OT - Insurance question

[Kenny Cole]

Originally Posted by Peter_Spaeth

I don't do a lot of work in this area, but one of my most gratifying cases was getting a recalcitrant insurance company to cover a major malpractice verdict for which a client hospital was liable. The efforts to which the company went to deny coverage were quite extraordinary and sad to say probably not atypical.

LOL, a war story. A few years back I represented a guy who purchased a disability policy which specifically covered quadriplegia. About 4 months later he's in his car, stopped for a red light, when this drunk driver comes screaming off an exit ramp from the interstate at about 75 mph. He rear ends my guy, who suffers burst fractures of his 4th, 5th, 6th and 7th cervical vertebrae among other injuries. The fact that he can't feel anything from the neck down is noted on the accident report. Among other places, the fact that he's probably a quad is noted on the history and physical when he's admitted to the hospital. It is the discharge diagnosis when he's sent to the rehab facility. The fact that he's a quad is on pretty much every page of the rehab facilitie's daily progress notes, where he got to stay for several months. He now uses a sip and puff wheelchair to get around. This guy is the poster child for when disability coverage is supposed to pay.

My guy's mom fills out a claim form for the disability coverage. In addition to the claim form, she sends in the accident report, a physician's statement, the hospital admitting documents, the discharge report from hospital and a bunch of records from the rehab facility. The carrier's response? You haven't shown that you are disabled, sorry, we have to deny your claim. We appreciate the opportunity to be of service.

Mom, in disbelief, says you must be kidding, you must not have looked at all the proof I sent in, here it is again. The insurer's response the second time? You haven't shown that you are disabled, sorry, we have to deny your claim. We appreciate the opportunity to be of service.

We sued them for fraud and bad faith in federal court. I can't remember the precise number, but after a dogfight during discovery we finally learn that they had sold many, many, thousands of these policies. They had thousands of claims a year and had paid on seven claims over the past five years, five of which they paid on after they were sued. When we took depositions, the claims people were in this dingy little office buidling with cubicles. There were only a couple of claims people who even had an office with a door. The sales people, however, all had real big offices (with doors) in a real tall building with real big windows and a real nice view of downtown New York City. It was pretty clear where the emphasis was.

Ultimately, they paid quite a bit of bad faith money in our case, but I'll hazard a guess that what they paid us was less than .1% off of what they made selliing these policies and denying the claims. Insurance. What a scam.