The momentum created by the Cunningham v. Aetna case in Oklahoma has contributed to a national trend of lawsuits being filed against health insurers who deny proton therapy to their policyholders suffering from cancer.  Readers of this blog may will recall the Cunningham vs. Aetna case in Oklahoma County, Oklahoma in November, 2018. In that case, the jury found Aetna wrongfully denied proton therapy to treat the cancer of its policyholder, Orrana Cunningham. Mrs. Cunningham’s tumor was immediately adjacent to her brain stem and other critical structures in her head. You can read the full story of her case here.

The result was a $25.5 million verdict in favor of the Cunningham family. This appears to have been the first large verdict against the health insurance industry regarding a proton denial anywhere in the country.  The verdict is now on appeal. Whether the verdict is upheld on appeal or not, it appears to have had an effect on the way proton therapy is being viewed by patients, treating physicians and insurance companies around the country. Since the Cunningham verdict, multiple class actions have been filed on behalf of classes of proton patients whose claims have been denied by their health insurance companies. Other insurance bad faith cases involving proton therapy for individual patients have also been filed.

Because of the Cunningham case and the national publicity it received, awareness of proton denials has certainly been raised.  More and more patients who need proton therapy have become aware that when an insurance company denies them that therapy, they may have legal recourse to challenge the insurance company and maybe, under the right circumstances, sue the insurance company for insurance bad faith.

Proton therapy is a high tech cancer treatment prescribed by radiation oncologist for patients whose tumors are found in difficult locations in their bodies, specifically when the patient’s tumor is adjacent to a healthy “critical structure” of the body. For example, according to highly trained and experienced radiation oncologists at places like MD Anderson and the Mayo Clinic, proton therapy is often the appropriate treatment for a tumor located adjacent to critical structures of a patient’s body like the brain, the brainstem, the heart, the esophagus, the lungs, etc.

There are numerous reasons for this, the most important of which is that proton therapy can be delivered/targeted much more precisely than alternative forms of radiation therapy like photon radiation.  There are very specific scientific reasons this is true, and they can be explained in a compelling way by a radiation oncologist who is familiar with the difference between proton therapy and radiation delivered by photon (referred to as “intensity modulated radiation therapy” or “IMRT”.

Proton therapy Has been used to treat cancer in human beings since the 1950s and has been FDA approved since the 1980s. It has been around as long as IMRT. However, as technology has advanced and more people have been successfully treated with proton therapy over the years, it has become much more widely available to the general public. This is because there have been more proton centers offering the therapy opened around the country over the last couple of decades. Where there used to be only a handful of proton centers, now there are in excess of 30 just in the United States.

Access to proton therapy gives physicians and patients alike a full range of treatment options for a patient‘s cancer.  Any cancer patient or cancer doctor would tell you more options for treatment or better than fewer.

Generally speaking (but not always), proton therapy is more expensive than photon therapy because the equipment/machinery needed to generate a proton beam (the delivery mechanism for protons to cancer cells in the body) is more expensive to build and maintain then the equipment/machinery needed to generate photons for IMRT treatment. Therefore, because protons are generally more expensive than photons, our friends in the health insurance industry have decided to wage war against the proton industry in an apparent effort to curtail the continued development of proton technology. The only real reason the insurance industry has to deny patients access to proton therapy is to attempt to increase its profits at the expense of its policyholders who have the misfortune of being diagnosed with cancer.

I for one am very hopeful that our work in the Cunningham case and other proton cases around the country will continue to have a positive impact for cancer patients in need of this life-saving treatment. Let’s hope that one day the insurance industry will stop putting its profits ahead of patients who need proton therapy. My guess is they won’t do so without a fight.  Until then, my law firm and the lawyers I collaborate with around the country will continue to fight for patient rights.  Only by holding the insurance industry accountable when they do wrong can we hope to really make change.

You can find more information about my firm and what we’re doing at:  www.dougterrylaw.com.

As we frequently discuss on this blog, insurance companies owe a duty of good faith and fair dealing to their policyholders. Unfortunately, insurers regularly violate this important duty in a myriad of ways. This is not uncommon. However, it is very uncommon for an insurance company’s actions to be called out as forcefully as they were in an April 29, 2019 order issued by United States District Judge Robert N. Scola, Jr. in Miami, Florida.

