KUFM Commentaries 2007
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Delay, Deny, Defend
January 22, 2008

Last week the insurance commissioner in Florida suspended Allstate's right to sell new insurance policies in Florida until Allstate produces subpoenaed documents on how it determines their premium rates.  In November, Washington state voters approved an initiative implementing legislation that holds insurance companies liable for up to treble damages and attorney fees for wrongfully denied or delayed insurance claims - even though the insurance industry spent a record eleven MILLION dollars to fight the initiative.  In September, a Missouri court ordered Allstate to pay a $25,000 per day fine until Allstate produces subpoenaed documents on its claims handling policies and procedures - the tab is nearing three MILION dollars as Allstate continues to refuse to produce the documents. 

The story behind these stories is an industry wide practice of insurers delaying, denying and aggressively defending legitimate insurance claims - claims from their own insureds and from those injured by their insureds.  And the name behind that story is McKinsey & Company, a giant of the business consulting industry hired by Allstate, State Farm and other insurance companies. 

The public cover story has been that the claims handling policies and procedures refined by McKinsey were all designed to fight growing fraud in the car accident business.  The center piece is what has become known as the Three Ds - delay, deny and defend.  An integral component of the Three Ds is making low ball offers to those that have been injured - often amounting to less than the documented costs the injured person has incurred.  Does it work? Over 80% of accident victims, according to those familiar with the industry, accept the get tough, low ball take it or leave it offers. 

Experts say the new get tough strategy is adding up to billions in profit for the insurance companies and little, if anything, for the public.  With the get tough approach, individual policy holders get dragged into court on minimum damage claims that previously were settled, yet there are no corresponding reductions in premiums - the touted benefit for fighting supposedly fraudulent claims.

Allstate's training manual details how that was going to be done.  First, force what the manual calls smaller walk away settlements - the "take it or leave it offer."  That's the low ball offer that over 80% of injured people will take.  If that doesn't work, the Three Ds are brought out. 

Deny - that's the "leave it" of the low ball offer.  Delay: make numerous requests for information from the injured person, sometimes asking for the same information that has already been provided; submit the injured person to more medical examinations; refuse to provide information the injured person requests, then provide some of the information, and stall until absolutely required to provide the full information; schedule numerous depositions of potential witnesses and possible experts; file numerous motions with the court over multiple issues; and many more keeps the matter from getting before a court for years. 

Defend - the result of the delay is that an injured person walks into the courtroom two, three or four years after the crash, and they don't look injured at all.  The insurers' attorneys want the jury to forget about the medical bills incurred at the time of the crash, the testimony of the pain suffered in the weeks and months after the crash - they want the jury to ask themselves where's the evidence, today, of the pain?
And, it works all too often - juries will find damages in an amount less than what the injured person actually incurred just in medical costs.

But, the real payoff to the Defend strategy is that it forces an injured person's attorney to front expensive litigation costs, which in the end, she won't get back.  By making these already relatively low dollar cases so expensive to litigate, fewer and fewer attorneys will take them. 

Which means more and more injured people that accept the initial "take it or leave it" low ball offer.  And that means more and more profit for the insurance industry.  The property casualty insurance industry (those who sell coverage on homes and cars) is reaping huge profits.  Property casualty insurers reported their highest profits ever, $64 billion, in 2006. This trumps the previous record profit of $44 billion they made in 2005, even after accounting for Katrina claims.  Experts predict that 2007 looks like another stellar year for the industry.

Could that be why an Allstate is willing to pay $25,000 per day fines to keep their policies and procedures manuals out of the public eye, or why they are willing to risk losing the right to sell policies in one state?  Is the money made by delay, deny and defend worth the price of secrecy?  Evidently.

The insurance industry has awakened to the fact that its reputation has been seriously damaged.  Frank Luntz, the Republican pollster and wordsmith, author of "the Healthy Forests Initiative" moniker has been hired to try and improve the industry's image.  Maybe the industry should spend less time and money on a smoke and mirrors image campaign and just try paying legitimate claims on time and in good faith. 

You can check our website, monttla.com, for links to more information on Deny, Delay and Defend tactics.

This is Al Smith for the Montana Trial Lawyers Association.

