Insurance, when done properly, serves an important social function: risks are spread among the many, and each individual is protected from risks that he or she otherwise could not personally afford. But insurance, when done improperly, can needlessly expose a policyholder to the very risks of liability that insurance should protect against.
An insurance company puts its policy holder at risk when it:
- Doesn’t act promptly and fairly on communications related to a claim
- Doesn’t perform adequate investigations
- Doesn’t promptly and equitably settle claims
- Puts the company’s interest over that of the policyholder’s
- Exposes its policyholders to unnecessary financial harm or emotional distress
Any lawyers the insurance company hires to defend a policyholder must represent the best interests of the policyholder, not the insurance company.
Insurer’s “Bad Faith” Results in a $17 Million Jury Verdict Against Insurer
Cornel was a GEICO policyholder whose ’“bad faith” claim exposed GEICO’s improper practices. The company even went so far as to encourage Cornel to file for bankruptcy to protect GEICO!
In 2007, Cornel accidentally hit a motorcyclist. The biker wound up with over $68,000 in medical bills, lost income, and serious, permanent injuries. Cornel had a $100,000 auto insurance policy from GEICO, so the motorcyclist offered to settle for the $100,000.
GEICO refused to pay the injured motorcyclist the $100,000, even though it recognized from the start that Cornel was fully at fault and that the motorcyclist’s full losses greatly exceeded that amount.
Motorcyclist Was Forced to Sue Cornel
The motorcyclist’s attorney made multiple offers to GEICO to settle for the $100,000 policy limit. GEICO rejected all those offers without telling Cornel about them. The injured motorcyclist was left with only one choice: to sue Cornel for his losses.
At trial, the motorcyclist won a $330,000 judgment, leaving Cornel personally liable for the remaining $230,000 balance due, plus interest. The motorcyclist was positioned to take Cornel’s family and personal assets including garnishment of Cornel’s wages and bank accounts. Cornel had been looking forward to retirement; now, thanks to his insurer’s mishandling his case, he faced financial ruin.
The insurance company’s lawyers encouraged Cornel to take bankruptcy, which would have harmed his credit for years. GEICO knew if he filed for bankruptcy, the insurance company would be off the hook. GEICO’s attorneys even found a bankruptcy attorney for Cornel. Because of Cornel’s belief in personal responsibility, he eventually decided not to file for bankruptcy.
Trial Against GEICO’S Bad Faith
When an insurance company unreasonably rejects opportunities to settle a case that should be settled within the policy limits, the policyholder may have the right to bring a claim against the insurance company. In 2014, when it looked as if all hope was lost, Cornel was referred to The Corson & Johnson Law Firm.
There were about 20,000 pages of file materials to review before we started Cornel’s case against his insurance company. The documents filled up a large bookcase at our law office. The trial of Cornel’s case required a good number of witnesses and voluminous evidentiary materials offered by both sides.
GEICO fought all the way, forcing Cornel to go through a second trial.
When the jury heard the full facts over two weeks in the courtroom, it assessed a $17.5 million verdict against GEICO. Most of that amount was for punitive damages to deter insurers from similar misconduct in the future.
Under current federal law, juries are not allowed to punish companies that much in this kind of a case, and the punitive damages were reduced by the trial judge to $2,679,443.80. The original verdict would have been enough to catch the attention of GEICO’s management; instead, the reduced amount became more of a slap on the wrist to a $22 billion corporation.
Even so, an Oregon jury showed that insurance companies must treat their policyholders fairly.
Holding Insurance Companies Accountable
Representing an individual against his or her own insurance company can be both satisfying and extremely challenging work. As Cornel’s story above suggests, there are a lot of important facts that must be discovered, organized, and effectively presented in order for the jury to understand what happened, and that what happened was wrong. These cases are more complex and demanding than many other cases, and are vigorously defended. But if we want insurance to work for the average person, these cases are necessary and important to keep insurance companies playing by the rules.