Judge Scola was assigned to preside over a class action brought against United Healthcare. In that case, it is alleged that United wrongfully denied coverage for proton therapy to its cancer patient insureds. Judge Scola felt the need to recuse himself from the case because of personal experiences in his own life, and he entered a written order explaining those experiences.   Judge Scola wrote that he had been diagnosed with prostate cancer in early 2017, and consulted with top medical experts around the country. According to Judge Scola, those experts told him that if he opted for radiation treatment for his cancer, proton therapy was by far the wiser course of action. Judge Scola also noted in his order that a very close friend of his was diagnosed with cancer and that friend’s physicians at MD Anderson in Houston recommended proton therapy. Judge Scola’s friend, who was insured by United, had coverage denied for the proton therapy, but luckily had the money to pay $150,000 for the therapy out of pocket. Only when Judge Scola’s friend threatened to sue United did the company agree to reimburse the money.

Judge Scola then stated what is obvious to cancer patients seeking proton therapy and radiation oncologists who utilize proton therapy to treat their patients on a regular basis. Judge Scola wrote:

It is undisputed among legitimate medical experts that proton radiation therapy is not experimental and causes much less collateral damage than traditional radiation. To deny a patient this treatment, if it is available, is immoral and barbaric.

In my opinion, the tide is turning on the health insurance industry as it relates to proton beam therapy. Readers of this blog will recall the case of Cunningham v. Aetna, which I tried in Oklahoma City in late 2018. That case involved Aetna’s denial of proton therapy to Oranna Cunningham, who was suffering from a nasopharyngeal tumor located within 2 mm of her brainstem. Like Judge Scola’s friend, Oranna was being treated at MD Anderson in Houston, and her doctors there recommended proton beam therapy as the best way to deliver a curative dose of radiation to the cancer while avoiding radiating critical healthy tissues immediately adjacent to the tumor (like the brain stem). Aetna fought Oranna’s case aggressively for 3 1/2 years before trial. The case was tried for over two weeks and resulted in a verdict of $25.6 million. The jury found proton therapy is not experimental or investigational. They also found Aetna’s conduct in denying proton therapy to Mrs. Cunningham was in bad faith and recklessly disregarded her rights. $10 million of the verdict was for punitive damages, with the jury stating after the trial they thought Aetna’s system was broken and they gave their verdict in hopes that Aetna would fix it.

Since that verdict, other cases around the country have been filed against health insurance companies alleging denial of proton therapy for cancer patients is an act of bad faith. There are at least two class actions (including the one formerly assigned to Judge Scola) seeking to recover damages for classes of people whose proton therapy has been denied. Judge Scola’s unsparing order setting forth his own opinion based on his own experiences has shined a light on this issue. Judge Scola has done a tremendous service to the population of people in our country who have cancers that call for proton therapy to be utilized. Lawyers like me who have experience taking on huge health insurance companies to hold them accountable for this practice have been aware of the tragic consequences of the health insurance industry’s “immoral and barbaric” conduct for years.

Undoubtedly, the insurance industry and its shills in the medical community will cry and moan about Judge Scola’s assessment of the propriety of their practices. They will act as though Judge Scola does not know what he’s talking about and claim their position on proton therapy is somehow justified by a strained reading of the science. But, the industry is in denial.  Like the jury in Cunningham v. Aetna in Oklahoma City, real people will see right through the industry’s rhetoric. The conclusion is inevitable: the insurance industry desperately seeks reasons not to pay for treatments like proton therapy because the industry prioritizes its own profits over the health and welfare of its policyholders.

A high-profile California insurance bad faith lawsuit brought by Gillen Washington and his attorney Scott Glovsky against his health insurance company, Aetna, has now been settled.  In this case, first reported on by CNN, evidence emerged in the form of the Aetna-in house doctor’s testimony that Aetna medical directors make decisions on policyholders’ claims without first reading the medical records submitted to Aetna by policyholders and their doctors.  When the California Department of Insurance learned of this evidence, it launched an investigation into Aetna’s claim handling practices in that state. Several other Departments of Insurance in other states followed suit and began investigating Aetna’s practices as well.

