Chicago Injury Law Blog

"Mississippi Attorney General Jim Hood sued State Farm Fire and Casualty Co. on Monday, claiming the company failed to honor an agreement for a mass settlement of claims over Hurricane Katrina damage.

In January, Hood agreed to drop State Farm from a lawsuit his office filed against several insurance companies. Hood did that after State Farm settled with lawyers for homeowners on a $50 million payout to about 35,000 southern Mississippi policyholders who hadn't sued the company but could have their claims reopened.

But the pact fell apart after a federal judge refused to endorse it. Hood has said he didn't negotiate the terms of that settlement and shared the judge's concerns about the deal."

Read the full article at Crain's Chicago Business.

Below is an ad found in Bloomington, Illinois, the corporate headquarters of State Farm Insurance.  It was paid for the the Scruggs Katrina Group, who is helping Katrina victims put their lives back together.  The ad is in response to a marketing campaign by State Farm along the Gulf Coast, flying their 'Like A Good Neighbor' slogan while denying thousands of Katrina related claims.

"Attorneys say a federal jury that awarded more than $2.8 million to a man who lost his home to Hurricane Katrina sends a strong message to insurers who refused to pay thousands of other homeowners for damage from the storm.

"Insurers should worry about taking any case to a jury," said David Rossmiller, a Portland, Ore.-based attorney who writes a Web journal on Katrina insurance cases and other industry issues.

The U.S. District Court jury decided Monday that Allstate Insurance Co. did not pay Robert Weiss, of Slidell, enough money to cover the wind damage to his home.  Allstate had claimed that most of the damage was due to storm surge, an event not covered in its policy."
Read the full article in the Boston Globe.

"A onetime Illinois HMO was hammered with a $334 million judgment Tuesday, the largest of its kind ever in northern Illinois and an amount almost equal to the company's profits since it was founded.

U.S. District Judge Harry Leinenweber added a $190 million penalty on top of an October $144 million jury verdict against Amerigroup Illinois and Amerigroup Corp. for purposely not insuring "unhealthies" and women in late-term pregnancies."

Read the full article in the Chicago Sun-Times.

Looks like delay, deny, defend is really working for the insurance industry.

"(AP) - State Farm Insurance, the nation's largest insurer, said Thursday that profits climbed 65% in 2006 as claims dipped amid a relatively tranquil year for hurricanes and other natural disasters.

The Bloomington-based insurer posted earnings of $5.3 billion, up from $3.2 billion the year before when payouts soared after a flurry of hurricanes including Katrina, the costliest disaster in U.S. history.

State Farm said catastrophe losses dipped by $4.1 billion from 2005, when the company paid out a record $6.3 billion for claims and expenses in the aftermath of Katrina, Rita and other tropical storms."

Read the full article in Crain's Chicago Business.

CNN's Anderson Cooper recently performed an investigation into the insurance claims practices of America's largest insurers.  What did he find?  Not to our surprise: insurers put profits over people.  The investigation focused on way insurers like Allstate and State Farm actively reject claims made by those injured in automobile accidents.  The insurers make it their policy to employ the "three D's", Delay, Deny and Defend, for all cases not involving serious collisions.  With Allstate one must ask, are you in good hands?  Only if you are the upper brass of the company.

The transcript may be read in its entirety at CNN.com and the accompanying article may be found here.

"Newly-released data shows that insurance company profits for 2006 are approaching record highs.  This follows the industry’s 2005 profits, which itself broke records despite Hurricane Katrina.  The high profitability trend applies to all lines of coverage, including auto insurance. In New York State, for example, a report issued today by the New York City’s Comptroller Office finds state automobile insurers experiencing unprecedented profitability, with motorists paying historically high insurance premiums despite lower payouts by insurers. (Office of the New York City Comptroller Office of Policy Management, William C. Thompson, Jr., Comptroller, Highway Robbery: The High Cost of Automobile Insurance in New York, November 2006, found at http://www.comptroller.nyc.gov/)"

Read more at Center for Justice & Democracy.

