Confessions of A Former Insurance Defense Lawyer

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Confessions of A Former Insurance Defense Lawyer!

By Sue Di Paola, Esq.

June 2002

I began work as an attorney for insurance companies and selfinsured

employers in the 1980s. Being a lawyer for insurance companies and employers

brought me a feeling of accomplishment, offering me a role where I contributed

to the prevention of insurance fraud. The career of the claims adjuster

seemed to be a solid one then also. Adjusters and managers worked the same

companies for years until retirement. The claims sent out to attorneys had

legitimate legal or factual disputes. I felt that my clients and I had mutual

respect for each other. When I gave legal advice, applying current law to

the facts of their cases, the accepted it, even if they had lost objectivity

on a particular case. They understood that a pyrrhic victory was something

that adversely affected their company and public policy. Most

importantly,we worked as a team and I greatly enjoyed that aspect of the work.

Disturbing Trends Start in The Early Nineties

Sometime around the early 1990s, the industry began to subtly, but

radically change. First, there was a constant turnover in claims adjusters.

There

were fewer " career " adjusters and more clerks, generally young women,

promoted within companies who were apparently set upon a path of training of

which the emphasis was the denial of claims. Then another pattern sprung up. I

found that if a claims examiner did not agree with defense counsel's legal

advice, he or she would either try to get the lawyer to agree with them or

pull the case, sending it to a lawyer who would agree to do what they

wanted.

Often, in attempting to formulate agreement, they would quote law as

though the legal principles occurred in vacuum, rather than within the context

of the facts of an individual case. Other times, they would purport to

having obtained a " second opinion " from another lawyer so that they could argue

about the case. We ceased to become a team, and instead became

quasi-adversaries. Frequently, defense attorneys would find themselves

unprofessionally

maligned when a case was pulled and given to another attorney. It became

common for claims adjusters to allege that they hadn't received reports and

documents, and I began to routinely fax documents so that my office had

proof of receipt.

This was also the ears when I began to hear phrases like " Let's starve

them out! " or " This should drive them crazy! " A colleague of mine who follows

bad faith in insurance has labeled this practice " gaslighting " . This

approach clearly incorporates the belief that the party with deep pockets,

namely

the insurance company or employer, can hold out longer than the injured

claimant or plaintiff.

These new adjusters took the cases deeply personally. When a claimant

would retain an attorney to represent them, many of these adjusters were

personally insulted. I also started to hear statements from adjusters that

implied blatant contempt of our laws. For example, I repeatedly heard Workers'

Compensation claims adjusters saying, " If I don't pay, so what? It's only a

ten percent penalty. Big Deal! " State-imposed penalties for delaying payments

of claims meant nothing to the insurers or these new claims adjusters. (A

parallel in another area insurance is the summary denial of claims, which

fall under federal ERISA guidelines and therefore are not subject to the

safeguards of insurance bad faith.)

The Cost to the Public of Ignoring Legitimate Claims

The approach of denying claims, trying the case in court and appealing

when the insurer lost, even though they knew they would both lose the case and

the appeal, developed purportedly to " send a message " to workers. The

cost? The worker's benefits could be held up many months on appeal. The

claimant's attorney, whose income was limited by statute, also had to wait to be

paid upon ultimate resolution of the case. This way, adjusters stated, other

workers would think twice before they filed a claim!

As a tax payer myself, I became increasingly disturbed with the way claims

were handled by public employers, who were often self-insured and handled

their own claims within their companies or had third party administrators

who adjusted their claims for them. In the early 1990s, I represented a

self-insured employer whose claims were handled by a third party administrator

(TPA). I had worked for this particular TPA for years.

Their new manager, who was unnecessarily hard-nosed, was training her

adjusters to be likewise. One day, I was sent to a case, which involved several

claims filed by a law enforcement officer who worked for a school district

in an impoverished and dangerous urban area. After reviewing the facts and

taking the claimant officer's deposition, I recommended my client accept

and settle the main claim, but dispute several of the appended questionable

claims. My recommendation was backed by strong reasoning.