In response, Aetna took an aggressive stance.  It issued a press release in which it alleged a “gross misrepresentation” of the evidence in Mr. Washington’s case.  Aetna pointed to a statement issued by the Aetna in-house doctor and claimed, among other things, his deposition testimony had been taken out of context.  Further, with regard to Mr. Washington’s case, Aetna stated in its press release:  “Our policies always have our members’ best interests in mind.  When those policies are called into question, we will defend them.”

However, as CNN reported last week, Aetna has now settled Mr. Washington’s case, choosing to do so instead of defending its policies when they had been called into question.  Aetna did not offer an explanation as to why it had settled the Washington case, instead saying the settlement was not an admission of liability and Aetna does not comment on settlements.  The CNN story went on to say:

News of the settlement raised eyebrows in the legal community. “In my experience with Aetna, they don’t settle cases easily, despite their public pronouncements in the media,” said Doug Terry, an Oklahoma attorney who won a $25 million verdict against Aetna last fall over a “bad faith” case in which a cancer patient was denied coverage.

Hopefully, health insurance companies have learned from Aetna’s experience in Mr. Washington’s case in California that deciding the health insurance claims of its policyholders without doing the proper inquiry before denying them is a practice to be abolished.  A proper inquiry requires a careful review by well-qualified, well-trained, non-biased personnel of all the pertinent evidence gathered in a complete investigation of the facts.  If health insurance companies are not performing these basic claim-handling functions (in return for their policyholders’ hard-earned premium dollars) they should be held accountable, either by regulators or in court.

United Healthcare (“UHC”), the largest health insurance company in America, was found by the California Department of Insurance to have committed over 900,000 violations of California laws and regulations.  As a result, the California Insurance Commissioner imposed $173 million in fines.  UHC challenged the fines in court, and in early January the California Supreme Court upheld $91 million of those fines.  The remaining $82 million in fines are still pending on appeal.

According to a CNN story the California Insurance Commissioner who began the investigation was quoted as saying: “ PacifiCare [which was bought by UHC] sought to weaken consumer protections to allow insurers to escape liability when they intentionally deny expensive but life-preserving medical care.  This is an important victory for California consumers and consumers across the country.”  UHC engaged in a long legal battle with the California Department of Insurance, but the commissioner ultimately imposed the fines, which the Supreme Court recently upheld.

There are very few ways the health insurance industry can be held accountable for wrongdoing.  One of them is when an insurance commissioner is tenacious enough to take on the industry.  A fine like the one in California should very well get the attention of UHC, and in theory it would cause UHC to change its ways.  We can all hope.

The other way the health insurance industry can be held accountable is in a lawsuit filed by a policyholder with the guts and determination to fight a difficult battle, represented by lawyers who can go the distance.  While the California fines against UHC are encouraging, they amount to only about $200 per violation.  An insurance bad faith case can result in substantial amounts of money for each policyholder who brings such a case, and if the policyholder wins, he or she get compensated for what the insurance company put them through.  In some cases, a jury might even award large punitive damages to send a message to the insurance company to change its ways.

Aggressive investigation and enforcement by insurance commissioners and departments, along with bad faith lawsuits, are the only meaningful way for regular people to stand up to the power of the multi billion-dollar insurance industry.

I am happy to announce we obtained a $25.6 million verdict for our clients Ron and Orrana Cunningham this week in Judge Lisa Davis’ court in Oklahoma County.  The case is Cunningham v. Aetna, CJ-2015-2826.  It is a non-ERISA health insurance bad faith case.  I apologize for the length of this post, but I think this is a story worth telling.  I tried this case for 12 days with my former law partners, Justin Meek and Tom Paruolo.  They were awesome.  You can get in a fox hole with those two and know they’ll fight with you to the bitter end.

Our client is Ron Cunningham, a retired OKC firefighter.  He is the toughest, most tenacious client you could ever ask for.  He has been battling for justice in this case for 3 ½ years.  The case has been on file since May, 2015, and it has been fought by Aetna tooth and nail at every turn.

Ron’s wife Orrana (a really amazing person) was diagnosed with stage IV nasopharyngeal cancer in November, 2014 when she was only 53 years old.  This is Orrana.

Orrana is described by her loved ones as an extremely soft-hearted, caring person who always had a bright smile and a helping hand for those in need.  Ron says he never knew anyone who met Orrana who wasn’t immediately taken by her warm nature.  She brightened everything she touched.