Consider the following from Indystar.com:

"From 2004 to 2005, WellPoint Chief Executive Larry Glasscock made $14.12 million in total realized compensation (salary, bonus, restricted-stock awards, long-term incentive payouts, stock-option gains and other compensation), according to Equilar Inc., a compensation research firm.

The Illinois medical malpractice insurer Medical Protective recently announced they were reducing rates by 32% in Illinois. This comes as a direct result of the insurance regulation reform that was passed as part of the medical malpractice reform legislation last year. As mandated by the legislation, insurers in Illinois began to diclose claims and payout information. The law also allowed state regulators to hold public hearings where insurers had to justify thier rate filings. Although Medical Protective should be commended for lowering their rates, Illinois largest malpractice insurer, ISMIE, has actually increased thier rates. Furthermore, even the successes of the insurance regulation portion of the new legislation does not outweigh the harm created by the damage caps included in the same law.

In an act of irony (or hypocrisy), Senator Trent Lott has filed a lawsuit against State Farm based on their refusal to pay on the Senator's policy covering hurricane damage. Of course Senator Lott is a long time proponent of tort reform, basing part of his career on limiting citizen's access to the courts. However, what is good for the goose is apparently not good for the gander, as the Senator has gone back on his tort reform ways. He has in fact lawyer'd up with longtime plaintiff's attorney Richard Scruggs, who is representing many Katrina victims in their case against insurers. 
Hopefully we will see some good out of all this, with Lott initiating some insurance reform at the federal level. 

Here is a trial that is worth keeping an eye on. Should we be surprised that an HMO would look to fatten its pockets by denying claims made by pregnant women and the seriously ill?

"A health maintenance organization that prosecutors charge discriminated against pregnant women and seriously ill people went on trial in federal court Wednesday, with the State of Illinois and the U.S. government seeking to reap tens of millions of dollars in a major whistleblower lawsuit.

Read the full article in the Chicago Tribune.

The following is a great Op-Ed regarding a families tragic loss and the failure of justice in Texas.

"Our legal system is rigged. Texas families seeking their day in court are coming face-to-face with the reality that insurance companies dominate our courts and have run roughshod over our constitutional protections.

Few cases are a better illustration of the difficult battle Texans face when they try to hold a wrongdoer accountable than that of Sharon Boyd. Boyd died in July of colon cancer that would have been easily preventable had her doctors ordered a standard colonoscopy. Instead of conducting this routine test, they told her that her symptoms were nothing to worry about and sent her home time and again.

Instead of taking responsibility for their inaction, the doctors hid behind a team of insurance industry lawyers who went to work stalling Boyd's day in court. The lawyers working for her doctors' insurance company said she should have known better than to rely on the advice of her three doctors because she was a nurse with a family history of colon cancer."

Read the full article in the Austin American Statesman.

A recent filed class action alleges that Allstate made concerted efforts to systematically deny claims made by people who were the least able to fight for themselves.  The lawsuit alleges that Allstate hired the firm of McKinzie& Co. to revamp its procedures for handling claims. McKinzie & Co. has the dubious honor of being a "key architect that made Enron a Wall Street darling." The "McKinzie documents" are at the core of the lawsuit, and are also the main subject of a new book called From Good Hands to Boxing Gloves. 
The suit seeks to compensate those who were victims of Allstate systematized stalling tactics and upholding claims processes. The majority of the McKinzie documents are under a protection order, however attorney's involved in the case state that the documents indicate nationwide fraud.

Read more here.

"Reckless and malicious" is how a jury described State Farm's conduct in refusing to compensate a policy holder for damage done to his home in 1999. A tornado in Oklahoma City seven years ago destroyed many homes in the area. Recognizing the possibility of serious financial losses, State Farm actively hired engineers to both underestimate the value of the homes damaged, and to conclude that the damage was not caused by the tornado in order to deny the claim.
Looks like State Farm is employing similar tactics against those who lost their homes during Katrina.

