Tuesday, October 02, 2007
Insurance companies fight law on punitive payouts
SEATTLE, Washington (CNN) -- Across the country, insurance companies, trial lawyers and legislators are closely watching a November referendum in the state of Washington that could change how insurers are required to treat their customers.

Insurance companies are using the referendum process to try to strike down a new law in Washington state.

Insurance giants like Allstate, State Farm, Safeco and Farmers have poured more than $8 million into the referendum battle. Their goal is to convince voters to reject a law passed earlier this year that could force insurers to pay up to triple damages and lawyer fees if they fail to pay a legitimate claim and then lose in court. A "yes" vote on the referendum allows the law to go into effect while a "no" vote strikes the law down.

Supporters of the law say it forces insurance companies to pay legitimate claims in a timely and fair fashion and frees the courts from relatively minor cases that clog the system for months and even years. One supporter, the Washington Trial Lawyers Association, has raised almost $900,000 to fight the insurance industry over the referendum.

Click here to read more

-- By Drew Griffin, CNN Correspondent
Kathleen Johnston, CNN Producer

Posted By CNN: 2:14 PM ET
  19 Comments
Somehow I think forcing insurance co's to pay triple damages is going to translate into higher premiums for all of us.
Posted By Steve - Peoria, IL : 8:13 PM ET
Insurance companies take our money for years, then, when you make a claim they say, "oh, you're covered for A and B, but not C." So, I think it's OK for the law to step in and stand up for the little guy.
Posted By Allie Marquis, Manchester, Vt. : 8:17 PM ET
everybody dislikes frivilous lawsuits, but if these insurance companies would not use the 'fine print' excuse to wiggle their way out of covering you , people wouldn't have such a low opinion of insurance companies...
Posted By Lee W., Seneca, NY : 8:21 PM ET
Ask any Floridian what will happen if the referendum gets passed: Insur Co will make good on raising rates. Florida economy has been devastated by insurance companies and heading toward a depression if our political leaders do not act. Most Floridians can't move because they can't sell their homes.

No matter what kind of insurance it is, this is a twisted Goliath that needs to be dealt with on a federal level.
Posted By Anonymous : 9:14 PM ET
THANK YOU so much for reporting on this!! I live in Olympia and attended some of those hearings you mentioned.

Those "Reject R-67" ads have been flooding the airwaves. In fact, I'm seeing one of those ads on CNN right now! My biggest concern is that enough people will be fooled by these deceptive ads to strike down this much-needed law. You in the media are our only line of defense against these insurance companies' deep pockets!

Please don't stop reporting on this! People deserve to know the facts.
Posted By Kris : 10:50 PM ET
Yet again, another example of corruption of an institution that was created to simply financially protect the average person from events beyond their control. It has mutated into nothing but big business with only one goal- to make huge profits at any cost.

Janet, Nelson, BC Canada
Posted By Anonymous : 10:54 PM ET
I've watched people like those profiled on AC-360 tonight suffer due to unreasonable denials of insurance claims. Losing your car, your home, your health, because someone a thousand miles away is following an insurance company directive to delay or deny reasonable claims.
I'm glad we have insurance companies, and I'm usually not in favor of government regulation of business, but it is clear to me that insurance is one industry that desperately needs someone watching to make sure it plays by the rules.
Posted By Steve in Seattle : 10:57 PM ET
You did a real hatchet job on this story...all you wanted to do was slam the insurance industry so you highlighted a few claims disputes and tried to make it sound as if it commonplace.
The biggest problem with your reporting of this story was the lack of perspective.
You make it seem as if the industry is summarily denying claims just to make profit.
You NEVER mention what percentage of claims are paid right away and how many policyholders are happy with their claims.
Companies will tell you that more than 99.5% of their claims are paid satisfactorily. Disputes are rare.
You also failed to mention what the real impact of the Washington law will cause to consumers if they don't vote to strike it down.
The fraud floodgates will open in a big way.
Consumers are already forced to pay billions of dollars in unnecessary premiums because of unscrupulous and greedy personal injury lawyers and medical providers who are ripping the system off.
You never mentioned that the Washington law will force insurers to pay even the most questionable of claims to avoid having the threat of a treble damages lawsuit.
Lawyers will continually threaten and badger insurers to pay questionable and outright fraudulent claims.
This will cost hundreds of millions of dollars of unnecessary payouts. Consumers won't get most of this money. Trial lawyers will.
Crafty personal injury lawyers who are so good at hiding the truth have sold CNN on a good 'gotcha' story to the producers who bit and produced a piece of terribly biased infotainment (I can't even call it journalism).
Why should consumers be forced to unnecessarily pay hundreds of millions of dollars more in premiums (that will result when the lawyers and fraudulent medical providers flock to Washington) when disputes are extremely rare and there is a perfectly reasonable system in place to handle them?
In your zeal to try to make an entertaining piece of 'gotcha' journalism, you checked your ethics at the door and turned out a piece of unbalanced junk.
There's always another side of the story. It's too bad you didn't bother to adequately check it out.
Shame on you!
Posted By Mark Kulda : 11:17 PM ET
As a police officer, I have seen both sides of abuse of and by the auto insurance companies.

As courts use the words, "as a resonable person", some people do succeed in scamming the insurance companies. These are flagrant red flags raised that should sound an alarm to a responsible company.

To the insurance companies logic in the three "D's" (Deny, Delay and Defend), one should wander who is getting richer on this after-thought, Insurance Companies, Private Investigators or Lawyers.