The claimant's testimony was solid and impressive. There were no witnesses

to rebut his testimony. On the contrary, the chief of law enforcement for

the district agreed with the claimant's perception of the facts. The

claimant's attorney offered to settle the main claim for under $30,000. The

demand was fair. The claims manager, however, was livid when I presented them

the settlement demand with a recommendation that they take it. Her response?

" Fight it all the way. That's why we hired you. "

Further expensive discovery merely confirmed what I already knew: we

simply had no witnesses to support our unreasonable position. This would have

the effect of increasing any future settlement amount. Nonetheless, instead

of trying to settle, my client seized on the fact that the claimant was a

recovering alcoholic in an attempt to impugn the claimant's character. This

approach, I knew, was certain to backfire with a judge. The morning of the

trial, the injured officer's lawyer demanded $32,000 - still an extremely

reasonable demand for settlement.

The judge advised me that he had reviewed the file and asked me why we

weren't settling. At the judge's avid behest, I called the claims manager.

Angry at my call, she stated that if the judge has recommended that we settle,

and then he should excuse himself from the case for " bias " against us.

Sighing inwardly, I carefully explained that part of the judge's job is to try

to get the parties to settle when appropriate. The concept, however, was

lost on her.

Two years and four claims adjusters later, my client was still fighting

every single issue tooth and nail. The claimant's attorney was quite patient

because he and I had a long-standing mutually respectful working

relationship. Not unpredictably, though, the final hearing in the case regarded

a

penalty against my client's continuing delay of legitimately due benefits. In

preparation for this hearing, I instructed the claims adjuster to bring

evidence of timely payment. She assured me she would.

On the day of the hearing, the adjuster arrived with a piece of paper with

handwritten " dates paid " . She stated that her supervisor, the angry

manager, had told her that she didn't need to bring anything; she could just

" testify " to the dates paid. Since the claimant was there with actual evidence,

namely the dated check stubs, I tersely advise that we settle -

immediately. We settled that day, but from that day forward, my office was no

longer

on this company's approved list and they eventually pulled all of their

files from my office.

The clincher? Ultimately, this case cost the public over $250,000,

excluding my legal fees - almost ten times more than if we had settled it at

the

outset.

I had a similar experience with another public entity, in which I

negotiated a fair settlement on a case with massive exposure, both financially

and

politically. The claimant in this case was a credible witness with

impressive credentials and a legitimate claim. She would be able to give

irrebuttable testimony because the claimant's own boss, the principal of a

public

high school, stated that the claimant's perception of the facts and events

were indeed correct. Having completed my discovery and recognizing the huge

financial exposure to my client because the claimant was completely disabled,

I continued to recommend settlement.

The day before the settlement conference, the human resources manager for

the school district pulled the file and sent it to another law office,

striking our office from their list of approved attorneys. Approximately a year

later, I happened to see the attorney to whom the file was transferred. I

asked him what had finally happened to the case. Shaking his head he said,

" What happened is just what you said would happen, and you'd already done

the work. The judge gave the claimant a 100 percent disability rating. I

don't know how the district thought they wouldget a different result. "

Attorneys and Ethics

As the business changed, my colleagues and I began to have closed door

discussions about the ethical ramifications of following the directives of our

clients. A serious dilemma was how to handle a client's outright rejection

of legal advice, which would result in significant financial loss to the

client. Any continuing education class on legal malpractice will teach an

attorney to write a confirming letter to the client to document that the

client has chosen not to follow it.

To the insurance defense attorney, this is a confounding Catch-22. If such

a letter is written, the result can be loss of business. However, without

this documentation, we found that claims adjusters would willingly point

the finger at the defense attorney for disastrous results, denying that the

advice was given to them.

Along with the increasing ignoring of legal advice, companies began to

institute stringent fee guidelines and other " creative " arrangements to

eliminate or reduce legal costs. In the mid-1990s, many of my long-standing

clients began to demand flat fees for handling of cases or sought to impose

arbitrary fee guidelines. The result of this policy was that a client could

very well insist that the attorney take the case to trial, but would " allow "

only two hours for trial preparation.

