ThePopTort

Confidential Memo on "Judicial Hellholes" from Insurance Industry!

Looked what was just leaked to us!

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CONFIDENTIAL MEMO

To: American Tort Reform Association

From: Property/Casualty Insurance Industry PR Hacks

Date: December 6, 2021

Re: Good luck tomorrow!

I hope you know that we value nothing more than our friends in the “tort reform” movement, like you, who share our goals: getting politicians and media outlets on our side, demeaning judges who rule against us, and passing laws that take power and authority away from juries. Our methods may be different than yours: we engineer the unjustifiable price-gouging of policyholders until they scream, you issue an inane repetitive yearly “judicial hellhole report” designed to cause screaming! (More about that below.) But as our goals are the same, we thought you might benefit from our recent experience trying to attack judges and juries during a pandemic - since it looks like you are officially releasing another one of these reports tomorrow.

We should start by being honest and telling you that those screaming about your report aren’t quite what we’d hoped, and have instead presented some real PR challenges for our movement. The severity of attacks by legal scholars and media outlets even took us by surprise! Targeting jurisdictions with poor and minority populations probably doesn’t help either (although we do that all the time so who are we to judge?). Also, attacking local judges and juries seems un-American and unpopular to a lot of people. So, while you were already on thin ice with this “study,” there is now a whole new context to consider: the pandemic. The civil justice system was dormant for many months and is only now slowly coming back to life. Jury trials stopped, are still not happening in many places, and injured people can’t get cases heard. In other words, this darn pandemic has just wreaked havoc on our PR messaging!

We know this from experience. Let us explain. A few months before the pandemic, we began suddenly raising insurance rates on businesses (as usual) despite sitting on mountains of cash (close to a trillion dollar surplus now). For forty years, we followed a standard playbook: 1. Suddenly raise rates on doctors and businesses so they go nuts; 2. Falsely tell them that lawsuits, juries, lawyers and victims are to blame even though there is never a spike in insurance claims or lawsuits; 3. Lie to politicians, saying enacting “tort reform” is the only way to bring down rates; 4. Get "tort reform" laws passed that take power away from juries. This worked every time.

But our old tricks aren’t working now. In 2019 and 2020, we dutifully created a new insurance crisis, trying to follow the same playbook. We even thought up a convenient new term to blame for our price-gouging. We called it “social inflation” - a term we haven’t given up on yet, by the way. We thought this was a perfect PR device, a term so vague it can be used for everything we hate: policyholders who go court, “aggressive” attorneys who represent them, and local juries. But one thing we didn’t anticipate: COVID. COVID shut down the courts. Complaining about too many lawsuits and “out of control” juries suddenly made us look silly. And without that kind of PR hook, no one was screaming for “tort reform.”

Things aren't getting much better. In fact, thanks to the pandemic, civil cases are now completely backlogged. Civil cases are being put at “the end of the line,” and they are piling up. Judges – and there are simply not enough of them - are trying to prevent jury trials altogether, often for the safety and economic concerns of potential jurors. They are pressuring settlements like never before. So believe it or not, sometimes we’re the ones pushing for jury trials now! (As one lawyer put it, “We are finding that liability insurers and defendants, most of the time, will not waive their right to a jury trial…”)

Now I’m not saying you won’t be able to bamboozle some, shall we say, “gullible” reporters and editors to pick up your spin. For example, just look at the awesome, highly misrepresentative headline by media outlets (like here here) reporting on a so-called “record breaking” Nebraska jury verdict for a negligently injured, permanently-disabled child. We all know the family will receive only a tiny fraction of this verdict because Nebraska has a severe cap on damages for injured patients including children – a cap the jury was not told about. But this fact was barely mentioned in the articles. Kudos to whatever PR operation hoodwinked some lazy reports and editors on this one! But the media isn’t as reliable for us as it used to be. Take, for example, the very popular podcast “You’re Wrong About That.” Here’s what they tweeted when they re-ran this year their episode on the McDonald’s Hot Coffee case. They’ve turned our entire PR fabrication about this case on its head, just like the 2011 HBO documentary film Hot Coffee. 

Whatever happens tomorrow, we’ll have your back don’t worry. We just feel bad that your role in our movement has been reduced to releasing tired, discredited messaging about judges and juries who rule against your corporate members when they kill and injure people. Perhaps it's time to reevaluate?

A Civil Justice Top 10 Thank You List

Here’s our Thanksgiving gift to you because sometimes things do go our way and we need to talk about that! Everyone feel better, and Happy Thanksgiving.

1. Congress quit “tort reform.” For 15 years, there has not been a serious “tort reform” effort in Congress. That’s when, in 2006, the last of seven bills to cap damages for medical malpractice victims was brought to the floor and decisively killed in the U.S. Senate even though the “tort reform” party controlled Congress, “tort reformer” in chief George W. Bush was President, and members of Congress were under enormous pressure to succumb to medical and insurance industry pressure. (Doctors had been suffering through four years of unnecessary price-gouging by medical malpractice insurers.) That happened because civil justice advocates effectively pushed back. While the U.S. House may pass bills now and then, they now arrive DOA in the Senate irrespective of who's in charge.