In the segment, Safeco was pittied with Allstate. Safeco was reported as a responsible company in the injured parties claim. Allstate, well she was not in GOOD HANDS.

Reminds me of a movie plot.....
Posted By Anonymous : 12:08 AM ET
Excellent reporting...I would also like to point you in the direction of DISABILITY Claims... TRY LOOKING into ARISA claims...The law is old, it is stacked in favor of companies and they win 80% of cases (I've been told). My ARISA case has been going on for over 4 years...and still no end in sight...Thanks...
Posted By Anonymous : 10:32 AM ET
I was hopping mad after I saw the piece last night on the Washington State proposition. Of course it is up to the Washington voters to decide the best course of action, but I know how I would vote. What upset me most was the way the spokeswoman for the proposition lied about the Insurance Commissioner's position on the issue. I don't know why I am still naive enough to believe that people would tell the truth, but I am.

I want to give kudos to the Washington legislature for passing the bill in the first place. That would not happen in CA. Our full time legislature would have passed it as a proposition in the first place and not had the guts to do what they are paid to do. Rather than our elected officials taking the bull by the horns, we once had 3 propositions about insurance on the ballet with confusing voting directions--vote yes and it means no.

I know just how this propostion got the signatures necessary to get on the ballet. People paid by the signature stood outside of Target and bombarded people juggling babies and bags saying do you want your insurance rates to go down? Do you want to stop the slimeball lawyers (sorry Jeff) from picking your pocket? Sign this proposition. I decline to sign any proposed propostions anymore because you don't have time leaving a store to make an informed decision about what you are signing.

I hope to see a follow up to this story next November to see what the voters in Washington decided. And we should not broadbrush all insurance companies with the same brush. The insurance commissioner made a good point that if an insurance company does what it is supposed to do, it will not be fined. We shopped for our insurance company using Consumer Reports and have not had any trouble with claims or customer service.
Posted By Charlotte D, Stockton CA : 10:48 AM ET
I think this is a little unfair to insurance companies. In the example given Ms. Tribble had $18K worth of medical and expected her auto insurance company Allstate to pay for that. Many people don't realize if you have Personal Injury Protection on your policy your limits are usually $2,500.00. The rest should be covered by your health insurance. Why sue for something you are not entitled for? And why should insurance companies have to pay you when another person who didn't complain wouldn't get paid? Then it becomes unfair for everyone. An insurance company is only responsible for what you insure yourself for.
Posted By Amanda, Dallas TX : 1:12 PM ET
As a doctor which has dealt with these very companies for years I am glad to know that their very policy holders will now know what the insurance companies do 24 hours a day 7 days a week to deny and reject valid and legitimate claims that there insureds are rightfully due under the guise of all the "Rampant Fraud" that they claim exists.

If they only spent that 8 million on training their employees and increasing their efficiency in handling and paying claims they would not have to worry about this bill. It is the responsibility of higher elected officials as has been done in this case, to use their power appropraitely to address important issues such as this one that will continue to be abused and worsen if not addressed.
Posted By Anonymous : 1:41 PM ET
This looks like two groups of powerful, rich people (or corporations) which do not have the people's interests in mind, but their bottom line. The REAL bottom line is, insurance companies need to do a better job of taking care of the people they insure and lawyers need to stop pushing for such exorbitant payouts. If both of those things would happen, then the average American would be better off.
Posted By Nestor, Austin, TX : 2:03 PM ET
It's an old concept called "bad faith refusal to pay". It is used against insurance companies that refuse to pay legitimate claims and write off minor penalties as a cost of doing business. What this law would do is make a bad faith refusal to pay a particular claim a cost of doing business that is too high a price to pay.

The balance in the last few decades has tipped too far toward big business. This law should be passed.
Posted By Anonymous : 2:43 PM ET
Insurance companies are motivated by profit, not morality. The only way to get them to stop cheating their customers is to hit them hard in the pocket book when they fail to pay legitimate claims. Its about time we had a law like R 67 so we can defend ourselves against our own insurance companies.
Posted By Brian Scott : 5:18 PM ET
I think it's a double-edged sword. People are known to fudge a little on insurance claims, so the companies are just covering for themselves against fraud.
Posted By Dane P., Omaha Ne. : 5:18 PM ET
Hi Drew, thanks for coming to my neck of the woods to cover this story. I used to work for an insurance company. I have since quit that job because I could not, in good conscience, work for a company who denies legitimate claims and brags about profits at the same time. They're supposed to make good on their promise to make their policyholders whole as long as they pay their premiums. Since quitting that job, I've been able to sleep at night.

I look forward to follow-up reports of this story. Thanks as always for keeping them honest.

Lilibeth
Edmonds, Washington
Posted By Lilibeth, Edmonds, Washington : 5:38 PM ET
I thought this story was excellent and hope similar laws are passed in every state. My family has had bad experiences with insurance companies especially when my daughter who was 6 years old was hit by a car. It was clearly the driver's fault but the driver was covered by State Farm, who ruled it was my 6 year old daughter's fault and refused to pay any of the medical claims. Even the fact that witnesses told them the driver was speeding and my daughter was on the side of the road she should be on did not sway them. So, yes we have been bitten first hand by their delay and deny policy.

If the insurance companies always paid just claims why are they so worried as to hike up rates. As the insurance commissioner said, treat your customers fairly and there will be no lawsuits.
Posted By Suzanne Pratt, Knoxville TN : 7:44 PM ET
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