She was also a hard-working person who loved caring for the horses and cattle she and Ron kept on their beloved farm near Meeker, Oklahoma.  Orrana was proud of the fact that she was an excellent fisherman, and invariably caught the most and biggest fish on every outing.

This diagnosis came a couple of months after Ron and Orrana had finished building a house (almost entirely with their own two hands) on a farm near Meeker in eastern Oklahoma County.  It was Orrana’s dream house.  She hung sheetrock and set tile and stained the logs for the log cabin exterior.  She and Ron worked on the house for three years.  Orrana took care of the farm and worked on the house full time, while Ron would go to work as a firefighter then join Orrana to work on the house in the evenings, on weekends, etc.  It took them three years to build.  They built the house with a west-facing front porch so they could sit together and watch the sunset.

When Orrana was diagnosed, the Cunninghams sought medical advice here in OKC and were told, due to the difficulty of her case, they should go to MD Anderson.  They immediately got down to Houston.

MD Anderson is an incredible place.  I had never been there before this case (and hopefully will never be there as a patient or family member of one), but the level of expertise and professionalism is mind-boggling.  MD Anderson is the kind of place where you can find an entire group of radiation oncologists who specialize in head and neck cancers.  They are also, as you might imagine, on the cutting edge technologically.  The MD Anderson doctors we met and deposed from there were incredibly compelling witnesses.  Their testimony was powerful to the jury.

MD Anderson evaluated Orrana and determined she needed proton therapy.  Her tumor was at the base of her skull, adjacent to multiple “critical structures” in her head.  These included her brain, her optic nerves and her brain stem.  For example, the tumor was between 2 mm and 3 mm from the brain stem.  The advantage of proton therapy over traditional radiation therapy is that it can be delivered with the most precision of any kind of radiation, thus sparing radiation dose to the adjacent critical structures.  When those critical structures are the brain, the optic nerves and the brain stem (among others) it is critically important to deliver the radiation as precisely as possible.  The MD Anderson doctors told Ron and Orrana they could kill the tumor with both protons and traditional radiation, but proton therapy would increase the chances that she would be cured without devastating side effects.  Those side effects included (among others) blindness, loss of memory, loss of the sense of taste, and potentially death.  In order to kill the tumor, the doctors had to deliver a high enough radiation dose that the same dose delivered to the brain stem (2-3mm away) could kill her.

Obviously, the Cunninghams wanted proton therapy.  MD Anderson submitted a request for coverage to Aetna on their behalf.  The evidence at trial showed three different Aetna nurses recommended the claim be denied because proton therapy is “experimental or investigational,” and three different Aetna in-house “medical directors” denied the claim because proton therapy is “experimental or investigational.”  One of the Aetna medical directors did a telephonic “peer to peer” call with one of the MD Anderson radiation oncologists.  The evidence was this Aetna doctor was an internal medicine/family practice doctor before going in-house 25 years ago, and had never treated a single patient for anything since.  The evidence was that during the “peer to peer” phone call, this Aetna doctor told the MD Anderson doctor (according to the MD Anderson doctor’s testimony, which the Aetna doctor did not refute because he couldn’t remember the call) that he knew the MD Anderson doctor was right, but he had to deny the claim anyway.  The evidence was the other two doctors who denied the appeals of the initial denial were a general surgeon and a hematologist/oncologist, neither of whom have ever treated a single patient with radiation of any kind.

As it turned out, the evidence showed the Aetna doctors (in addition to being medically unqualified to make the decision on this claim), had never heard of the duty of good faith, had never received any training on the obligations owed by Aetna to its insureds under Oklahoma law, were sorely overworked (one was loudly complaining in her personnel file about working 16-hour days and deciding 80+ claims per day) and were receiving sizable bonuses each year, based in part on the profit of Aetna.  Each of the medical directors spent about 30-45 minutes reviewing the claim (including a 150+ page appeal package sent to them by MD Anderson).  At trial, each medical director claimed to have read everything in the file in that amount of time.  Apparently, the jurors did not believe them on this.  In contrast, each of the medical directors (who testified live in our case in chief) testified they had spent days and days preparing for their trial testimony.  We presented an insurance industry expert, Stephen Prater, to testify regarding his opinion that Aetna’s conduct in this case was egregious and an extreme deviation from industry standard practices.