2. Judicial progress. Yes, the federal courts were decimated during the Trump/McConnell years. But the Biden/Schumer years have made much headway turning things around. Quoting our good friends at the Alliance for Justice, “President Biden has already seen more judges confirmed in his first year than the past five presidents, and he shows no signs of slowing down. With each slate, we see his continued commitment to bringing more professional and demographic diversity to our courts.”

3. Support for civil justice is bi-partisan. The “tort reform” movement finds itself no longer fighting just its traditional opponents - Democrats and progressives - as they had been for the first 30 years of the “tort reform” movement. They are now fighting people of their own political party and conservatives – and they are losing. Conservatives helped stop a bad class action bill and federal tort reform, and are now supporting a bi-partisan bill to ban forced arbitration clauses for sexual harassment cases. Who thought we’d ever see that?

4. Forced arbitration is backfiring. Speaking of forced arbitration, who saw this coming? As we wrote last July, “Amazon decided to give up its ‘forced arbitration’ requirement and allow itself to be sued in court. Why?  Because they were outsmarted. Specifically, rather than dropping claims, more than 75,000 Echo users, who were very angry that these Alexa devices were recording them without permission, filed for arbitration, hitting Amazon with a bill for ‘tens of millions of dollars in filing fees.’” Yet smart lawyering isn’t the only trigger for this development. Other big companies, like Google, have also dropped their forced arbitration clauses following major grassroots organizing. The company-by-company approach can’t replace Congress’ much need action on the FAIR Act, but the public education that has surrounded these developments can’t be overstated.

5. Unlikely courts have struck down caps. While not every state supreme court has struck down caps on damages, several surprising decisions have done so in conservative states and/or in states where courts had earlier ruled differently (e.g., Kansas, Oklahoma, Oregon). As a result, less than half the states (24) have laws that specifically cap non-economic damages in medical malpractice cases, which is the most popular kind of “tort reform” proposal. And only nine cap non-economic damages generally.

6. Research comes through. Often the insurance industry can bamboozle politicians despite the best efforts of civil justice advocates. (See what just happened in Louisiana.) But enough time has passed since many “tort reform” laws have been on the books, that credible, in-depth academic research about the impact of these laws is possible. And it’s showing “tort reform’s” failure at every level. That’s true even when it comes to the most common “talking point” in support of such laws: bringing down costs. Caps on damages, for example, cause system costs to actually increase, not decrease! See the book Medical Malpractice Litigation: How It Works, Why Tort Reform Hasn’t Helped, written by six top medical malpractice researchers, published by the conservative Cato Institute, no less. And let’s not forget survey-type research, like this one from one “tort reform” lobbying group. They say that for small businesses, the issue of “lawsuits” is of less importance than almost any issue small businesses could possibly face, or on which they want lawmakers to focus. 

7. New media is smarter. Gone are the days when press releases from manipulative industry PR operations with a lot of money, sent to traditional media outlets, become the only way people hear about civil justice issues. If you want to see how that used to happen, catch the documentary film Hot Coffee, which showed the destructive impact of that PR machine. But there is much more skepticism these days, and many more popular outlets want the truth. Take, for example, the very popular podcast “You’re Wrong About That,” which consistently ranks at the top of podcast episode and show lists. Here’s what they tweeted when they re-ran this year their episode on the McDonald’s Hot Coffee case which (like the film), debunks many anti-civil justice myths about this case: “This is by far our most requested episode! We're a little reluctant to do it simply because the ‘you're wrong about’ narrative is so well-known at this point. But maybe it's worth looking into anyway!” It's not the mid-1990s anymore.

8. Insurer price-gouging not working for them. Volcanic eruptions in insurance premiums for commercial customers (businesses, doctors) occurred the mid 1970s, again in the mid-1980s, and the early 2000s. While lawsuits had nothing to do with why premiums suddenly jumped, each time the industry responded by successfully pushing states to enact “tort reform” laws stripping victims of their legal rights. Now we are in the fourth such cycle. Insurance prices have been rising since 2019. But unlike in the past, today insurers have been unable to exploit their own mismanaged underwriting to push for similar “tort reform” laws. Why? Perhaps it’s because no one believes lawsuits caused insurance premiums to rise in a year when the civil courts and juries were essentially shut down. Or maybe it’s that the industry is sitting on a record-breaking trillion dollar surplus. Or maybe, people are just wising up to how this dishonest industry operates..

9. Law students emerge as a force. Law students have never been more politicized and active on civil justice, corporate accountability and court issues as they are now. People's Parity Project has emerged as a critical new voice on these issues, growing out of a movement at some of the top law schools in the nation. The [F]law is a new publication from Harvard Law School students, with a mission “to share stories that reveal how corporate law and power create social problems and systemic injustices.” And there’s been a huge jump in law school enrollment due to a number of factors including “continuation of what is called ‘the Trump bump’” and “what happened in 2020 — including the police killing of George Floyd and the racial justice movement that arose from it — spurred more applicants, she said, as did the death of Supreme Court Justice Ruth Bader Ginsburg and the confirmation of a controversial successor.” Can’t wait to see what these students do when they make it into the workforce.

10. Finally, we are thankful for everyone who pays attention to ThePopTort, the work of the Center for Justice & Democracy, and all the amazing advocates we work with. Have a very Happy Thanksgiving!

