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Why insurance companies don’t have to worry much about going after innocent policyholders who file claims

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* Buzzfeed has a story about how insurance companies are in some cases helping fund police investigations and prosecutions against their policyholders who file claims…

It’s impossible to say how often innocent customers are the victims of false charges, because much of the potential evidence is hidden from public view by the companies themselves. In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an “unwritten policy” within the company to withhold evidence from customers that could help prove their innocence.

Policyholders, meanwhile, often find it difficult and expensive to fight back, leading many to walk away from claims or face pressure to take plea deals for crimes they didn’t commit. And even those individuals who are able to successfully bring lawsuits against insurers are usually obliged to sign confidentiality provisions as part of the terms of any settlement, making it difficult if not impossible for others to find out what happened.

But by reviewing hundreds of court records from around the country, complaints filed with state regulators, and internal company records, and interviewing dozens of former insurance company employees, BuzzFeed News uncovered a system that has ensnared countless innocent people.

In Florida alone, state law enforcement received roughly 14,500 suspected fraud referrals about homeowners and vehicle claims in the past five years — the vast majority of them from insurance companies. Yet authorities determined that in more than 75% of the cases, there was not enough evidence to move forward with a criminal investigation. And regardless of whether fraud accusations turn out to be false, many sit in databases shared among insurers, where they can haunt people if they ever have to file another insurance claim.

These tactics can be applied with impunity, thanks to legislation in all 50 states restricting the ability of customers to sue insurers for wrongly accusing them of fraud — unless the customers can prove the allegations were malicious or made in bad faith.

The legislation was crafted with help from insurers, which worked to get versions of it passed across the country.

But critics say that the way the law has been implemented favors insurance companies’ commercial interests while failing to provide adequate protections for innocent people. [Emphasis added.]

Thoughts?

posted by Rich Miller
Monday, Aug 19, 19 @ 2:26 pm

Comments

Without the ability to sue for damages or harm caused by wrongful accusation the profit motive for throwing everything at customers and seeing what sticks is almost irresistible.

This was an eye opening investigation by Buzzfeed and is a must read to see another example of how a confluence of public-private coziness and big data/technology can run amok with dystopian consequences.

Comment by Bobby Beagle Monday, Aug 19, 19 @ 2:35 pm
=a Farmers manager admitted under oath that there was an “unwritten policy” within the company to withhold evidence from customers that could help prove their innocence.=

Sounds like bad faith to me.

Comment by JoanP Monday, Aug 19, 19 @ 3:20 pm
If you go to the police and falsely state that someone committed a crime against you, and you know it isn’t a crime (you have evidence to the contrary) isn’t that itself a crime. How are insurance companies able to get away with filing false police reports?

Comment by Da Big Bad Wolf Monday, Aug 19, 19 @ 3:22 pm
Was this an ALEC initiative?

Comment by 47th Ward Monday, Aug 19, 19 @ 3:23 pm
The current director of IL dept of insurance, rob muriel, was an attorney and did battle with these companies before he got picked by JB. Perfect time to institute some new regulations, considering several of the biggest insurance companies are based here.

Comment by Lester Holt’s Mustache Monday, Aug 19, 19 @ 4:01 pm
This seems like the classic sensational story where the author finds a few egregious cases and then tries to smear the whole industry with them. 14,500 over a five year period in a state as large as Florida doesn’t seem excessive to me, but to really know, we’d need to know how many claims were filed in Florida during that time period. My guess, though, is that 14,500 is a fraction of 1%.

I also don’t see a major problem with insurance companies and the police working together since they both have access to different types of information. Like any type of law enforcement activity, though, it is important that there is oversight of that process to make sure it is not abused.

I also don’t see a problem with the legal protection that restricts the ability of a customer to sue the insurance companies for making a good faith referral of potential fraud. It’s similar to the protections in place for people who refer cases of possible elder or child abuse. If you leave people open to litigation for reporting potential crimes, fewer people will make those reports even when they probably should. The State Farm case against the contractor in the article seems like one that wouldn’t be protected by the good faith standard since it is pretty clear he was targeted by an overzealous investigator.

Comment by Pelonski Monday, Aug 19, 19 @ 4:08 pm
===14,500 over a five year period in a state as large as Florida doesn’t seem excessive to me===

Going after that many innocent people doesn’t bother you? Seriously?

Comment by Rich Miller Monday, Aug 19, 19 @ 4:09 pm
===don’t see a major problem with insurance companies and the police working together===

lol

They’re paying the cops and the prosecutors.

Comment by Rich Miller Monday, Aug 19, 19 @ 4:09 pm
=== It’s similar to the protections in place for people who refer cases of possible elder or child abuse===

Those folks tend to not have giant budgets with loads of employees who focus on going after customers.

Comment by Rich Miller Monday, Aug 19, 19 @ 4:10 pm
Pelonski, the question is whether the balance with the lawsuit protections are tilted towards the large corporations or the individual consumers whose lives are ruined by the actions of the companies whose sole purpose is to maximize profits. It certainly seems like the laws are tilted towards the insurance companies.

Apropos of nothing, I do find it interesting that while the Business Roundtable announced today a new mission statement that de-emphasized the focus on maximizing shareholder profits, one of the CEOs who did not sign on was the State Farm CEO. While it is unknown why he did not sign the statement, it is an interesting coincidence.
https://www.washingtonpost.com/business/2019/08/19/lobbying-group-powerful-ceos-is-rethinking-how-it-defines-corporations-purpose/?noredirect=on

Comment by MyTwoCents Monday, Aug 19, 19 @ 5:38 pm
Withholding exculpatory evidence should make the referral a bad faith referral. The insurance companies should be subject to discovery.

On the other side of the coin are scam artists. Fifty plus years ago our insurance agent was upset. He knew of a team of lawyers and doctors who handled lots of fraudulent injury claims. They always settled so no cases went to court. He could of get the insurance companies to force these scam artists into court. It was not cost effective from their standpoint for an individual case and they did not care about the systemic problem.

Comment by Last Bull Moose Monday, Aug 19, 19 @ 6:05 pm
=14,500 over a five year period in a state as large as Florida doesn’t seem excessive to me=

Unless you are one of the 14,500.

I guess you are not a big fan of civil right either.

Which insurance company do you work for?

Comment by JS Mill Monday, Aug 19, 19 @ 6:38 pm
I think Pelonski must be part of the industry if they are shrugging this off as no big deal.

Comment by Demoralized Monday, Aug 19, 19 @ 7:32 pm
Insurance company lawyers can be disbarred for failing to provide the other side with exculpatory evidence. File a complaint on their law license with the State’s licensing body. In addition, filing what turns out to be a false report/complaint is a crime, so the victim/insured can fight it that way as well. The prosecutors hate finding out they were lied to.

Comment by rivfun Tuesday, Aug 20, 19 @ 7:10 am