Holiday Safety
Novenber 27, 2007

It’s the holiday season, and that means new toys will arrive soon in homes across Montana. But are all of these toys safe? Too often, families come to trial lawyers because a child has been seriously injured or killed by a seemingly safe toy. And, all too often trial lawyers find out that the manufacturer, the distributor, the retailer or the government knew the toy posed an unreasonable safety hazard, yet the toy was still on the market. Fortunately, over the years, through government and industry regulation, consumer involvement, and through litigation by trial lawyers, toys have become safer.

We have laws to protect children from toys that create hazards because of toxic substances, and from toys that present electrical, mechanical or heat risks. Choking hazard warning labels are required on packaging for small balls, balloons, marbles and certain toys and games that have small parts and are intended for use by children ages 3 to 6. Toys intended for use by children under age 3 posing a choking, aspiration or ingestion hazard, are banned by law. We also have labels that give age range and safety recommendations for toys.

With all that's been done, there is still a risk that a child’s joy, a new toy, can become a family’s tragedy. Consumers shouldn’t be lulled into complacency. The U.S. Consumer Product Safety Commission (CPSC) does not test all toys and not all toys meet the CPSC safety standards. There are unscrupulous manufacturers who fail to put the required safety warnings on packages. There are others who manufacture and distribute toys that they know present an unacceptable level of risk to young children. There are over 900 toys listed on the CPSC website that have been recalled for various safety reasons.

While warnings help, parents and family members have to be careful in selecting toys that bring joy, not heart break. Unfortunately, toys often do not face a CPSC recall until after a child has been injured. Every year children die and tens of thousands of children are treated in hospital emergency rooms for toy-related injuries. Children ages 5 and under are at especially high risk - last year 20 of these young children died and over 70,000 sought emergency care

Riding toys, including bikes, unpowered scooters and roller blades, are always popular. Unfortunately, they are also the source of many injuries. Many riding injuries are preventable. If you do buy items such as a scooter, bicycle, or in-line skates, please purchase the safety gear, especially a helmet, your child will need to use the toy safely and include it as part of the gift.

Choking is a leading cause of toy-related deaths, especially for younger children. Children easily choke on small toy balls, balloons, marbles, small building blocks, or small pieces that were pulled off of a toy. And, unfortunately, there are manufacturers who fail to put proper choke hazard warnings on their toys. One of the best ways for parents to test whether toy parts pose a hazard to young children is to try and put the parts through the opening of a roll of bathroom tissue. If the part of the toy fits into that opening, don’t buy the toy.

Protecting children from unsafe toys is the responsibility of everyone, from manufacturers, to government, to parents and other family members. Selecting toys with an eye on safety and proper supervision of children at play are the best ways to protect children from toy-related injuries.

On dark December evenings, with holiday celebrations approaching, we are drawn to the warm comfort of a fireplace, the glow of candles, or the illumination of holiday lights. Creating a warm, festive look in the home is a part of the holiday tradition for many Montana families.

Please take steps to ensure that holiday festivities don’t turn into family tragedies. According to the National Fire Protection Association, December is the peak month for candle fires, with nearly twice the average number of fires. Candle fires alone result in, thousands of injuries, hundreds of millions in property damage, and hundreds of deaths each year.

If candles in your home are part of your holidays, make sure that you always use non-flammable holders; keep them away from fabric, dangling holiday decorations, and wrapping paper; place them in low-traffic areas, so that people will not knock them over or get burned; and never use lighted candles on a tree, wreath, or other combustible decorations.

Each year 7,000 people are treated in emergency rooms for injuries related to holiday lights, decorations and Christmas trees. Some holiday lighting safety tips include: checking all lights, old and new, for broken or cracked sockets, frayed wires and loose connections, and throwing away damaged lights; fastening outdoor lights securely so they are protected from wind damage; using no more than three standard-size light sets per single extension cord; and, turning off all lights on trees and other decorations before going to bed or leaving the home.

This holiday season we need to be especially vigilant. We’ve all heard the reports of lead tainted toys imported from China. There have also been reports of other unsafe toys, including those with small parts that are a choke risk. The one sure bet is that there are unsafe toys out there - be informed and protect the youngsters in your life. We have provided links on our web site, monttla.com, to agencies and organizations where you can obtain more information on toy and holiday safety. If you do not have access to a computer, you can make a quick phone call to the Consumer Product Safety Commission at 800-638-2772and request guides or fact sheets on shopping for toys and on holiday safety.

Finally, during this holiday season, please take the time to install smoke detectors, or new batteries in the ones you have, and TEST them. Wishing you a happy and safe holiday season, this is Al Smith for the Montana Trial Lawyers Association.