Get Ready for the Next Great Insurance Escape

The trailer isn’t out yet for the Hurricane Ida sequel to the “The Great Insurance Escape” (not to be confused with the “1963 American epic adventure suspense war film”). “Horror” is a more apt genre for this film, and it’s one we’ve seen many times before.

Here’s a synopsis: policyholders who dutifully pay premiums for years, expecting claims will be paid when a catastrophe hits (like a hurricane or a pandemic) find insurers denying claims and forcing policyholders into court. And the pleas of public officials – even U.S. Presidents – to insurance companies to quickly pay these claims, are proven worthless.

In this true film, former bully-in-chief Donald Trump is no match for the profiteering bullies at the property-casualty insurance industry. Back in April 2020, he urged companies to pay COVID-related business interruption claims, saying,

“You have people that have never asked for business-interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it… And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”

Oh, but it did happen. Businesses collapsed and insurance industry profits soared. (Learn more here.)

President Biden has pushed harder against this industry. For example, in a disaster as devastating as Hurricane Ida, the availability of insurance can literally become a matter of life or death, especially regarding the promise of temporary living expenses under “loss of use” clauses in homeowners policies, which many residents have. Following Ida, Biden was able to get a concession from at least a few companies that they won’t misuse their power to deny living expenses to those who voluntarily evacuated. He also said,

"I'm calling on private insurance companies: Don't hide behind the fine print and technicality. Pay what you owe your customers, cover temporary housing costs in national disasters and help those in need. That's what we should all be doing now.”

We should, but they won’t. Hiding behind fine print is essentially their business model. Take hurricane policies. The common understanding of a hurricane is a windstorm generating copious amounts of water. Homeowner policyholders who want to make sure they’re covered if a hurricane hits often sign “hurricane endorsements” with clearly labeled “hurricane deductibles,” thinking they have full coverage beyond the deductible in the event of a hurricane. They would be wrong. Elsewhere in those very same policies, insurers will expressly exclude payment for flood damage in all of these policies. To get flood insurance, homeowners must purchase separate policies from the federal flood insurance program. Except if someone is living in an actual flood plain, an insurance agent probably won’t explain any of this.

In 2005, immediately following Hurricane Katrina , many individuals were left destitute, without food, water or a roof over their heads. The insurance industry quickly denied responsibility for most of the damage its policyholders were suffering, wasting little time disseminating the message that most damage was flood-related, whether or not it was, and claiming it would not be responsible for this. The entire world watched this horror unfold on their television screens.

Fast forward to this year’s Hurricane Ida. Bob Hunter of the Consumer Federation of America explained the situation today:

Fortunately, Louisiana has one of the highest percentages of residents who carry flood insurance in the nation so most people who had flood damage from this storm in Louisiana will be covered by flood insurance.  Almost all wind-damaged homes have homeowners policies covering wind but insurers have been steadily increasing hurricane wind coverage deductibles and imposing other, sometimes draconian, homeowners insurance policy limitations. This shift of costs to consumers under homeowners insurance policies may take some by surprise, since disclosures of coverage changes are often buried in renewal paperwork that consumers may not understand or even read. Because so many consumers in Louisiana experienced severe claims problems in the wake of Hurricanes Katrina, we urge homeowners dealing with losses caused by Hurricane Ida to be vigilant with their insurance companies, including the insurers settling National Flood Insurance claims, to ensure that that they receive a full and fair settlement.

As to how we might expect insurers to behave towards East Coast policyholders devasted by Hurricane Ida’s massive flooding, let’s look back to 2012’s Superstorm Sandy. As we wrote in 2013:

Homeowners whose lives were shattered by Superstorm Sandy are still engaged in perpetual battles with insurers to get their flood insurance claims properly paid.  The situation is no better for homeowners claiming under their non-flood policies, with insurers putting homeowners’ money into escrow accounts and then micromanaging repairs. Writes one policyholder, “No matter insurance company has documentation already and has approved repairs. No matter repairs have been made and homeowner just wants reimbursement.… TD Bank has this policy. So does Wells Fargo. Problem is you don't know this until u go to deposit insurance check.”

Yet the problems were worse than we could have imagined. As we wrote in 2016 after an expose by 60 Minutes:

Two and a half years after Hurricane Sandy, “[t]housands of [victims'] claims have still not been resolved and there is evidence that many homeowners were victims of what appears to be wide-scale fraud where original damage reports were later changed to make it look like the damage wasn't as bad.” The facts uncovered in this piece are horrendous.

Certainly, we commend both President Biden and consumer groups trying to help. Their assistance and advice are critical. And right now, the media spotlight is shining on the insurance industry, which might incentivize them to do the right thing for a little while. But once the cameras are gone, victims of these catastrophes may be left to struggle on their own, once again.

Welcome to Insurance Isle!

There is something particularly unseemly in how the property/casualty insurance industry has used its power to get rich off the COVID crisis. Not that insurance industry observers would expect anything less. This is an industry that never saw a crisis it didn’t try to exploit. In fact, after 9/11, the Center for Justice & Democracy wrote a whole paper on this very topic, called Shakedown: How the Insurance Industry Exploits a Nation in Times of Crisis. Pretty much a running theme over here.

