Insurance Coverage Blog

I've had a number of stories by Becky Mowbray of the New Orleans Times-Picayune sitting around in my feedreader waiting for me to find time to comment.  Between the day job and the Trailer Lawyers, it's been difficult, but I can sneak some of them in here. 

-- This Mowbray story is about federal regulation of insurance, as opposed to the current state system. It's interesting that opponents of federal regulation claim it would amount to deregulation, which of course by that they mostly mean deregulation of rates.    

Consumer advocates counter that "optional federal charter" is code for deregulation, and there's nothing in it for policyholders. In their lobbying, deep-pocketed insurers would make sure that a federal system would resemble the most deregulated state systems, such as Illinois. Allowing companies to choose between being regulated by the states or the federal government would create a race to the bottom on regulation as the two systems would compete to attract insurers. Strong consumer-protection laws in California would be dismantled, and Florida would be powerless in its stand against insurance companies.

"I'm not opposed to a federal role, but the OFC is a bad idea because it gives the option to the insurance companies," said Hunter, who will release a study this week on the effects of different regulatory systems on consumers. "If I'm a state and I want insurance companies to choose my system, I would lower my standard. It would decimate regulation."

The kicker, Hunter said, is that [Treasury Secretary Henry] Paulson's proposal is short on details about consumer protection, but states explicitly that there would be no regulation of homeowners and auto insurance rates. He's not kidding.

"While numerous arguments have been made to justify such rate regulation, they are unpersuasive," Paulson's proposal reads. "Insurers should neither be subject to rate regulation nor be required to use any particular rate, rating element or price."

I wonder why some always assume that lack of central planning will result in consumers getting hosed.  The history of deregulation -- increased competition, in other words -- is to the contrary.  Can't say that it matters much to me either way, but it's interesting to think about.

-- Louisiana's efforts to shrink the risk profile of the state-run property insurer are bearing fruit, with new companies moving in to buy up some policies held by Citizens Property.

-- Allstate's posting of 150,000 McKinsey documents to its website wasn't enough disclosure, some are claiming.  They also want to see documents relating to hurricane catastrophe claims adjusting.  Allstate says it is reviewing to see if there are more relevant documents.

-- FEMA says it wants to change the formula by which insurers get paid for flood adjusting -- it says the formula worked well before, but resulted in a windfall for insurers for adjusting claims from Hurricanes Katrina, Rita and Wilma. 

-- Even though this is non-Mowbray, I'm also going to sneak in one Trailer Lawyer comment here.  I have no idea what the Trailer Lawyers are like in real life, they may be great people, steady as a rock, unflappable, whatever. I only comment on what I see in their public fight with State Farm, and, I'm trying to say this in a way that is not completely unkind. They need some professional public relations help.

This bombastic, chest-thumping pose they strike in pleadings and interviews with friendly newspaper reporters is not the way to go.  It's got the smell of fear to it, desperation, evasiveness, running for the tall grass. Whereas this kind of thing calls for a certain touch of Cary Grant, of David Niven, a certain grace under pressure, kind of like the characters Will Smith plays in the movies, the Trailer Lawyers give off the aura of folks in a chair fight on the set of Jerry Springer, some cross between Woody Allen and Travis Bickle, Robert DeNiro's character in Taxi Driver. ("You talking to me?").

Their selective analysis, including that incredibly ill-advised pleading where they refused to use the word "trailer," tells you that they are getting their clocks cleaned public relationswise. 

As for the Trailer Lawyers, Chip Robertson is well-regarded. Robertson's and DeWitt's firm has had considerable success over the years and employs a number of good lawyers. Todd Graves' firm, on the other hand, is at best untested. The real problem is that neither firm should be relying on its own zeal-soaked lawyers to respond to State Farm's motions--both would have been well-served to engage outside counsel to draft their responses (or at least edit them). Their strident memoranda are comic relief for readers of this blog, but the court is unlikely to be amused by their chest-thumping. An objective lawyer surely would have crafted more measured responses. Indeed, the unhelpful tone of the responses prepared by DeWitt and Marcus on behalf of their repsective firms lessens the force of a couple of decent arguments available to them.

RE: Missouri Lawyers

I think it is State Farm that is concerned with the public relations. They are the ones with an army of public relations guys. I doubt this law firm is concerned with their own public relations but are concerned about the allegations and innuendo that State Farm alleges as facts via blawgwiggers and unsubstantiated allegations in their motions.

Belle,

No matter how many times you repeat something, it doesn't make it true. Are you not reading the same information David is posting as I am?