"Nine months after Katrina's record-setting storm surge destroyed some of the most desirable real estate on the Gulf Coast, the signs are a clear signal that people here are losing hope of ever being made whole again.

Private insurer losses for Katrina are estimated at $40 billion to $60 billion, making it the costliest catastrophe in U.S. history and renewing debates about the insurance industry's ability to pay for such losses.

But that discussion means little in Bay St. Louis, where hundreds of homeowners have learned that if your home is destroyed by a hurricane's storm surge, your hurricane insurance policies might be useless. The scenario serves as a sobering wake-up call for Southwest Florida homeowners who think their flood and wind policies will safeguard their investments in the event of a catastrophic storm.

Joe De Benvenutti and his wife, for example, thought they had done everything to protect their dream home: They had $250,000 in flood coverage -- the maximum allowed by the federal insurance program -- and a "total replacement value" hurricane policy through State Farm.

The flood program paid out.

But State Farm has refused to pay on the grounds that Katrina's 30-foot storm surge -- not its 140 mph winds -- wiped out their home and the damage isn't covered by their policy. With a home valued at nearly $700,000, the flood payout doesn't come close to replacing all the Benvenuttis lost."

Read the full article in Florida's Herald Tribune here.

"The Lakin Law Firm of Wood River and the Chicago law firm of Freed & Weiss LLC filed the lawsuits in 2001 against multiple providers of car insurance. The lawsuits alleged the companies used a computer system to routinely pay below-market values for vehicles wrecked beyond repair.

The final settlement was approved in December by Madison County Associate Judge Ralph Mendelsohn, but Lakin attorney Richard Burke on Monday said the period during which the defendants could have sought an appeal only recently expired.

Burke said roughly 3 million people were eligible to make claims for $5 to $132. The plaintiff attorneys were awarded $16.1 million in fees, to be paid by the defendants."

Read the full article in the Belleville Democrat here.

A recent article in the Wall Street Journal points out yet another CEO the makes millions, even billions, in industries that are in crisis.

"Unrealized gains on [CEO] Dr. McGuire's options totaled $1.6 billion, according to UnitedHealth's proxy statement released this month. Even celebrated CEOs such as General Electric Co.'s Jack Welch or International Business Machines Corp.'s Louis Gerstner never were granted so much during their time at the top.

Dr. McGuire's story shows how an elite group of companies is getting rich from the nation's fraying health-care system. Many of them aren't discovering drugs or treating patients. They're middlemen who process the paperwork, fill the pill bottles and otherwise connect the pieces of a $2 trillion industry.

The middlemen credit themselves with keeping the health system humming and restraining costs. They're bringing in robust profits -- and their executives are among the country's most richly paid -- as doctors, patients, hospitals and even drug makers are feeling a financial squeeze. Some 46 million Americans lack health insurance."

Read the full article on WSJ.com here.

In a year including the one of the greatest disasters in United States history, the insurance industry increased their overall profits by 18.7%.

Read the full story in the Chicago Tribune here.

PHILADELPHIA — A Pennsylvania federal judge on March 29 upheld a jury verdict awarding almost $8 million against an insurer for refusing to settle an underlying medical malpractice suit filed against its insured (Stephen P. Jurinko and Cynthia Jurinko v. The Medical Protective Co., No. 03-04053, E.D. Pa.).

An engineering company altered a report to eliminate the significant role wind played in severely damaging the home of an elderly Gulfport couple during Hurricane Katrina, according to a lawsuit filed Friday in Mississippi.

A Mississippi lawfirm is asking a judge to order the original report restored and award $5 million in damages to Hubert W. and Joyce Smith, who used retirement savings to repair their home after their insurer paid $16,000 on a policy with a total of $540,000 in coverage.

A lawsuit represents only one side of the legal argument.

Private insurance companies are covering only wind damage from Hurricane Katrina because their policies generally exclude coverage for damage caused by wind-driven water. The local engineer who completed the Smiths' report verified it had been altered and his signature forged, according to the lawsuit and other records obtained by the attorney who filed the suit, William B. Weatherly.