Before COVID, the industry was in the early stages of deceiving businesses, consumers, and regulators about its financial condition in preparation for creating a national insurance crisis of skyrocketing rates. This, mind you, was while it was sitting on more cash than at any time in its history. “Juries were out of control again so your premiums have to go up,” the industry started saying. Juries, victims, and lawyers were suddenly creating an urgent need for insurers to price-gouge. (See a complete explanation here.)  

This is the same script they have used for the last 40 plus years to justify each prior liability insurance crisis, and what many experienced as a volcanic eruption in insurance rates. There have been three such "crises" before now.

It's easy to see a familiar yet bizarre pattern. To buy the industry's position, one would have to accept the notion that lawyers and juries were particularly aggressive in the mid-1970s (when rates shot up the first time), then stopped for a decade, then became aggressive for three years in the mid-1980s (when rates shot up a second time), then stopped for 13 years, then got all aggressive again from 2002-2006 (when rates shot up a third time), then they stopped for 13 years, and now, 13 years later, are aggressive again. Do they think we're that dumb? Who can't see an insurance industry cycle at work, which by the way is well recognized by the industry but they don't talk about it much. And to be clear, this cycle has nothing to do with claims or payouts. Actual data show those have remained stable throughout. (Why this cycle happens is all explained here.) But data and facts never stops the industry from trying to bamboozle the public. So in 2019, rate hikes accompanied by a new anti-jury crusade, began again.

But then COVID hit. Courthouses shut down. Jury trials stopped. People stopped driving, People drastically cut down on non-essential medical care, like elective surgeries, while at the same time most states passed laws immunizing hospitals and nursing homes from liability. Whoops! Now who’s gonna believe that backlogged juries, non-existent victims and lawyers who can’t get their cases heard, are driving rate hikes? Pile onto that the fact that insurers, who had already put virus exclusions in many commercial policies, indeed refused to pay virus-related business interruption claims and fought businesses in court while still marching down to Washington demanding a bailout (just in case they needed it) much like they did after 9/11.

Turns out, an insurance bailout isn’t what anyone needed from government officials. What was needed was someone to look at their books. Not only did they not refund money as they should have, they kept raising premiums while everywhere, claims dropped. Their profits doubled, their surplus (the extra money over and above what’s need to pay claims) ballooned to nearly 1 trillion dollars. Now it looks like they even hid profits in bloated reserves. Yet they are STILL raising rates.

And it’s not like we and other groups didn’t scream that this was exactly what was going to happen. (Can state regulators please start taking consumer groups seriously?)

Ha, I do sound a bit angry but actually I’m over it. I’ve decided it’s time reconsider this industry with the level of mockery it so richly – and I mean RICH-ly deserves. With humor. These people are a comedy show.

So in keeping with that theme, we present to you Insurance Isle, the latest from the Center for Justice & Democracy, who say: 

[We] decided to offer Insurance Industry Fat Cats a “safe” place to go so they can enjoy their outlandish profits in peace while commiserating with other Fat Cats.

But don’t worry, our extensive sourcing puts the lie to everything they say. And our funny illustrations help make the point.

So spend some time with us on Insurance Isle, where you can "Relax at Profit Beach." "Hoard Your Money at Pirate's Cove." "Shop on Spin Boulevard." "Chill While Our PR Experts Do the Work (Social Inflation Anyone?)." "Spend Hours at Whiner's Warf." Learn how auto insurance companies worked the pandemic for maximum greed, er, bliss. It’s sure to put a smile on your face – unless, of course, you’re an insurance company.

Download the brochure - and learn all about Insurance Isle here.

Insurance: The Essential Guide to a Bewildering Industry

Are you sick and tired of the property/casualty insurance industry? What I mean is, are you tired of the P/C insurance industry using endless amount of confusing data that no understands, and then asserting its “superior knowledge” of insurance to make all kinds of demands on the rest of us? Like raising our rates, denying our claims, or lobbying for laws that strip us of our legal rights, all while blaming everyone but themselves?

Well, the Center for Justice & Democracy says, “no more!” CJ&D has figured out a way to help explain this industry while keeping you appropriately entertained because, let’s face it, insurance sometimes can be a little boring. But not to CJ&D. They’ve developed a fun (yep, very fun) new manual called, Insurance: The Essential Guide to a Bewildering Industry. Or just go to InsuranceFatCat.com for a look.

This manual is fully illustrated (by Austin's Jason Stout) using a very appropriate Fat Cat motif, and includes sections like, “Crying All the Way to the Bank,” “Hiding Wealth with Tricks and Loopholes,” “Anyone Else Would Go to Jail,” and “When Words Aren’t What They Are.”

It is easily shareable both as a printed document and online. So spread the fun. And don't take their *$%# anymore.

Confidential Insurance Memo: Stop Mimicking Donald Trump!

The following is a memo we obtained from a confidential insurance industry source (FWIW). 

MEMO

From: Four Seasons Media Consultants, Inc.

To: The property/casualty insurance industry

Re: Stop Mimicking Donald Trump!