Also, the evidence at trial was that none of the medical directors even read the insurance contract before denying the claim.  Apparently, they instead relied on Aetna’s “Clinical Policy Bulletin” or “CPB” as the basis of their denial, which is not a part of the insurance contract Aetna sold the Cunninghams.  Aetna is very proud of the CPB, which purports to set forth the state of the science on proton therapy.  We showed the jury through a radiation oncology/proton expert, Dr. Andrew Chang, (who also did an incredible job explaining to the jury what proton therapy is and why it was the thing Orrana needed) that the CPB is outdated, skewed and cherry-picked in the way it refers to the medical literature.  In any event, at trial, the Home Office Aetna doctor in charge of writing the CPB’s had to admit the CPB’s are not designed to decide claims, but only to serve as a resource for the Aetna medical directors if they need it.  The medical directors are supposed to decide these claims on the basis of their own expertise and judgment.  This, of course, puts the Aetna medical directors’ expertise and judgment squarely at issue.

After the denials, Orrana was in a horrible position.  She needed this life-saving treatment for her life-threatening condition.  The repeated denials had taken away Orrana’s hope of receiving the treatment her doctors said would cure her cancer and minimize her side effects.  At one point, she told Ron:  “Maybe this wasn’t meant to be.  Let’s just go home.”  Ron was willing to do whatever it took to get his wife the best care available.  Ron told MD Anderson money was no object, and learned the treatment would cost $92,082.19.  He went right straight to his bank in Oklahoma and borrowed the money against the dream house he and Orrana had built.  He took a cashier’s check to MD Anderson and paid cash on the barrel head up front for the full treatment.  He never hesitated.  He loved Orrana unconditionally.  Orrana felt horrible about the fact her illness was causing this financial burden, but Ron wouldn’t hear of it.

Orrana got the treatment (which is tough to go through – 30+ treatment days spread out over about 6 weeks in Houston) and it appeared to be working.  Orrana hated tight spaces, so any time she was getting a scan or MRI, Ron was by her side, rubbing her feet and hands.  Orrana’s sister Pam testified at the trial that it was incredible how caring and attentive Ron was to Orrana.  Pam said Ron never left her side.  Ron was a cancer survivor himself.  He testified at trial that Orrana never left his side when he had cancer, and he wasn’t about to leave her side when she needed him.

Orrana was released to go home, and she got to “bang the gong” at MD Anderson, symbolizing the end of her treatment.  The evidence was the financial stress of the whole situation (in addition to the fact she was battling cancer) weighed on her heavily.  When she got home, she developed an outbreak of herpetic encephalitis, her brain swelled uncontrollably causing her brain stem to herniate and she died.  Ron filed his lawsuit shortly thereafter.  He and Orrana had talked about it and she wanted him to stand up for her and for himself against Aetna.  And he sure has.

After 12 days of trial, the jury found:

  1.  Aetna breached its insurance contract with the Cunninghams, effectively meaning they found there was coverage under the Aetna policy for proton therapy for Mrs. Cunningham’s nasopharyngeal tumor. They awarded the Cunninghams the $92,082.19 they paid out of pocket for proton therapy. We believe this finding could be very important in the course of the ongoing effort by the insurance industry to restrict access by patients to protons.  We hope so.  This was one of Ron’s major motivations in pursuing the case.  In effect the jury determined the experimental and investigational exclusion in the policy does not apply to exclude proton therapy in this situation.
  2.  Aetna acted in reckless disregard of the duty of good faith and fair dealing it owed the Cunninghams in connection with the way it investigated and evaluated their request for coverage for proton therapy. This allegation focused on the manner in which the Aetna nurses and medical directors involved in the claim did their work. We offered evidence and argument in court that the Aetna claim handling system is designed to utilize unqualified, untrained, overworked and biased personnel to consider claims like this. The jury agreed.

The jury awarded compensatory damages for the emotional distress caused by Aetna’s repeated denials. They awarded Mr. Cunningham $500,000.00 individually. Then they awarded Mrs. Cunningham’s estate $15,000,000.00.

We then proceeded to a punitive damage phase of the trial. We argued to the jury that to send Aetna away without punishing them for what the jury had already found was reckless conduct would not be a just result. The jury agreed and awarded another $10,000,000.00  in punitive damages.  This brought the total verdict to $25,592,089.19.

