Hiding Behind Insureds

See statistics for cases involving State Farm Insurance Company here 

Insurance companies are involved in nearly every lawsuit. If you are injured through no fault of your own and have to file a lawsuit, then chances are an insurance company has hired a lawyer for the other side.

This is a fact. Our lawyers asked, through a "Freedom of Information" request to the Arkansas court system, how many cases involved an insurance company directly versus how many involved cases against insured people. The court records suggest that as few as 22% of cases involving insurance companies are actually brought against the insurance companies themselves. The rest are brought against the policyholders or the "insureds", who have insurance precisely to protect themselves from lawsuits.

Any time someone buys car insurance, part of their premium goes toward the "duty to defend." If someone gets sued for hitting an innocent victim, then the insurance company has to hire an  independent lawyer to defend the at-fault driver (Nathan's Arkansas Supreme Court case made sure these lawyers have to be independent, not merely employees of the insurance company). The independent lawyer must diligently defend the insured, but insurance defense lawyer's hands are usually tied because the insurance company holds the purse strings and decision-making power.

There are two problems with this. First, the insurance companies rarely want to pay full and fair value for injury claims. Second, the insurance companies have lobbied for favorable rules in Arkansas to keep their participation in cases a secret from juries. Insurance companies literally hide behind their insureds, and the companies take great offense to even a hint that insurance is covering a loss in a case. Why do they do this? Because it is very, very profitable. One way the carriers keep their involvement a secret is by having the insurance defense lawyer pay any expert witnesses, and then reimburse the lawyer. This is because who pays the expert witness is always admissible in court.

When a case goes to trial, odds are it is because an insurance company wouldn't pay fair value for a claim. The at-fault driver usually wants to get out of the suit as fast and  cheaply as possible, which is why he or she bought insurance in the first place (you can find at-fault driver rights here). But, if the insurance company refuses to pay, the at-fault driver has no choice but to go to trial, since the insurance company can deny coverage if the at-fault driver refuses to cooperate. A trial puts the at-fault driver at risk of losing a judgment over and above the policy limits. If that happens, the at-fault driver may have his or her credit ruined, have to file  bankruptcy, and might even have his or her driver's license suspended; all because the insurance company didn't want to pay a few extra dollars (compared to billions in premiums as shown by the annual reports of the Arkansas Insurance Department) to resolve the claim for the insured. And, of course, trials cost money out of our counties’ budgets.

What's the solution to this insurance abuse? One idea is to stop allowing insurance companies to hide behind the people their policyholders. This works in Louisiana, where injured parties can sue insurance companies directly in all types of cases.

Another idea is to enforce stiff penalties against insurance companies asserting frivolous defenses who fail to pay meritorious claims. This would penalize greedy insurance companies and put them on a level playing field with insurance carriers who follow the rules.

The only way to force the insurance companies to change is for consumers to take action. Write your elected officials and tell them you want insurance industry abuse stopped now!