"This to me proves one of my deepest, deepest fears, which is that there's a concerted effort to cheat people," Weatherly said Friday.

"The Louisiana Department of Insurance moved Thursday to avert a crisis by enacting an emergency rule that prevents insurers from dropping policyholders waiting on hurricane repairs. Emergency Rule 23 requires companies to keep commercial and residential policies in effect at their existing rates until people are able to repair damage from Hurricanes Katrina and Rita. The rule came just days before the expiration of a set of consumer protections enacted immediately after Katrina that prevent insurance companies from raising rates and dropping policyholders."

Read the full article in the Times-Picayune here.

While the insurance industry spends millions of dollars lobbying Congress for limits on compensation for malpractice victims, a new study shows the industry has consistently overstated its payouts by billions of dollars.
The Foundation for Taxpayer and Consumer Rights (FTCR) examined the official filings that malpractice insurers submit to state insurance commissioners and found that over a 9-year period, the amount insurers reported they would pay out on policies was 46% more -- approximately $12 billion – than what they actually did pay to victims.
The malpractice insurance industry grossly overstated its payouts every year in the 9-year period FTCR examined, and in one year, overstated payouts by 66%.
"By manipulating their books to misrepresent their 'losses', the insurers have profited in two ways. First, they have used the inflated numbers to justify rate increases that were unnecessary and excessive. Second, they have invoked their exaggerated loss estimates to promote legislation allowing these insurers to limit how much compensation they have to pay out to victims of medical negligence," said FTCR's Harvey Rosenfield.

Read more here.

Allstate is raising car insurance rates in Illinois for nearly half of the states policy holders. Rates are to increase 2.4% for policy holders with full coverage. Rates will increase between 5% and 8% for those with only liability coverage.
Allstate cites increase medical costs as the reason for the rate hike.

Many insurance companies in Louisiana and Mississippi, including Allstate and State Farm, are denying property damage claims citing policies that do not cover flood damage. Plaintiff's attorneys like Richard Scruggs and the Mississippi attorney general have vowed to fight these denials so that victims of Katrina have some hope of being able to rebuild.

Read the full article here.

As if we needed another study proving that malpractice lawsuits have nothing to do with the skyrocketing malpractice insurance premiums. US citizens pay 53% more per person for health care than any other industrialized country. And in spite of the political rhetoric being tossed around by the current administration and in Springfield, malpractice lawsuits have little impact on these high costs.

This study, compounding upon previous studies, shows that the effect of lawsuits on health care costs is minimal. Medical malpractice actions (including payouts and costs of defense costs) account for less than 1% of spending. Defensive medicine, the idea that doctors perform unnecessary tests to cover their tails, makes up no more than 9% of total spending.

"What we said three years ago and still reiterate is, it's prices, stupid," said Dr. Gerald Anderson, lead author of the report and a professor at Johns Hopkins Bloomberg School of Public Health.

Read the complete article in Investor's Business Daily here.

As part of a class action lawsuit brought over 5 years ago, WellPoint Inc., the nation's largest health insurer, settled with physicians and medical providers for $198 million. The lawsuit alleged that restrictions and flat out refusal of payment for certain procedures was detrimental to patient care. Michael Sexton, the President of the California Medical Association, sums up the result of the settlement stating "[t]he insurance company will no longer by in the exam room with the physician and patient."

Read the full article here.

The State's Attorney of Connecticut and Missouri recently announced that they would investigate the inexplicable spike in insurance premiums for medical malpractice insurance. Recent reports filed in each states' respective insurance departments show that premiums charged to doctors have increased dramatically within the last five years, while total payouts have actually decreased in the same time period. For example, Healthcare Indemnity Company, one of the larger malpractice insurers, raised rates by 173 million while payouts decreased by 74 million.