We anticipate Aetna will likely appeal the jury’s verdict.  Ron says he is prepared to continue his fight for Orrana as long as it takes.  He is gratified to know the jury saw what Aetna did here the way he does.  Ron says his goal has always been to bring Aetna’s conduct into the public light in hopes Aetna will change the way it does things in the future.  He says he does not want what he and Orrana went through to happen to anyone else.

Click here for a link to KFOR-TV’s coverage of the verdict.

Click here for a link to the Daily Oklahoman story from Nolan Clay.

UPDATE:  The story of Orrana’s case has now garnered a lot of national news attention, including a detailed story by Wayne Drash on CNN.com.  Orrana’s story, originally reported very well by Nolan Clay of the Daily Oklahoman, was picked up by the Associated Press and has run in newspapers across the country, including the New York Times.  It has also gotten attention from CBS, ABC, Fox, Law360, National Insurance Journal and many, many other outlets.  To see more, please visit www.DougTerryLaw.com.

Insurance adjusters often don’t know how to properly interpret the language of the very insurance policies their companies sell their policyholders.  My experience tells me adjusters often read the insurance policy looking for any arguable as (even outlandish) way to deny coverage.  They take language out of context, misapply language to the facts of the claim and generally look harder for reasons to deny than for reasons to pay.  This is exactly the opposite of what the duty of good faith requires them to do – they should be looking harder for reasons to pay than for reasons to deny.

This phenomenon takes on many, many forms.  But one of the most common examples of the problem is when an adjuster makes a knee-jerk decision on coverage without knowing all of the facts of the claim that are required to make a fair decision about whether the claim is covered.  Adjusters too often don’t seem to fully grasp the concept that the duty of good faith requires them to conduct a full, fair and timely investigation of the coverage issues before denying coverage.

An insurance policy cannot be fairly interpreted in a vacuum.  A policy cannot be fairly interpreted based solely on the language of the policy, without an understanding of the claim facts to which the language of the policy is being applied.  A policy is a contract between the insurance company and the policyholder requiring the insurance company to provide coverage under certain circumstances, and not under others.  Therefore, how can an adjuster know if there is coverage if they don’t fully understand the circumstances of the claim?

The adjuster absolutely must investigate the circumstances before deciding to deny coverage.  Instead, the coverage “investigation” conducted by adjusters often consists of nothing more than a cursory reading of the policy language, a failure to gather all the pertinent facts of the claim, and a coverage denial lacking any thoughtful analysis.

If you’re like me early in my career, you may be wondering why adjusters do this.  The easy explanation (one that is often true) is that they look for ways to save the company money because that kind of behavior is rewarded by the management of the insurance company.  Denying claims is easier on an adjuster with his or her boss than paying claims.  But, as the years have gone by and I’ve taken more depositions of adjusters than I care to recall, it has become apparent to me that adjusters receive little to no training on how to properly conduct a good faith coverage analysis.  As a result, adjusters often know little about what the duty of good faith requires of them before they take a stab at interpreting difficult policy language and making an uneducated guess about coverage.  When this happens, the insurance company wins and the policyholder loses.  And the duty of good faith is violated.

A recent story in the Guardian reveals the statistics on how CEO pay at the largest US corporations has skyrocketed over the last few decades.  The Guardian story says in 1965, CEO pay was 20 times that of workers.  That would mean if a worker made $30,000.00 per year, the CEO would be making about $600,000.00.  However, today CEO pay has risen to an average of 312 times that of the average worker.  Therefore, if a worker is making $30,000.00, the CEO would be making $9,360,000.00.

The Guardian story gives a couple of specific examples, including the McDonald’s CEO making 3,101 times the average McDonald’s worker and the Wal-Mart CEO making 1,188 times the average Wal-Mart worker.  These numbers are shocking, but it goes further.  The CEO’s of the top 350 companies earn 5.5 times the amount earned by the average earner in the top one-tenth of one percent of earners.

Putting aside the politics of these statistics, it makes one wonder:  have CEO’s gotten this much better since 1965?

I believe this phenomenon is directly relevant to the way in which big companies treat their customers, and this includes the way insurance companies treat their policyholders.  When the people at the top of a company stand to become mega-wealthy if the company is more and more profitable, then those people (who are the ultimate decision makers on company direction and culture) will seek company profits at all costs.