Date: November 11, 2020

Friends, voters have spoken about the current President and what they’ve said is, “we don’t like this guy.” As a fairly detested industry yourself, you could learn some things from this experience. Based on what I observed from yesterday’s A.M. Best Webinar called, The Impact of Social Inflation on Insurance, which featured grievance-filled insurance lawyers and litigation consultants, I would like to make a few recommendations.

1. Stop Playing the Victim

Trump played the victim for four years. Ultimately the public didn’t buy that story. They’re not buying yours either. Maybe it’s just that your disgruntled lawyers and consultants who (sometimes) lose their cases need to stop representing you in Webinars. I think it’s more than this, however. Consider the “optics,” for example. You have made huge profits during this pandemic, partly due to the fact that you are price-gouging your struggling commercial policyholders. As you must know, the whole idea of “social inflation” was fabricated to justify these premium hikes, which began last year and have continued all this year. This is all happening while you hoard money, fight claims, and dump risk while making a windfall due to fewer claims, delayed jury trials, and low-balling settlement offers. Trump's campaign was grievance-driven. He lost. Please take a lesson from that.

2. Stop Talking about Jury “Fraud” with No Evidence

Talk about ripped from the headlines! Here are some of the things I heard at the A.M. Best Webinar. Jury verdicts, rendered by everyday people from a community (jurors, like voters!) are “fraudulent.” This “fraud” occurs when jurors hear from both sides in a case, believe the plaintiff’s version of things, and award an injured victim a sum that you consider large. This is your main definition of “social inflation.” But as one Webinar panelist noted, this is a completely made up industry term, created with “no scientific evidence behind it” and “no sound scientific basis for it.” And he was the first speaker! “Who cares,” said one of the corporate lawyer panelists later. “I know it when I see it” (paraphrasing Supreme Court Justice Potter Stewart trying to explain hard-core pornography). Nope. U.S. government policy is about to become science, data and fact-driven again. Get with the program, folks!

3. Stop Ignoring Covid

I’m not talking about ignoring lives lost due a lethal pandemic, as Trump has done. I’m talking about holding a gripe-filled session about jury verdicts at a time when, due to Covid, the civil jury system in under more strain than at any time in modern history. Civil juries trials barely exist today. How can you possibly be complaining about jury verdicts right now? Even when jury trials start up again, civil cases are so backlogged that “extreme delay” seems like an ridiculous understatement. (A few articles and observations here, here, here.) Some injured victims are having to turn to private systems, like mediation and arbitration, to adjudicate their claims - systems that can be infected with corporate bias.  As the LA Times reported,

Having to rely on mediation and arbitration to resolve cases has left many plaintiffs in a painful limbo, said Oakland attorney Micha Star Liberty, president of Consumer Attorneys of California. Liberty’s law practice represents people whose claims include wrongful termination from work, sexual harassment and serious injury or abuse.

 “Regular folks who depend on an ability to petition the courts to remedy wrongdoing are in dire straits,” Liberty said.

“Systems like arbitration favor corporations and are extremely expensive. Mediation is extremely expensive,” she said. “With the courts failing to function at full capacity, delay and denying tactics are working and people are getting hurt.

Not only that, insurance defense lawyer costs are down since everything’s on Zoom. No more padding those business travel expenses!  And no more ignoring Covid. It’s been a windfall for you guys and you know it.

4. Don’t be a Sore Loser

Another recent Trump theme, of course.  Most of your fake evidence of “social inflation” is the litany of cases you lost due to your inability to defend your client’s negligence or misconduct. Sorry you did not do well but blaming anyone but them and you for this is juvenile. No, it’s not lawyer ads that cause your loses, or litigation finance companies that actually screen-out frivolous cases. (See more here.) Most of the Webinar addressed how insurance defense lawyers can turn things around for themselves. Here’s a thought – settle more legitimate cases for a fair amount of money. You’ve got the funds. Stop fighting everyone. If you really don’t like these outcomes, leave and do something else like set up your own media company. Or something like that.

To sum up, Tom Friedman had a recommendation in his recent New York Times column about how “the Trump presidency has dangerously normalized lying.” He said,

[I]t’s vital that every reputable news organization — especially television, Facebook and Twitter — adopt what I call the Trump Rule. If any official utters an obvious falsehood or fact-free allegation, the interview should be immediately terminated, just as many networks did with Trump’s lie-infested, postelection, news conference last week. If critics scream “censorship,” just shout back “truth.”

So consider this memo my shouting back a little truth. Make sense? If not, I hear the Trump White House is still hiring.  

The Insurance Profiteers

A few years ago, an article in Business Insider posed the age-old question, “Is there such a thing as too much profit?” Or to put it another way, is it right that companies are allowed to do anything and everything to (legally) increase profits even if those decisions ruin the lives of their employees, customers and communities? As the writer wrote,

I initially thought, "What kind of hippie question is this?" but I was in for a surprise. Regardless of someone's politics or economic point of view, everyone I spoke with reached the same conclusion. Ultimately, the answer is:

His answer was: "it depends," which is honestly a better answer than I’d expected from a Business Insider writer.

This question came to mind the other day after reading news reports of Travelers insurance company’s third quarter 2020 profits, headlines like, "Travelers Reports Strong 3Q with Profit More Than Doubling."

