We’ve pondered for some time whether to post something about the Oregon legislature’s failure to act on the serious insurance problems in the State of Oregon. This post isn’t going to sit well with some people, and others might find it a bit odd given the future considerations of the problems, but given the article today in the Willamette Week, we’ve decided to post this in a half-hearted attempt to change the legislature’s course before its too late for Oregonians.
Our firm has been involved in some of the largest insurance fraud cases in the country where insurers had intentionally underpaid their own policyholders by billions of dollars. Our goal was to stop systematic fraud by the insurance industry that underpaid claims, or improperly reduced payments to doctors who had treated injured people. Ultimately, we were prevented from continuing our work on behalf of policyholders because of the “Class Action Fairness Act” passed during the second term of the Bush administration. Once that occurred insurance bad faith claims had to be filed on a state by state basis.
None of these cases were focused in Oregon though. Why? Because Oregon has the worst insurance bad faith laws in the country. In short, insurance companies can abuse their policyholders in nearly any way possible in Oregon with absolutely no consequences beyond paying what was already owed. As some examples, if your business or house burns down, your own insurer can claim that you are an arsonist and set the fire yourself with no consequences. You will sit by as your own insurer attacks you and your reputation, forcing you out of business or to become homeless. Once they are found wrong, you have no legal recourse in Oregon. If you are injured by an uninsured driver and have a catastrophic injury that leaves you unable to ever work again, your own insurer can claim you are a liar, that you are making up your symptoms, and simply deny your claim and force you into litigation. There are no legal consequences for making false allegations about their own policyholders and then denying the claim or delaying the proper payment. We know, because it happens all the time in our cases. [The only possibility of a bad faith claim in Oregon is if you as an insured get sued by someone you hurt, the insurer undertakes your defense, and the insurer fails to properly defend you by making a bad offer (or no offer) in its defense of you. That was the case in the Willamette Week article, in which a pedestrian was hit, incurred approximately $65,000 in medical charges and substantial injuries, and GEICO refused to settle the case on behalf of their policyholder for the full amount of the insurance policy on a claim ($100,000) for those medical bills, future medical bills and personal losses.]
It has become commonplace for some insurers (including GEICO) to make little or no offer on serious injury cases in Oregon. One of GEICO’s own lawyers admitted to us that GEICO has instructed its adjustors to make offers of between $500 and $2,000 on cases regardless of injury severity and that the their lawyers will litigate any of the cases where the offers aren’t accepted. Needless to say, some people have such substantial financial losses or personal losses that they can’t possibly accept $2,000 for their case. In fact, none of our clients can accept such an offer because we don’t accept cases with minimal injuries.
This issue isn’t limited to GEICO. And it isn’t just auto accident cases. It’s homeowner cases, and business cases as well. We’ve called the Oregon Department of Insurance and they won’t do anything about what has become almost uniformly ridiculous offers, or no offers, on serious injury cases. When the injured person can’t accept the offer, the insurer will then turn the policyholders life upside down seeking information on every form of past physical or sexual abuse, every past psychological record, every social networking post, and every lurid detail about the person’s marriage. What should be a good faith negotiation between a policyholder and their own insurance company has turned into little or no offers for cases with clear liability and serious injuries, followed by “scorched earth” litigation tactics.
The Oregon legislature has set up Oregonians for this kind of insurance company abuse. Several times in the past, legislation has been proposed to allow Oregonians to file “claims practice” or “bad faith” cases against an insurance company that improperly denies or delays claim payments. But, these bills have been uniformly rejected because the insurance lobby is so wealthy they can kill any bill that would hold them accountable for their bad conduct. And, why would a legislator want to do anything that will help lawyers? (There is a problem with this logic as hiring a lawyer is the only viable option for Oregonians who are impacted by improper insurance company claim denials.)
Oregon’s failure to pass laws to hold insurers accountable, incentivizes insurers to refuse to pay claims, or to make unreasonably low settlement offers. Insurers know, that if an injured person has to resort to litigation, the jury will assume they are greedy even though they are just trying to get reasonable compensation for their losses. What Oregon lawmakers need to understand is that insurers accept Oregonian’s money for premiums, but then improperly profit by denying or delaying claim payment to their own policyholders, as well as to anyone who is injured by their policyholders. Collectively, insurers who hold billions of dollars in claims nationally, profit through interest on that money. And, the longer they hold the money, or the more nasty they make the litigation, truly injured Oregonians give up and become dependent upon social benefits that all of us have to fund, taking tax dollars away from deserving purposes such as schools.
What is the long term ramification of the Oregon legislature’s failure to pass bad faith legislation?
The Cascadia Fault (also called the Cascadia Subduction Zone) in Oregon has the potential of a 9.0 earthquake that is considered long overdue, and that scientists are predicting will cause a massive earthquake within the next 50 years. Our schools are trying to prepare kids for it, because it is expected to happen soon. The fact this earthquake will happen is so well accepted that the Oregon legislature convened a special board to consider the consequences. The report issued by the state (called the Oregon Resilience Plan) has been described as “a chilling picture of death and destruction that would cripple the entire Pacific Northwest, from Northern California to British Columbia.” The report estimates that bridges, dams, roadways and buildings — including Oregon’s State Capitol in Salem — will be in a state of utter collapse. No water, electricity, natural gas, heat, telephone service or gasoline — in some cases, for months. Economic losses are expected in excess of $30 billion.
When this happens, people will lose their houses and their businesses. Other states that have major natural disasters have bad faith laws so that they can hold insurers accountable for damage from earthquakes, hurricanes and other natural disasters. Oregon has no protection to hold insurers accountable for paying claims, and so when this earthquake happens you can expect that insurers will sit on claims and not pay them. Because when they do the same in other types of claims Oregon Department of Insurance does nothing about it. In fact, in discussing this with the Oregon Department of Insurance, they admit that they will be powerless to handle this situation.
Insurers will require Oregonians to go through litigation to get what they deserved in the first place (replacement of their house or business) and there will be no consequences for wrongful claim denials, or payment delays. If you are homeless for the months or years following the disaster, the Oregon legislature has given you no recourse. If you went out of business, the insurers aren’t going to replace the financial or personal loss associated with you going out of business. What would this situation be like? Imagine Hurricane Katrina, but with the insurers having no incentive to pay the claims, and instead every financial incentive not to pay the claims.
Legislation was proposed this session (SB 313, SB 314, and SB 510) to resolve this issue and the Oregon legislature sat on it, because apparently the problems that Oregonians face with insurance company abuses, and the threat of the earthquake that the state has already acknowledged is imminent, aren’t sufficiently important to act. And when this earthquake hits, Oregonians will be out of luck because the legislature refused to act when they had the chance.
So, we’re going on record now to inform Oregonians that the legislature had a chance to prevent that outcome for you and refused to act. While the legislation is dead, if you want to prevent this outcome, feel free to call your state Senator, or the Senate Committee on Judiciary to tell them your feelings about their failure to pass legislation to protect you from insurance company abuses. If not, you know who to blame when the insurers refuse to pay your claim.
The insurance companies and defense lawyers are, of course, celebrating the loss for Oregonians.