To be sure, insurance companies are in business to make money.  And the insurance industry, in theory, serves an important societal purpose.  But if the insurance industry is nothing more than a profit-at-all costs behemoth, and the industry’s duty of good faith and fair dealing to its policyholders/customers is subjugated to the chase of the almighty dollar, the important societal purpose served by the insurance industry goes unfulfilled.  Insurance company CEO’s are making millions and millions of dollars every year, much of it in profit-based bonuses, stock options, etc.  Are insurance companies keeping their mission of providing security and peace of mind to their policyholders at the top of their priority lists?

 

When an insurance company receives a claim from its policyholder, the first thing the adjuster does is “check coverage.”  This means they verify the policy is in force by making sure the premiums have been paid and the policy period is in effect.  Then, the adjuster looks at the facts of the claim the policyholder is presenting to determine if the insurance policy language provides coverage for the claim.

This may sound simple (and it often is) but sometimes whether the facts of the claim are covered by the policy is not a black and white question.  Often, there are shades of gray on whether coverage exists.  Anyone who has read an insurance policy (or even part of one) knows they can be extremely hard to understand.  It might be surprising, but this is true of lawyers, even lawyers who practice insurance law.  There is a reason for this.  Most insurance policies are written in such a way that they are almost impossible to understand.

Over the years, I have come to believe that insurance companies attempt to write insurance policies so that only they know what they really mean.  If the language of the policy is incomprehensible and the policyholder has no idea what it really says, then the adjuster has the power to tell the policyholder what is covered and what isn’t without the policyholder being able to dispute it.  Way too often, policyholders hear an adjuster say “there’s no coverage for your claim,” throw up their hands and walk away.  They feel like they can’t take on the big, bad insurance company and win.  This is not true.

In reality, most insurance adjusters have very little training or ability to fairly read and interpret policy language, even if they think they do.  Insurance adjusters have a tendency to look for reasons there is not coverage, as opposed to broadly interpreting the policy language to attempt to find coverage.  Also, adjusters often overlook the fact that the duty of good faith requires them to fully, fairly and timely investigate and even-handedly evaluate coverage questions, just like liability or damage issues.  As a result, coverage denials are often based on superficial, knee-jerk readings of policy language by untrained or unknowledgeable adjusters.

Policyholders who are told there is “no coverage” for their claim should demand a written, detailed explanation of the adjuster’s position, including reference to specific policy provisions the adjuster says preclude coverage.  Then, if the policyholder has questions, they should contact an experienced lawyer to help them understand their rights.

There are many people working as claims professionals in the insurance business who strive to do the right thing by the company’s policyholders. When I run into one of them, it is like a breath of fresh air. These folks seem to genuinely care about policyholders and work hard to try to find ways to pay claims. They do not relish denying a policyholder’s claim and do not feel as though they have “won” somehow by denying a claim.

Unfortunately, there are too many claims professionals who seem to fall in the opposite camp.  Some claim professionals appear to take some sort of perverse joy from saying “no” to their policyholders. I don’t know what motivates these folks. Perhaps they have been indoctrinated by a culture that promotes this kind of behavior in their company’s claim department. If being overly tough on claimants is rewarded with praise from supervisors, advancement in the company, or increased pay/bonuses, then a certain segment of a company’s employees will act this way. I have certainly seen this dynamic play out in my experience suing insurance companies.

Sometimes I think the insurance claim business draws people to it whose personalities are geared toward saying “no” instead of “yes.”  Too many of the adjusters, supervisors and managers in insurance company claim departments I have met in depositions and trials over the last 25 years just seem to be constitutionally incapable of open-minded, evenhanded, caring attitudes toward policyholders who make claims. Too many of these folks fall too easily into a mindset in which they assume a policyholder making a claim is being dishonest and trying to get “something for nothing” by seeking compensation for their loss.

Either way, whether by company culture, personality type or a combination of the two, when claim handlers approach claims with a “say no first, ask questions later” attitude it often leads to a policyholder who feels aggrieved and ends up seeking legal advice. When a skilled lawyer reviews a claim handled by an adjuster looking to “beat down” a policyholder (oftentimes by delay, needless obstacles placed in the way of a claim settlement or just plain indifference) the bad faith litigation that results ends up costing the company way more money than a fair settlement would have in the first place.