Doubling. During a pandemic, while the company’s own commercial customers (and so the nation’s economy) are collapsing in large part due to the insurance industry's decision to fight claims – especially over “businesses interruption” losses (see here and here) - and at the same time, being forced to pay ever-increasing insurance premiums. And just to fully fill out this picture, insurers are also receiving a direct financial windfall from the pandemic itself, especially in personal lines like auto insurance. The Consumer Federation of America and the Center for Economic Justice have been up in arms about this, most recently last week:

The Consumer Federation of America (CFA) and Center for Economic Justice (CEJ) criticized insurance companies for opposing a proposed regulation by the Nevada Division of Insurance to ban the use of credit information to increase insurance rates for the duration of the COVID-19 pandemic. This rule is modest, but it will help make insurance more affordable and ensure that consumers are not harmed by large premium increases due to declines in their credit score over the past eight months. Yet auto insurers remain steadfastly opposed to the proposal, and even tried to weaken it.

“Insurance companies have reaped massive profits due to the COVID-19 pandemic and its effects, including significantly increased unemployment, which caused a huge decline in driving, car accidents, and insurance claims. Yet they are opposed to any efforts to protect consumers from harmful credit scores resulting from the pandemic,” said Michael DeLong, CFA’s Insurance Advocate. “This proposed rule is limited, but it will protect consumers from insurance premium hikes caused by declines in their credit scores. We are encouraged that Nevada’s Division is pushing back against industry attempts to undermine this badly needed rule, and urge the Division to enact it as soon as possible.”

And there's more. The insurance industry is also taking advantage of people who have been hurt by low-balling settlement offers to exploit trial delays. We covered this problem here.

Back to price-gouging. In early March, the Center for Justice & Democracy and CFA released How the Cash Rich Insurance Industry Fakes Crises and Invents Social Inflation, showing that this industry was, once again, causing a national insurance crisis of skyrocketing rates, while sitting on more cash than at any time in its history. Now months into the pandemic, we see the continuation of ever increasing insurance rates on businesses throughout the country.

Travelers just boasted about sticking almost all of its commercial policyholders with higher premiums. As one Wall Street Journal reporter wrote, the company's excessive third quarter profits have much to do with insurance rates, which they insist on increasing because (they say) claims might go up in the future even though they have no evidence of this, and today claims are in fact way down. Less driving, people aren’t working, the economy is in shambles.

So to sum up, the insurance industry is hoarding money, fighting claims, and dumping risk while making a windfall due to fewer claims, delayed jury trials, and low-balling settlement offers while shaking down their policyholders with price hikes.

So I guess in answer to our first question, yeah. It's a thing.

Calling All Real Housewives: Time to Condemn the Insurance Industry

Century 21, 2001. It survived.

The Real Housewives of New York (RHONY) don’t always get it right but at least they try. Like the time they hosted an event to honor the work of our friend Bridie Farrell, a leader in the effort to change statute of limitations laws for child sexual abuse survivors. The event quickly turned into what Andy Cohen called one of the most “cringeworthy” events in Housewife history, which is saying something.  At least a lot of people suddenly knew about Bridie.

Sonja Morgan is a RHONY star who hasn’t always gotten it right but clearly has tried. As fans of the show know, she recently did a deal with New York’s most famous discount department store, Century 21. She "was planning to be Chief Lifestyle Officer taking people on shopping sprees… helping ‘people transition through hard times in their life’” such as providing “wardrobes for people who need to ‘get a leg up on a job interview,’ or folks who are ‘going through a sex change, coming out or coming back from the military.’” Who didn’t admire her for that and hoped it worked out?

Century 21, 2020. It didn't survive.

The insurance industry, that’s who. This industry’s greed has now destroyed Century 21 and with it, Sonja’s admirable plans. It should be noted that Century 21’s flagship story, directly across from the World Trade Center, survived 9/11. Back then, the insurance industry did the right thing, paid claims it owed, and helped Century 21 survive and grow. Isn’t that how insurance is supposed to work? You pay premiums (sometimes for years), and if something unexpected happens, insurers pay your claims.

Yet today, the industry is refusing to pay pandemic-related claims knowing that by doing so, they are destroying businesses like Century 21, and severely weakening the U.S. economy. In other words, it has now wrecked a company that the terror attacks couldn’t. Not to mention that it’s pulled the rug out from under Sonja Morgan.

The only thing insurers seem inclined to do during this pandemic is to hold onto all their money and add to their already huge $800 billion (give or take) surplus. The industry’s entire response to this pandemic has been either to try to escape responsibility for virus-related claims or dump risk while at the same time price-gouging customers with completely unjustified rate hikes.

In fact, as we’ve noted before, when this pandemic began, the industry had already started raising rates on its business customers using its go-to excuse – “out of control” U.S. juries, which rule in only 2 percent of cases. In fact, they created their own lingo for this so-called nonexistent “problem”  – social inflation. Blaming juries has always worked whenever the industry has wanted to jack up rates or cancel coverage. Incredibly, this is true even now, when the entire civil jury system is on hold and American jurors themselves are sick and dying of a pandemic and insurers are low-balling every claim. 

