Recently in Insurance Law Category

A Tumblr complaining about Progressive has gone viral. The author's sister, "Katie," died in a Maryland car accident; the other driver's insurance paid its limits, and Katie's family went to Katie's insurer, Progressive, to seek coverage for the underinsurance of the other driver. Progressive refused, so the family sued the other driver to prove liability, and found themselves adverse to Progressive in court, and the author was furious, as are readers of the story. (A jury found for Katie, so her family will recover from Progressive after all.)

Without more facts, however, it seems Progressive is being viewed unfairly. Maryland is one of the few remaining contributory negligence states: if Katie was 1% at fault in the accident, there is no liability to the other driver or Progressive. As the author himself admits, there was a "possibility that Katie was at fault in the accident." Is Progressive supposed to give money away when they aren't legally obligated to do so? The author says "One indication that the case was pretty open-and-shut was that the other guy's insurance company looked at the situation and settled with my sister's estate basically immediately." But because "that payment didn't amount to much," that insurance company could have reasonably decided that there was little point in spending the small insurance limits on attorneys instead of just writing a check. Progressive had more money at stake and more reason to defend.

Yes, "[c]arrying Progressive insurance and getting into an accident does not entitle you to the value of your insurance policy." But that's true for all insurance companies when the policy holder is not in a no-fault state. Progressive isn't unique in that regard.

As of 2007, Maryland permits recovery on a "bad faith" theory against insurers who refuse to pay claims where liability is not "fairly debatable." One would expect that Progressive would not have taken the action it did, and risk liability, if their position was not "fairly debatable." (See the entertaining story of Rex DeGeorge for examples of insurance companies being quick to pay when bad faith might be at issue.) The author seems to concede that Progressive's position was fairly debatable; he also makes no mention about further litigation against Progressive for its initial refusal to pay.

One sympathizes with the author for the tragic loss of his sister. But his fury at Progressive is misguided. Katie, and other Maryland drivers, pay as little for auto insurance as they do precisely because insurance companies don't have to immediately pony up when they are not liable. One could ask for different rules, but consumers would be paying for those different rules up front. Related: Consumerist.

In 2009, we noted that the Ninth Circuit rejected a California law that purported to permit lawsuits against insurers over the Ottoman genocide of Armenians. (That decision came too late for some insurers, who gave in to the legal extortion and funded cy pres slush funds that have since become the subject of collateral litigation.) Since then, California has renewed the law, permitting these suits to be brought until 2016, but last week, the Ninth Circuit, sitting en banc, unanimously reconfirmed its decision that the move was outside of appropriate insurance regulation.

There have been a variety of meritless lawsuits against power companies on a theory that power companies contributed to global warming, global warming contributes to property damage, therefore power companies are liable. Randy Maniloff discusses the case of AES Corp. v. Steadfast Ins. Co., 715 S.E.2d 28 (Va. 2011), where a power company (now joined by a state trial lawyers association on a motion for rehearing) unsuccessfully argued that these lawsuits created a duty to defend from its liability insurer.

As in many tort cases, the facts are unfortunate: Chris Boertmann was driving home from a wedding on his motorcycle, when he was hit by a car and killed. But the plaintiff here is Gale Boertmann, Chris's mother, who was driving behind him. She wasn't involved in the accident, but she witnessed her son being killed, and says she incurred tens of thousands of dollars of medical bills over the emotional trauma. Who should pay? According to Boertmann, her own auto insurer: after all, she was driving in her insured vehicle when she suffered the injury. The insurer protested that that wasn't what the insurance policy covered, but a Michigan-state trial court and appellate court have found the insurer liable. The case is on appeal to the Michigan Supreme Court. [ABAJ]

Tort reform advocates are often accused of being in the pocket of the insurance industry, but insurers are sometimes among the worst offenders in the civil justice system. Allstate is suing Toyota for $3 billion of subrogation claims relating to the bogus sudden acceleration theory, and has hired Cozen O'Connor to push for ludicrous venue rulings to forum-shop the case in Los Angeles County. [NLJ]

Randy Maniloff has a new paper on bad-faith insurance claims in the August 5 issue of Mealey's Emerging Insurance Disputes. I discussed the issue with Marie Gryphon here.

The release of emails from the Scruggs Katrina Group's PR firm shows David Rossmiller getting under the skin of some corrupt lawyers and their PR flacks. See this must-read post from David Rossmiller: the quote in this post title ain't the half of it. It's great to see him back blogging.

POL has previously discussed the role of doctors and lawyers in no-fault insurance fraud. Bruce Cranner of Frilot LLC writes us with news of an interesting lawsuit where an insurance company is fighting back:

GEICO is getting very serious about pervasive and well documented no-fault insurance fraud in New York. In a $1.8 million lawsuit filed in the Eastern District of New York on June 11 GEICO seeks compensatory and punitive damages damages under RICO and New York common law against medical professional companies operating an imaging center on Long Island. Among the defendants are members of the plaintiff's bar and a law firm, which certainly takes a claim for simple medical billing fraud and turns it into a strong indictment alleging true litigation racketeering. In summary, GEICO claims that two physicians, two medical professional corporations, a non-physician (and the medical professional corporations) and (OH!) two lawyers and Long Island Law firm engaged in a scheme to submit false or fraudulent claims for radiology services to GEICO associated with no-fault claims. In my view, the inclusion of lawyers on the defense side of the v. is very, very important. GEICO claims this will be the first of many such suits. Other insurance industry powerhouses are, allegedly, poised to follow the Geico Gekko into the warfare of fraud litigation too. Various estimates suggest that pervasive no-fault fraud in New York is costing policy holders big money; as much as 20% by some reports. The problem is a well documented disaster. But, is no-fault the real issue? Is this a case where the system is broken and truly needs to be fixed? Or, is there something else going on here?

Ray Lehmann critiques a particularly egregious bit of special-interest legislation on behalf of executives at a Michigan insurance company.

A proposal to fold insurance, administered compensation and other institutional considerations into a staple of the law school curriculum. [Knutsen, Prawfs]