Remember the awful accident the “Saturday Night Live” and “30 Rock” comedian involving Tracy Morgan?  As you might imagine, it led to high-stakes lawsuits by the people injured, but what you might not know is it also led to insurance bad faith litigation between Wal-Mart and its insurance companies.

The accident happened on a highway in New Jersey back in June, 2014.  Morgan was riding in a “limo van” with friends and associates when the van was rear-ended at high speed by a Wal-Mart truck.  Six vehicles and twenty-one people were involved in the accident.  A comedian friend of Morgan’s was killed, and Morgan suffered severe injuries, including being in a coma for a few weeks, a brain injury and a number of broken bones.  The NTSB investigated the accident and ultimately concluded the Wal-Mart truck driver was traveling 20 mph over the speed limit, was seriously fatigued after having driven much more on the day of the accident than was allowed with far too little sleep.  The driver was charged with vehicular homicide and later pled guilty.

Morgan and his deceased friend’s family brought lawsuits against Wal-Mart.  Those suits implicated insurance coverage Wal-Mart had in place with Liberty Mutual and its subsidiary company, Ohio Casualty.  Wal-Mart settled the cases brought against it out of its pocket (the amounts of the settlements are confidential and have not been disclosed, but media reports indicate they may have been in excess of $90 million), then sought to be reimbursed by its insurance companies for the amounts it paid the claimants.  Apparently, Wal-Mart says it put the insurance companies on notice of the settlement negotiations with Morgan and the others, the insurance companies disagreed with the amounts of the settlements, and Wal-Mart went ahead and paid the money itself to settle.

According to media reports, the insurance companies took issue with reimbursing Wal-Mart because they claimed Wal-Mart paid too much money to settle with the claimants.  It appears the insurance companies pointed out that Morgan had been seen on television hosting and making guest appearances on TV shows within a year after the accident, indicating he wasn’t injured as bad as he said.  Morgan stated publicly he thought the settlement was fair.

Wal-Mart and Liberty Mutual/Ohio Casualty sued each other.  Wal-Mart claimed the insurance companies acted in bad faith by not consenting to the settlements and not paying the settlement amounts.  A Wal-Mart spokesman was quoted as saying:

This is no different than any individual who holds an insurance policy, makes a claim for a covered loss, and then is told by the insurance company that despite the existence of coverage, they don’t intend to pay.”

The insurance companies claimed Wal-Mart paid too much to settle the cases in an attempt to force the insurance companies to pay the full freight of the liability, when in fact much of the exposure to Wal-Mart was for punitive damages, which were not covered under Wal-Mart’s policy with the insurance companies.  The insurance companies were seeking to question Morgan and another injured person, presumably to attempt to show they were not injured badly enough to justify the size of the settlements paid by Wal-Mart.

Last month, the lawsuits back and forth between Wal-Mart and the insurance companies were settled and dismissed.  The terms of that settlement are also confidential.

This story goes to show even an entity as big and powerful as Wal-Mart can be the victim of what it believes as unfair treatment by an insurance company.  Wal-Mart’s insurance companies owe it a duty of good faith just like a normal person’s insurance companies do.

 

 

Most of us are well aware of the basic provisions of our automobile insurance policies.  For example, we know that if we back into something in a parking lot and damage our bumper, insurance will fix it.  We also know that if we have an accident that’s our fault and cause damage to someone else, or insurance covers it.  What most people are not as familiar with is what insurance adjusters and lawyers refer to as “Med Pay” coverage.  Not everyone has elected to pay for this coverage, but if Med Pay exists on your policy it can be a very important and beneficial coverage. You need to know if you have “Med Pay” when you are involved in an accident.

A typical Med Pay provision in a standard auto policy generally provides the insurance company will pay (subject to some exclusions, of course) reasonable medical expenses for necessary medical services because of bodily injury sustained by an insured person, including family members and others in your car.  This can be a very valuable coverage, depending on the policyholder’s circumstances following an accident.