Back to Bravo world. Say what you will about the lifestyles of Bravolebirities, there is one interest that seems to be shared by a lot of them: pet rescue. While most sane people see pet adoption as one of the few silver linings of quarantine, the insurance industry sees it rather as a new way to screw their policyholders. According to them: Pet adoption means dog bites; Dog bites mean people running to court; People running to court means “social inflation;” Social inflation means insurers being forced to cancel coverage and price-gouge. 

There is no actual data to back up any of this. That’s never stopped the insurance industry. And incidentally, way to encourage pet adoption, you creeps.

Your move, Real Housewives everywhere. Join us!

Insurance Industry Low-Balling Lowlifes Carry On

Here’s an interesting factoid: 70% of insurance industry employees have attended “on-line happy hours” since the pandemic’s start – more than just about any other group in America. Honestly, if I worked in a morally bankrupt industry trying to take advantage of a lethal pandemic, economic collapse and civil unrest, I might turn to alcohol too.

Actually, I have found that drinking helps get through the infinite number of online insurance industry webinars that I’ve listened to lately, where representatives try to explain the importance of exploiting these multiple crises. If there is one thing these companies know how to do, it’s holding onto money. In fact, the property/casualty insurance industry has stored away so much excess profit that it now sits on more surplus than at any time in history – a record level of well over $800 billion, which doubled from 2004 to 2018, quadrupled since 1994, and has risen by more 5,000% over the past 60 years. 

One of my favorite recent webinars was the May 19 presentation featuring insurance defense lawyer Ellen Greiper and James Dorion of insurance consultanting firm Willis Towers Watson, among others. They explained that while the backlog of cases due to pandemic-related court closures is, for most people, a troubling development, for insurance companies it could be a downright bonanza. In fact, it seems this is their ultimate fantasy come true. With no level playing field - in fact no playing field at all - insurance companies can finally force injured people to accept their lowball settlement offers.

A giddy Ellen Greiper put it this way: “I have had a flurry of phone calls, I would say in the last two weeks, from plaintiffs who are now willing to take that [settlement] amount I had offered before.… Those plaintiffs are realizing that they are not going to get a trial for at least two years [and they] may be out of a job now, or may be losing money that want to settle.” Echoed Mr. Dorian, “I’ve heard almost across the board from claim leaders at major insurance markets saying that they’re seeing opportunities and looking to capitalize on them where they can settle things more advantageously than they would’ve been able to a couple quarters ago.” (emphasis added).

Thank goodness for the California Department of Insurance, which is trying to get ahead of this cheating racket by sending notices to insurance companies, telling them that it is a violation of the California Unfair Practices Act to exploit the closure of the court system “by offering financially strapped claimants low settlements.”

“The department has been informed that some insurers and other persons engaged in the business of insurance in this state are unfairly taking advantage of the COVID-19 crisis and providing unjustifiably low settlement offers knowing financial need is high and recourse to the civil court system in the state is currently severely limited,” the notice said. “The department has also been informed that certain insurers and other persons engaged in the business of insurance in this state are lowering or failing to make settlement offers with full knowledge that, because of the reduced California court schedules, policyholders are unable to obtain prompt redress in the California court system.

“This lack of access to the California court system puts policyholders who are already in severe financial hardship at a disadvantage and vulnerable to unjust settlement practices,” it said.

Of course, low-ball settlement offers aren’t the half of it. The way this industry is trying to argue their way out of paying claims to their small business policyholders is utterly breathtaking. Take business interruption insurance, which is meant to cover business losses. Many businesses dutifully paid premiums for this coverage for years. They are now being told their policies cover neither losses due to the pandemic lockdown nor civil unrest that may have also forced businesses to close.  

First, ever since the nationwide lockdown, this cash-rich industry has been insisting they owe nothing to their business customers who paid premiums to cover business interruption losses. (See our earlier post.) They say either that the fine print in policies exempts virus-related business losses entirely, or even if it doesn’t, still limits what they owe because these businesses suffered no physical damage from a virus.   

Now that there is physical damage due to civil unrest, they’ve come up with new escape valves. For example, some say they will deny claims by arguing that if there are two concurrent causes for a business to be closed (i.e., pandemic and looting), they’ll only pay if the covered reason (say, looting) is the predominant cause of the shutdown. If not, they don’t have to pay a dime. And if they can’t get away with that, they’ll go the low-ball route and refuse to pay really what they owe saying essentially that since businesses are already losing money due to the virus, they are not making much anyway. That means less for insurers to restore. I mean, you could go in circles all day finding your way out of this logic. Former industry spokesperson Robert Hartwig summed up the windfall they expect over all this by saying that by refusing to pay what they owe, “The pandemic could cut industry losses from the civil unrest in half, from about $1 billion to $500 million.”  Whoop di doo.

But don’t pop the champagne cork yet, Mr. Hartwig. On June 4, the Consumer Federation of America brought this whole con job to light, calling on all major insurance companies to “not take unfair advantage of a two-pronged crisis that is wreaking havoc on so many small businesses in America” and “to pledge not to deny or underpay business interruption claims resulting from riots or civil disorder from businesses also impacted by the COVID-19 pandemic.” They said,

We write to ask you to make this very simple pledge to the businesses you insure across the country:

We pledge that our insurance company will not deny business interruption claims resulting from a riot or civil disorder because a business has been shuttered as a result of the pandemic or on the basis of a previous decision to deny a business interruption claim based on a virus exclusion in our policy.