I would also argue that State Farm has an army of PR because of nutjobs who think no matter what, State Farm is the "Evil Corporation" that robs the poor, punches babies, and does other terrible things. Again, I don't think that State Farm is blameless, but your reluctance to see the unethical and possibly illegal way the "Trailer Lawyers" handled themselves is moving from amusing to saddening.

Bellesouth, could we please get a definition of "blawgwigger"? And, are you suggesting that State Farm somehow controls, or even influences, what gets said on this or any blog? Talk about unsubstantiated allegations! What conspiracy theory can we expect to hear about next? Or, wait a sec -- we should probably go easy on you. Afterall, you're on the side of the admitted conspirators, so you must naturally assume that everybody plays dirty. Give us a substantiated allegation or give us a break.

Bellesouth is kinda like a wart. Hopefully, if you ignore it long enough, it will go away.

Don't get rid of Bellesouth. She cracks me up. She can't possibly be serious. I've pointed out before, I think, that criticizing her -- after you're on to the fact that she's a provocateur who can't possibly believe what she posts, is like criticizing "The Onion."

I don't know why there is all this VITRIOL. Do thou protesth too much?! It is not like SF has not been tried and convicted of malicious conduct in numerous cases. Why would the Rigsbys or their lawyers engage in unethical conduct? It obviously would not help them to do so. But the comments on this blog all want to hear themselves talk and not listen to anything anyone else says or thinks. It seems the behavior is quite immature IMO. Why would want to talk to anyone who is just going to shout them down? Is this a club? Are you all yes men?

Yes. (I had to be the first to say it).

Bellesouth:

Just a quick question.... What incentive does State Farm have to systematically rip-off its customers? I don't mean the occasional mistake, but a true systematic rip-off like that which allegedly occurred after Katrina.

To BS:
To answer your question "Why would the Rigsbys or their lawyers engage in unethical conduct?" That is quite simple....Money and greed. Can you tell me one solid good reason the good sisters used a client list of Dickie's to access and steal documents from SF, and then give those documents to Dickie? Don't give me the line about how their conscience over-powered them and forced them to do that, as anyone who was truely motivated along those lines would have contacted the authorities first and only dealt with the authorities. Going to Dickie first proves that they were only in this for money. Some may consider the sisters nothing more then common thieves.

Riskprof:

Great question.

Anyone contemplating answering it should be sure to factor in all of the costs of such a strategy: legal, regulatory, reputational, punitive damages and the like.

RISKPROF: At the risk of sounding naive, could State Farm have been motivated by..... profit maximization? ... loss minimization? ... misinterpretation of their own contract?

That would be a "Yes" for me also.

But echoing RISKPROF's question .... please inform us of the incentive Snake Farm possesses for All Actions Deemed Evil?

riskprof and OAEGE: see above two comments by claimsguy and MDC.

Belle - Do you understand that State Farm is a mutual company and profits are distributed to the policy holders?

So why were they found guilty of malicious conduct in Oklahoma and had to pay $10 million in punitive damages?

Or how about this: (see slabbed.wordpress.com under The Good Neighbor?)
Again the appeals court sums up State Farm’s behavior best and why the award of $4,000,000 in punitive damages for malicious prosecution would stand.

The Plaintiffs presented substantial evidence that would allow the jury to find that State Farm acted maliciously. Examples of this evidence include that State Farm did not provide NICB and, therefore, the prosecutor with its complete files. This included omitting the evidence regarding glass fragments with blood on them found in the car, which would tend to show someone had broken into the vehicle as opposed to the Plaintiffs being involved. The file also did not include the Miami County police report that made no mention of dual tire marks in the area where the 4Runner was found. Dual tire tracks would have been present if it had been towed to the scene of the fire by Vail, as State Farm’s theory of the case required.

Other examples include the alleged encouragement of the falsification of Carter’s report of the engine. There were also accusations that State Farm’s attorney told Hampton’s uncle, who was serving as her attorney at the time, that she needed to be careful about pursuing her insurance claim because criminal charges could still be brought. Hampton’s uncle also testified that one of State Farm’s attorneys told him that there were plaster casts of tire tracks found near the burned 4Runner that matched Vail’s tow truck. However, no such plaster casts exist.

Finally, there was also evidence presented that Pool considered contacting one witness’s diversion officer after the witness had changed his testimony in such a way that would not have been useful to State Farm. Although there was no evidence that Pool or anyone else ever spoke to the diversion officer, there was evidence presented that one of State Farm’s attorneys may have threatened the witness with perjury.