It is figures like these that caught the state's attorneys' attention. Connecticut state's attorney Richard Blumenthal sums the problem up nicely:

The numbers underscore the need for much tougher, more aggressive oversight to prevent and punish profiteering. Federal and state regulators should thoroughly scrutinize recent rate increases and take appropriate corrective action. Affordable medical malpractice insurance is critical to public health. Expensive insurance rates become a matter of life and death when they drive doctors out of business - as is happening in Connecticut and nationwide. Insurance company greed can be hazardous to our health.

You find more information about the investigations here.

A Louisiana jury awarded Ms. Christiane Hymel $2 million against Blue Cross Blue Shield for causing the delay in discovery of a spinal tumor. Ms. Hymel presented to her doctors complaining of back pain. Her doctors recommended a MRI, but BCBS refused to pay for it. Subsequently, the MRI was delayed by four months as Ms. Hymel raised the money to pay for the MRI on her own.
As a result in the delay in diagnosis, she requires extensive physical therapy in order to walk again, and suffers irreparable numbness from the chest down.

The full article is found here.

A group of about 2000 Missouri physicians filed several class action lawsuits alleging that insurance providers engaged in extortion, fraud and collusion. According to the lawsuit, insurance companies are conspiring together with elaborate schemes making it difficult for patients to get needed care.
The course of treatment for a patient is essentially decided by bean-counters at the insurance company. The power to care for the patient is taken away from doctors because the insurance companies repeatedly reject medical claims as not "medically necessary." An excerpt from an infuriating article in the Kansas City Channel is below:

"We have a barrier between doctors and patients, and it's the insurance companies," said Dr. William Soper, with Mid-America Medical Affiliates.

"In essence, they are practicing medicine, which they have no right to do," said Dr. Bob Gibbons, with the Metropolitan Medical Society.

Doctors said the insurance companies are focused on money, not health.

"There's never been a better time to be an insurance company than right now," Soper said.

Studies show that insurance companies have doubled profits in just four years.

Doctors are accusing insurance providers of paying out incentives to claims adjusters who deny care.

"There's just a huge reward for denying care," Gibbons said.

What is even more infuriating is the fact that more of these lawsuits are not being filed nationwide. You can find the follow up article here.

The accounting scandal at American International Group, Inc., has paved the way for other FBI investigations into the insurance industry. AIG is under investigation by the New York attorney general, the Securities and Exchange Commission (SEC), and the Justice Department. AIG is accused of using complex insurance products and offshore affiliates to artificially enhance its financial results and ultimately mislead investors. It has come to light that AIG is not the only insurance company that engages is such deciept. An excerpt from a June 27, 2005, article in the Wall Street Journal is below:

More than a dozen insurers and reinsurers have disclosed fresh subpoenas since early June, most from federal prosecutors in New York, seeking information about "finite risk" insurance and reinsurance, as well as other nontraditional insurance. Insurers buy reinsurance to spread the risk of loss from policies they write, but authorities are concerned that some finite-risk transactions are actually disguised loans. The insurers reporting new subpoenas include St. Paul Travelers Cos., ACE Ltd., General Electric Co., AXA SA's AXA Re reinsurance unit and Platinum Underwriters Holdings Ltd., all buyers of reinsurance from units of Berkshire Hathaway in recent years. The companies all say they are cooperating.

Allstate release a statement today agreeing to reduce rates for car insurance in New York at the request of New York legislators. Citing a reduction in car accident fraud in 2003 and 2004, Allstate agreed to reduce rates by 5.1% or 15 million dollars in savings for consumers. Allstate insures 1.5 private automobiles, or 17 percent of the market in New York. See related article here.

Allstate, based in Northbrook, IL, is unlikely to do the same in Illinois absent some prodding by the Illinois legislature or Governor Blagojevich. Rates are regulated within each state by state law, and Illinois is home to some of the most lax insurance regulation laws in the country. This is in no small part due to the fact that two of the biggest insurance companies in the country, Allstate and State Farm, are headquarted in Illinois.