Since legal ethics, as well as maintaining our malpractice coverage,

mandated that we prepare properly and thoroughly, the potential windfall

savings

for the companies were obvious. We could be exposed to suit if we didn't

prepare properly. The other disquieting trend was the encouragement of

bidding wars between attorneys, with the work going to the lowest bidder. This

is a true conflict of interest to the detriment of the insured.

Basically, we were becoming dupes. Everyone knew it, but no one could talk

about it. The rhetoric became especially heated about insurance fraud

perpetuated by the filling of false claims. One company, which no longer

exists, went so far as to take out full-page newspaper advertisements to show

how

they were " tough " on Workers' Compensation fraud. It is of particular

interest to note that one of the largest fraud cases in California was actually

against an insurance company for the alteration and destruction of

documents - it was the same company that took out the ad.

Life Threatening Illness Brings Me Home to Reality

In 1995, I was diagnosed with cancer. After a year of treatment and

recovery time, I returned to work part-time. My own experience with a

potentially

terminal illness brought me face to face with the torment that persons who

are injured or ill and decompensated are faced with when they cannot

collect the benefits they paid for or are entitled to. After my own illness, I

found it difficult to represent a client who would fight an injured worker

for a disputed $30.00 medical bill.

I would point out that the cost of my legal fees to fight would be higher

than the disputed amount. However, all too often the client insisted on

going to court and after losing, appealing the matter perhaps, many times in

an effort to discourage injured or ill parties from Pursuing claims. If the

case was lost, the attorney would be blamed. If the case was won, " anyone "

could have won it.

When I retired some years later due to more surgery and serious disability

I found myself wanting to make amends for being a dupe. I found myself

facing the same nightmare so many of the claimant I met must have lived.

Fortunately for me, the company I was dealing with, after " investigating " my

claim for over a year, which included a " defense IME " , agreed to provide the

benefits I was legitimately due. I acknowledge, though, even though I was

seriously ill, I still had a leg up on a " normal " claimant because of my

unique experience.

Changing Sides, Changing Views

After leaving the field, I made contact with other disabled people who

have had similar experiences with insurers and attorney who, like me, worked

for companies and third party administrators. There are many people with

legitimate claims who are victimized by insurers in many areas of insurance

coverage who enjoy collecting premiums and making great profit, but don't

want to pay the benefits.

Many lawyers' livelihood depend on doing what the insurance companies and

administrators tell them to do. These lawyers, like me, have children and

families who depend on them. Walking away from a paying client is not an

easy decision. Many lawyers simply may not fully realize the consequences of

what they are doing, but they do know that a lawyer in their business can be

dropped for practicing ethically and fairly. As far as loss of health is

concerned, most people just think it could never happen to them.

The more perplexing question is why adjusters working for public entities

persist in unreasonable approaches to claims handling at the taxpayers'

expense. I believe that it reflects a growing tendency of private insurers not

to want to pay legitimate claims, which spills over perforce into claims

handling in the public arena.

Some attorneys have recognized this and realize that it is a serious

personal, philosophical and moral dilemma. They have left the field and or

crossed over to the other side and now represent claimants. I believe that

companies have a right to be represented, but they do not have a right to

require the representatives collude in questionable claims

practices.____________onfessions of A Former Insurance Defense Lawyer

[Guest guest]

Sharon, that's a good one. Too bad there aren't more honest, decent lawyers.

________________________________

From: " snk1955@... " <snk1955@...>

Sent: Thu, October 8, 2009 4:27:31 AM

Subject: [] Confessions of A Former Insurance Defense Lawyer

_http://www.noiw. org/newsstories/ confessions. html_

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Confessions of A Former Insurance Defense Lawyer!

By Sue Di Paola, Esq.

June 2002

I began work as an attorney for insurance companies and selfinsured

employers in the 1980s.