This, along with other evidence presented by the Plaintiffs, provided substantial evidence to support the determination that State Farm acted maliciously.

Belle...could you give us Your Opinion as to why You believe SF would engage in "ripping off" its own customers/owners? (motive please)

Look you don't like my words, so don't set me up! How about ... profit maximization? ... loss minimization? YOU answer me THAT!

Florida Hurricane Survivor, thank you. State Farm is a mutual company. Profits are returned to policyholders. No one stands to profit except ....drum roll... the Rigsby sisters and their lawyers. And have you not seen the pleadings? The biggest, baddest case was one where one of the sisters handled the claim herself and approved both flood and homeowner's payments. The other one, where State Farm supposedly pushed money onto the flood policy, involved no flood policy. What the..!? The verdict in Oklahoma was vacated, if I remember properly. Besides, who would believe brick veneer can be blown loose when the windows were not even broken?

Mutual companies do not have a profit motive the same way other companies do. All profits belong to the customers. So one must provide a reason why SF corporate would have a general incentive to rip off its customers. I can see that local agents make mistakes and then compound them, but to have a general philosophy of denying claims without a benefit to the "company" makes no sense. I just can't see the directors of the company setting policies that increase "profits" so that they can give them back to the very same customers as dividends.

Underdog, the Rigsbys gave up a good paying job that they were probably very comfortable with. The Missouri Lawyers are probably working on a contingency fee basis and have to put out a ton of money here. All we know about is what Scruggs did with these sisters' inside status. This qui tam is US v. State Farm and they get nothing if it doesn't pan out. They have lost their jobs and have no income. There was never any more money than what they were making compared to their salaries at State Farm +/or Renfroe.

Belle,

Forgive me for saying so (because I like a good counterpoint, even if off-base), but you are a mouthpiece for Jim and Courtney. IMO, you are part of the AG's PR efforts. The problem is that Mr. Hood has stated that he does not want anyone affiliated with his office to speak to bloggers.

Are you not violating Mr. Hood's request?

Ironic

Riskprof:

At the risk of further stirring up Belle, do mutuals really behave differently from stock companies? Has there ever been any evidence of that, other than maybe among the little, specialized ones that are truly close to their customers?

If anything, the governance structure of mutuals might make their management more isolated (and therefore risk-tolerant or aggressive) than those of stock companies, I would think.

Belle,

Your copy and paste skills are among the greatest I have ever seen.

Let's see, what did the Rigsby sisters have to earn. Let's say, $150,000 as consultants/expert witnesses or even protector of the little guy. I don't know how much they were making as claims adjuster, but I find it hard to believe they were making more than that. Of course, you can try and argue it was their virtue that drove them to such noble actions. Forsaking all others, and their comfortable jobs. I am sure they never thought about the jackpot if they won the case. I mean, the books, movie, even the musical David is planning. No, I think it was their virtue that drove them.

State Farm has made mistakes, in fact I can't think of a single insurance company who has not. The fact that they lose a case and have punitive damages thrown at them does not mean they were guilty. Juries get it wrong all the time. A jury of your peers? Give me a break. Since when did an insurance company ever get this?

Belle, please name these NUMEROUS times State Farm has been found guilty. You've named 2 and they are spread out over time. Hardly numerous or a pattern. You are convinced State Farm is guilty because it is State Farm and nothing else. You ignore facts that show the Rigsby sisters may have acted illegally and without any noble purpose. You are just as guilty of bias as you accuse others of.

Ironic, you are basing your comment on fallacy: I am NOT part of "AG's PR efforts" so, therefore, I am not "violating Mr. Hood's request". It is absolutely incorrect to say otherwise. I could say, well, in my opinion you work for the insurance industry, but it doesn't matter what my opinion is because either you do or you don't. I don't work for Mr. Hood or anyone that works for him. I haven't spoken with him (other than to introduce myself to him during a break at the hearing here in Natchez) and have not spoken with anyone who works for him, ever. Is that clear enough?

Belle,

It's been said many times by the folks in Mississippi that "outsiders" who weren't there to see the devastation just don't know how the insurance companies operated. This was an attempt to devalue any argument by "outsiders" as being at the least uninformed, and at the worst misinformed.

Now you mention cases from Oklahoma and Florida.

I'm in Oklahoma, and you might want to do some more research on the case you mention from here.

As Underdog already stated above the verdict was vacated on appeal, and the case involved damages over brick veneer which the policyholder claimed was damaged/separated from the home itself, whilst the windows of the house were not even broken. There was a legitimate argument over whether or not the damage to the brick veneer was due to earth movement/settling over time or due to the tornadic winds.

