Insured is aghast that their insurance company will not pay their claim, but will pay legal fees to avoid paying it! So they fight paying the claim and then they refuse to show the Insured what they relied upon in denying their claim! It’s ridiculous and it’s totally unfair.

    Respectfully
    Shirley Heflin
    Tampa, FL

  • Chip Merlin

    Shirley,

    I actually should not have so brazenly asked them to respond.

    The truth is that insurance defense attorneys have a job to do. They have an important role to play as well.

    Ethically, they probably should not respond, and my tone could have been a lot better about asking for a response; but, I was too arrogant and “on my high horse” in my request rather than being more academic.

    But, it is maddening to get almost zero response to legitimate discovery requests!

  • Anne

    Hi Chip, I work in insurance, the manual is no big top secret, all ethical, in accordance to basic claim handling.

    Hope that helps