By Brenda McDermott, CPCU, SCLA, CIIP, SCLA, ARM, AIDA
Avoiding Bad Faith Judgements and Nuclear Verdicts:
Lesson 1: In the Rainmaker the evil insurance company, Great Benefit denies a bone marrow transplant to the dying son of a policyholder. They denied coverage seven times for seven reasons. The first reason being that leukemia is a preexisting condition and therefore not covered condition, and later saying that bone marrow transplants are experimental. After their final denial, the company’s Vice President of Claims writes in a letter to their policyholder, “Mrs. Black on seven prior occasions we have denied your claim. We are denying it for the eighth and final time. You must be Stupid, Stupid, Stupid”. A letter that the applicant attorney uses as a court exhibit blown up for the jury to see while asking the Vice President to read the letter out loud while he is on the stand.
The Verdict was $150,000 in actual damages and $50 Million in punitive damages. In an age of nuclear verdicts, what you do and what you say matters and can result in multi-million-dollar verdicts.
We’ve all had that frustrating insured or claimant that no matter how you explain the policy or the law to them they persist in demanding coverage and payment. But never put anything you don’t want introduced in court in writing, your claim file, or any related memos or emails. What you think isn’t admissible but what you say or write can be.
Lesson 2: In the Rainmaker, when called to testify at the trial the claim handler tells the plaintiff’s attorney about Great Benefit’s claims manual and instructions to the adjusters. If you think your claims manual and your training of, or instructions to adjusters isn’t admissible, think again. While she wasn’t allowed to testify about those instructions, the claim manual was eventually introduced to rebut the CEO’s testimony. The jury heard the company policy that claim adjusters were told to initially deny the claim per the company policy. And if the insured continued to pursue their claim, they were sent multiple denial letters until they gave up. They played the odds that the customer wouldn’t get an attorney.
Claim handlers need to use good faith claims handling and do their due diligence to investigate the claim and make the decision based on the evidence, the policy, and the law. A company policy that tells adjusters to deny all claims regardless of their merit is going to end up getting your company not only bad faith judgements and nuclear verdicts but a visit from regulators auditing your company files and practices. It could result in not only millions of dollars being paid out in judgments on claims that would have cost far less had you accepted and paid the claim, but in fines, potential take over by regulators, criminal charges, or an inability to write insurance in that state. In some situations, the adjusters could be named personally in the litigation. Make sure your adjusters are trained in how to read a policy and the law and make coverage and payment decisions. Provide leadership guidance to help adjusters make complicated decisions if they are unsure whether to cover a claim or admit the loss.
Making Your Company Relatable and Not the Bad Guy
Lesson 3: In A Time to Kill the defense attorney needed to make his client someone the jury could relate to. In his closing argument he asks the jury to close their eyes and tells them a story about what happened to his client’s daughter. He makes the jury see her as their own child or a child they know and love. He makes her someone they could relate to and in doing so makes his client’s actions, while not something they might have done, something they could understand. The jury acquits him.
We as insurers are often portrayed as the bad guys. As greedy multi-million-dollar corporations who try to cheat the insured or the claimant out of what they’re rightfully owed. Not as their neighbors and people who volunteer to help repair homes or cleanup litter. Not as the people who arrive in their town in mobile claim buses to help them recover after a devastating flood or tornado. Not as the agent who sponsors their kids’ little league team. To counter the negative way insurance companies and adjusters are portrayed, we need to be a part of our community and to give back so when the plaintiff attorney is painting insurance companies as evil, the jurors can see the face of the insurance adjuster, who handed them a check so their family could stay in a hotel and get a meal when their house was destroyed. We need to be sure we do the right thing in our jobs and our community so that the jury can see us in a way they can relate to.
How Data Can Impact a Verdict:
Lesson 4: In The Runaway Jury the defense for a gun manufacturer hires a jury consultant who is known for making sure defendants prevail in wrongful death and negligence suits when their weapons are used in a mass shooting. Both the consultant and the plaintiff attorney are contacted by someone who says that they can get them a verdict in their favor for a fee.
In Grisham’s book and movie, the person offering to get them the verdict is setting up the defense’s jury consultant to get even with him for his actions in a wrongful death suit they’d brought against a gun manufacturer for a mass shooting in their town. While that makes a good story, in real life, both sides have jury consultants trying to make sure they pick juries that will be sympathetic to their clients to ensure that they get the verdict they want. Data analytics that look at potential jurors’ jobs, charitable contributions and volunteering, political and social actions, social media posts, and other demographic factors are becoming big business. In a suit against an insurance company, the plaintiff will want to load the jury with people who have had prior claims and weren’t happy with what they were paid or who don’t trust big business and believe insurers are the evil. They want jurors who feel that someone must pay when there is a loss. These are drivers behind nuclear verdicts- big business is bad and someone must pay.
The Power of Doing the Right Thing and Acting Ethically.
Lesson 5: In The Firm, Mitch McDeer discovers that his firm is participating in fraudulent billing of their clients by mail – making the partners subject to RICO statutes for organized crime and uses it to get the FBI who are trying to get him to violate his attorney client privilege by providing evidence against the firms crime family client, off of his back.
Be on the lookout for fraudulent or unethical practices. You have a duty to report these practices to your employer, your internal SIU department, and in most states the state department of insurance and regulators. If we don’t act ethically, how can we expect our customers or juries to trust us? Remember Great Benefit in lesson one and two? Making a habit of doing the right thing; doing your due diligence and following the law in the way you handle claims or money, and acting ethically and lawfully will protect you and your company from facing juries or judges in bad faith claims, being the recipient of a nuclear verdict or making bad case law.
Brenda McDermott, CPCU, SCLA, CIIP, SCLA, ARM, AIDA is a workers’ compensation claims specialist in The Hartford’s Major Case Unit. She is a past International Rookie and Claims Professional of the Year and past International CWC Speak-Off winner. Sher was the 2022 Region V Insurance Professional of the Year. She has been a long-term member of IAIP and served in multiple offices at the local, state, and regional levels. A Past Region V RVP she is currently serving as the Region V Marketing Director and Co-Chair on the International Marketing and Today’s Insurance Professional Committee. She is an MAL in Region V from Missouri.