Is State Farm or any insurance company perfect? No. Have mistakes been made? Undoubtedly. Is this evidence of a systematic effort to defraud policyholders in order to maximize profits for a mutual company which returns it's profits to the same policyholders? No

I am not an expert on all mutuals, but I have seen an extremely strong motivation to protect policyholders which I have not seen in stock companies. I am talking about verbal and written statements-not necessarily actions. However, the literature used to think that mutuals were less efficient than stock companies because of the isolation of the management. However, over time we did not see real differences in performance as the mutuals have to compete against stock companies. That is the reason I asked the rhetorical question. Mutuals compete and if the "shareholders" of mutuals are the residual claimants who benefit from the efficiency of mutuals -then how does the company have an incentive to strategically rip off its customers by not paying legitimate claims? I could see this happening if individual managers had bonuses tied to claims performance, but that type of compensation system causes many problems and it is the kind of thing most good companies know how to avoid.

BS and others,
One thing that has bothered me through this whole mess is the statement that they gave up a $150K a year job to go to work for SKG for 150K a year, and a lot of people question that they could have possible made that kind of money before leaving Renfroe. I do not really doubt that they may have made that much money with Renfroe, but I've never seen any proof of it by way of the tax returns that were requested in discovery. That being said, let's just assume that they did make 150K at Renfroe. Let's also put some things into perspective here. I have heard that these catastrophe adjusters work at least 12 hrs a day, 7 days a week when they are paid on "day rate" when they hit the storm. Being an inside claim reviewer, they would have been paid on this basis vs a per file basis. A storm the size of Katrina would have demanded those type hrs for at least 6 months and maybe as long as a year. After a period of time they may reduce it to half days Sundays, or no Sundays. If you compute out the salary of 150K by the hours worked, you are looking at a possible wage of $34.34 per hr. Keep in mind that initially they may have been required to put in more then the 12 hr days. Now when they went to work for Dickie, they get the same 150K per year, but they even admit that they really didn't have any job duties they could describe when under oath, and even said that during one month they thought they only worked about 5 hrs. I'm not a rocket scientist or anything, but I figure that is roughly $2500 per hour pay for that month. Now would you call the pay and responsibility for that pay "apples for apples".

Most likely not a novel thought, but I've come to believe that the situation never called for a "class action" and the judges see it that way too and are setting things straight, wiping the slate clean and starting over they way things ought to have been. They have plenty of material to work with.

It becomes clear that Dickie Scruggs started licking his chops the minute Katrina formed and sought, yet again, to deploy his patented litigation approach as Katrina reached land, so flawed from the start, created a train wreck of monumental proportions - to the determent of everyone.

I'd wager Bellsouth simply thinks all insurance companies are evil and since State Farm is an insurance company, it is therefore evil. So of COURSE it's guilty - not just in a particular instance but in general. Anything done to hurt it (or rather to expose its evil!), therefore, is fine. Nevermind whether it was illegal or unethical, because if you in a fight with the devil (SNAKEfarm), all is fair.

People on these comments seem to think they know me (NOT), know what I do (NOT), know what I think (NOT). I'd wager they are just as wrong about everything else as they are wrong about ME!

Belle.....say it ain't so... don't tell me my (secret) crush on you is misguided!!!??? Ok, ACTUALLY, if you feel a little bit picked on, it is only because of your propensity to state opinions as facts, to spin recycled (and since disproven) allegations .... the amazing thing about the Truth is that it usually will come out (sealed decisions notwithstanding) and is usually not as exciting as the slobbered gushings made prior to the unveiling of that Truth. C'mon, tell me you don't cry a just a LITTLE bit during Extreme Makeover Home Edition when they "Move That Bus"?

(Or is it "Move That TRAILER"?)

Hmmmm.....

You are one sick dude, OAEGE. What would your Mama think?

My Mama loves me! :) And truthfully, we all love your opinions here too. (While we may not agree, at least we can hear about the issues from many differing angles, including yours and other contributors.)

Belle, you are being judged by your comments. If you can't understand that then you will never get it.

I'm with OAEGE, Belle. I've got a crush on you, too. Promise you'll never leave us.

Of course we don't know everything there is to know about you, BELLESOUTH. All we can go on is the content of your posts here. Based upon those, you appear to be a fairly typical "insurance companies are evil" (or perhaps even "corporations are evil")type. If I'm wrong, hey, it wouldn't be the first time I'd gotten the wrong impression from the written word (particularly on the internet!).