We further pledge not to reduce the amount of payment available on business interruption claims resulting from a riot or civil disorder below the amount that would have been paid prior to the pandemic.

Hopefully state insurance regulators or lawmakers will take notice and get involved. I’d like to believe the industry would do the right thing on its own, but these are the same people still obsessing over a case they lost nearly a year ago involving a grandmother and grandchildren killed in a head-on tractor-trailer crash. On top of that, they have decided that now is a great time to price-gouge their customers with rate hikes even though the industry is still sitting on record-breaking mountains of cash and claims have dropped due to greatly-reduced accident frequency.

But maybe instead, they’ll decide to treat their customers fairly, act honestly, and do the right thing. Maybe they’ll try to restore their reputation and no longer be one of the most detested industries in America. Maybe they will step up and help this country at a time of multiple crises instead of finding ways to hurt us…  

Naaaaaaaahhh!  (Video below in honor of J. Robert Hunter.)

 

Confidential Insurance Industry Transcript!

CONFIDENTIAL TRANSCRIPT

April 2, 2020

------------------------

COVID 19 MENTAL HEALTH SUPPORT HOTLINE: Hello, how may I help you today?

ANONYMOUS PROPERTY/CASUALTY INSURANCE INDUSTRY EXECUTIVE: Hello, I need help dealing with my anxiety because my industry is the worstest victim.

THERAPIST: Ok, hmm. Please explain what’s troubling you.

ANONYMOUS: So here’s the problem. People think we owe them something.

THERAPIST: Well isn’t that your job? To pay claims? Or, as I’ve seen you guys put it, to be “on our side,” a “good neighbor,” keeping us in “good hands.” 

ANONYMOUS: Hell no that’s just the TV ads. Our job is to collect and pocket money from our policyholders at the highest rate state regulators will allow – and let’s face it, most state insurance departments do nothing when we price-gouge policyholders. Then we get to sit on that money and pocket the interest without returning any of it to our customers, and then fight anyone who tries to force us to pay claims that we owe. And until now, we’ve done spectacularly well with that kind of business model! In fact, going into this global health crisis, we had amassed mind-boggling, record-breaking surpluses. Over $800 billion! 

But now this crisis threatens all of that. Everything’s going haywire. I’m scared.

THERAPIST: Why are you scared?

ANONYMOUS: Well, I feel we're in some danger because people don’t like us very much during times of national crises, which I don’t get. Sure, after Hurricane Katrina we did everything we could to escape our responsibility to homeowners, many of whom were destitute. But how was it our problem that our customers were hungry, exhausted, traumatized and homeless? We had every right to fight them even when we were wrong. And after 9/11, our response was to march into the White House demanding a federal bailout that we absolutely didn’t need, and which keeps getting renewed. But we were just asking to loot the federal treasury like every other industry that had dumped money on politicians over many years. 

And now, the $800 billion in excess profit that took decades for us to stockpile is threatened by businesses who think we owe them when we went out of our way to exempt ourselves from virus-related losses. 

Now granted, we may have missed a few of those policies and forgot to exempt viruses here and there, but that was just an oversight on our part and we shouldn’t be punished for it, right? Businesses need to suck it up and stop suing us.

Plus, those mighty consumer groups are writing to insurance commissioners saying the windfall we are about to receive on auto insurance (since no one's driving) should be returned to policyholders! Check out this letter from the Consumer Federation of America and the Center for Economic Justice, calling for “lower auto insurance premiums for people who have stopped driving and lower commercial premiums for businesses that have dramatically curtailed their business and limited their exposure.”  What kind of game is this?

And speaking of rates, when this pandemic began, we had already started raising rates on our business customers using our go-to never-fail excuse – U.S. juries and their terrible verdicts. In fact, we created our own lingo for this problem  – social inflation. I know, there are compelling reasons why juries decide as they do and for decades we’ve complained about them anyway. And only 2% of cases end up before juries and we win most of them. But blaming juries has always worked whenever we’ve wanted to jack up rates.  So we had to keep up the rhetoric.   

Yet now, the entire civil jury system is on hold and American jurors themselves are sick and dying of a pandemic. It seems suddenly our entire PR effort has become, what’s a good word, insulting? Immoral? Tone deaf?  Depraved? Un-American? We are being treated so unfairly.

THERAPIST.  Well is there any good news you can focus on instead?

ANONYMOUS: Hmm, let’s see. Well there is something. Seems like Congress is interested in expanding the terrorist claims backstop to cover pandemic claims. That means if these claims cut too deeply into our mountains of cash, taxpayers will bail us out. That seems more than appropriate, especially if businesses start winning their cases or, god forbid, anyone forces us to retroactively pay claims. 

And maybe Congress will even set up a business victim compensation fund like they did for families after 9/11. That would be extra sweet. They really should because if they put us in charge of distributing money by deciding which claims are valid, we can promise that no one will get anything! It's a win-win! (I just hope Chairwoman Velazquez took care of this before she got coronavirus.)

THERAPIST: It sound like you’ll be just fine even though no one else will. But why don’t you contact me again in a week to continue our session so I can make sure you’re ok.

ANONYMOUS: Probably not. My insurance won’t cover it.