When something goes wrong, your insurance company should be there to help you pick up the pieces and provide the services that you pay them for. But where do you turn when the insurance company doesn’t do that?
As it turns out, insurance companies in Oregon have a huge loophole to skirt around responsibility for their products and services. Oregon’s Unlawful Trade Practices Act aims to protect consumers from shady business practices and gives people the legal right to pursue monetary damages when businesses engage in certain unfair practices. However, the insurance companies have the ultimate loophole: their lobbyists got the insurance industry to be completely exempt from this consumer protection law.
A Partial Fix for the Insurance Industry’s Loophole
In late 2007, a car driver hit a motorcyclist in southern Oregon. The biker wound up with over $68,000 in medical bills, and serious, permanent injuries. The car driver had a $100,000 auto insurance policy, so the motorcyclist offered to settle for the $100,000.
In a strange twist, the car driver’s insurer refused to pay the injured motorcyclist the $100,000, even though the insurance company recognized from the start that the car driver was fully at fault and that the motorcyclist’s losses greatly exceeded that amount. Instead, the insurance company’s lawyers encouraged the car driver to take bankruptcy. The insurance company decided to force the car driver to go through an entire lawsuit and a trial, exposing him to the high likelihood of personal liability because the judgment was expected to be well above his $100,000 policy limit.
As a result of the insurance company’s decisions, the motorcyclist won a $330,000 judgment, leaving the car driver personally on the hook for $230,000 balance due, plus interest. Things looked bad for the car driver. The motorcyclist threatened to take the car driver’s personal assets at a time in life when the driver had been looking forward to retirement.
When it looked as if all hope was lost for the driver, he was referred to our law firm. While the Unlawful Trade Practices Act does not apply to the insurance industry, an insurance policy is a contract, and every contract has an implied covenant of good faith and fair dealing. We asked the insurance company and its lawyers to make good on that covenant, and when they did not, we brought a lawsuit on behalf of the car driver.
During the case, it became clear that the insurance company had put its own interests above those of its insured person, in violation of fundamental rules for insurance companies. The insurance company fought all of the way, taking the case to trial. When the jury heard the full facts over two weeks of trial, it hit the insurance company with a $17.5 million verdict.
Most of that amount was for punitive damages. Under current federal law trial courts are not allowed to punish companies that much in this kind of a case, so the trial court later reduced the punitive damages to $2,679,443.80.
Even so, with help from an Oregon jury, we proved that insurance companies are not exempt from the responsibility to provide the services that policyholders pay for, and to treat their policyholders fairly.