Insurance companies often hire an “expert”  as part of their investigation of a policyholder’s claim.  The expert can be a doctor, an engineer, an accident reconstructionist, an accountant, etc. , depending on the type of claim and the issue being investigated.  Insurance companies and their lawyers love nothing better than to claim that because they hired and relied on an expert before denying the claim, they cannot be in bad faith.  They use the old “legitimate dispute” defense discussed in earlier posts on this blog.  In effect they argue:  “How can we have been in bad faith when we solicited the opinion of an expert in the field, and relied on that opinion?”

Most folks’ common sense tells them there are real experts in a field and then there are “experts” willing to sell dishonest “opinions” for money.  This is a sad commentary on the state of play in litigation, but it’s as true as anything can be about our court system.  Ask any lawyer and they’ll tell you this is true.  So how does this play out in bad faith cases?

Here’s an example:  Mrs. Jones, a policyholder of ABC Insurance Co., is involved in a car wreck with an uninsured driver.  Mrs. Jones makes an uninsured motorist (“UM”) insurance claim under the ABC policy, and submits a report from her treating neurosurgeon showing the policyholder needs a neck surgery as a result of her injuries in the accident.  Of course, the cost of such a surgery is high and if the need for surgery was caused by the accident, then ABC will have to pay a lot more to resolve the claim than if it isn’t.  The ABC insurance adjuster knows this very well, so he decides to try to disprove Mrs. Jones needs a surgery at all, or if she does need a surgery, it wasn’t caused by the car wreck.

ABC has trained its adjusters to demand policyholders undergo an “Independent Medical Examination” or IME when appropriate.  Most auto insurance policies require the policyholder to submit to an exam by a doctor of the insurance company’s choosing if the company asks, so the policyholder is obligated to do so or risk being paid nothing for her claim.  The idea is that the company should be able to verify whether the alleged injuries are real, whether they were caused by the accident, and what the proper treatment for them would be.  This is not a crazy idea, of course, because an insurance company ought to be able to conduct a thorough investigation of a claim before deciding to pay it or not.

The problem comes in the execution.  Many insurance companies have conveniently created a list of “approved” doctors to perform IME’s on their policyholders and given that “approved doctor list” to their policyholders.  So, in our example above, ABC’s adjuster refers to that list and demands that Mrs. Jones submit to an examination by a Dr. Payne, whose name was on the list.  Of course, the adjuster is very familiar with Dr. Payne’s work because the adjuster has sent dozens of policyholders to be examined by him.  The adjuster would also be highly surprised if Dr. Payne said Mrs. Jones needed a surgery at all, and if so that the need for surgery was caused by the accident.  Instead, the adjuster has a real good idea that Dr. Payne is going to say Mrs. Jones had a pre-existing neck problem (don’t we all, by the way) and the need for surgery (if any) is related to that problem, not the car wreck.

Once Dr. Payne has written his report saying just that (oddly, it looks almost identical to all the other reports he has written for ABC with only the names changed), ABC’s adjuster tells Mrs. Jones he’s sorry, but the evidence indicates she doesn’t need a surgery at all and if so it was because of her prior neck problem.  Mrs. Jones tries to tell the ABC adjuster that she trusts her treating doctor more than an insurance-hired doctor, and tells the adjuster she’s never had any symptoms of neck problems before.  ABC says they’re very sorry, but they are relying on Dr. Payne’s report and won’t consider the surgery when evaluating the claim.

Is this a legitimate dispute barring a claim for bad faith?  What if in our example the evidence is that Dr. Payne has done over a hundred IME’s for ABC, and several hundred for other insurance  companies?  And he’s been paid tons of money for his work?  And the percentage of the time he opines the policyholder is actually injured is less than 10%?  And the majority of his income comes from IME’s?

Believe it or not, this very kind of thing goes on regularly in the insurance industry.  Is it a legitimate dispute for the insurance company to use a doctor to perform an IME doctor it knows good and well will always say exactly what the insurance company wants?  Is it good faith to knowingly rely on a biased expert?

I say the answer is no.  Other examples of this kind of conduct by insurance companies will be the subject of later posts.