While this coverage may seem fairly straightforward, bad faith litigation may arise from it.  Insurance companies are only obligated to pay “reasonable” and “necessary” medical bills under the Med Pay provision of the policy.  The questions of what medical treatment is “necessary” and what medical bills are “reasonable” can lead to disputes between insurance companies and policyholders.  After an accident, a policyholder will often receive treatment from his doctors and incur medical bills as a result and make a claim under his “Med Pay” coverage, only to find his insurance company claims the treatment and/or bills are not “reasonable and necessary.”

As in other claim situations, the insurance company has a duty of good faith in handling Med Pay claims.  So, the insurance company has to have a good faith basis for denying payment of Med Pay benefits.  The insurance company has to investigate fully and fairly and evaluate the evidence even-handedly.  Unfortunately, some insurance companies have attempted to deny and/or reduce payments under the Med Pay coverage by utilizing doctors and/or nurses (who often market themselves as cost savers to the industry) to evaluate the “reasonableness” and “necessity” of their policyholders’ Med Pay claims.  When done inappropriately, this practice amounts to an effort to create the appearance of a “legitimate dispute” to avoid bad faith liability.  If bad faith litigation results in a situation like this, the focus is often on the qualifications of the doctors/nurses hired by the insurance company, the quality of their analysis and the evidence of the insurance company’s cost-saving motive in sending claims to such doctors.

Insurance companies are entitled to analyze claims closely, including using outside experts if needed, but they are not entitled to manufacture disputes using biased experts in an effort to save money they otherwise owe their policyholders.  The way some insurance companies deal with Med Pay claims crosses this line.

Uninsured/Underinsured motorist or “UM” coverage is one of the most important coverages a person can buy.  State law requires all drivers to carry liability insurance, which is there to pay for property damage and personal injuries caused by the policyholder.  However, plenty of drivers violate that law every day and operate vehicles on the roads all over our state without carrying liability insurance at all.   Also, many people carry only the state-mandated minimum amount of liability coverage of $25,000.00.  If you are unfortunate enough to be involved in an accident caused by an uninsured driver or one who does not have enough liability coverage to compensate you for all your damages, UM coverage becomes critically important.

UM coverage is not mandatory under Oklahoma law.  You can choose to buy it or choose to reject it.  Your insurance company is required by law to offer UM coverage to you in the same amount as your liability coverage.  If you choose not to buy UM or to buy it in an amount less than your liability coverage, you must do so in writing on a statutory form your insurance agent provides you to sign.

Here is an example of how UM coverage might work in a common situation.  A UM policyholder is involved in an accident with a driver who has $25,000 in liability limits.  The UM policyholder is seriously injured, and ends up with medical bills of $50,000 from the accident.  The UM policy has $100,000 in policy benefits available to the policyholder.  The policyholder makes a claim to the UM carrier.  The UM carrier then has to fully and fairly investigate and even-handedly evaluate the claim.  To do so, the UM carrier must determine who was at fault for the accident (UM benefits are only available to the policyholder if the accident was the uninsured motorist’s fault) and the amount of the policyholder’s damages (like medical bills, lost wages, physical and mental pain and suffering, etc.)  If the UM carrier determines the accident was the policyholder’s fault or that the policyholder’s damages do not exceed the $25,000 in liability limits of the other driver, they will deny the claim.

There has been a great deal of bad faith litigation involving UM claims in Oklahoma.  The allegations by policyholders have ranged from unreasonable delay, to improper investigation, to under-evaluation of the policyholder’s damages, to reliance by the insurance company on biased experts, to improper policy langauge interpretation and so on.  A UM claim can be complicated (the adjuster must determine who caused the accident and the nature/extent of the policyholder’s damages – both questions can be nuanced and difficult) and there is a great deal of room for disagreement between the insurer and the policyholder.  An insurance company must take its duty of good faith very seriously and be proactive in its handling of a UM claim, or allegations of bad faith by the policyholder may very well follow.