Beware of Insurance Company Behavior During Monsoon Season

Today I read a press release concerning a trial which started just a few weeks ago against Nationwide Insurance Company concerning its conduct toward victims of Hurricane Katrina. This trial reminded me about what obligations insurance carriers have toward Arizona policy-holders and what remedies are available should you be deprived of the benefit of insurance purchased to cover a loss. If you make a decision to buy insurance to cover yourself and your family in times of calamity, you should receive the benefit of this coverage. Some insurance carriers disagree!

For example, according to a former employee of State Farm Insurance Company, after the California 1994 “Northridge” earthquake, “State Farm agents attempted to avoid paying claims by systematically forging signatures to make it appear that policy holders had declined earthquake coverage.” The process of affixing “unauthorized signatures by State Farm agents or agency employees on applications omitting earthquake coverage” led to routine denial of earthquake related claims by State Farm policyholders.

Also, after the devastation caused by Hurricane Katrina, according to the Mississippi State Attorney General, adjusters for several insurance companies including Nationwide Insurance, Allstate and State Farm,

[A]sked policyholders to sign forms that acknowledged they sustained flood damage, which is not covered by homeowners’ insurance . . . Adjusters . . . cajoled victims to sign [ ] forms, saying they are necessary to immediately receive a check for living expenses. The companies can use the sentence regarding flood damage against policyholders later . . . . The difference is important. Damage[ ] caused by wind or water falling into a structure, like through a hole, typically is covered by a homeowner policy. Damage from rising water, however, usually would be covered only by the National Flood Insurance Program, which is run by the Federal Emergency Management Agency.

These horror stories about insurance company misconduct designed to minimize expense should present some valuable lessons as we make our way through the monsoon season this summer. When you purchase insurance, make sure that you keep copies of all coverage and policy documents as well as all letters and correspondence to and from your agent. Generally, your insurance carrier will provide you with a declarations page and a copy of the insurance policy when you buy a policy. The declarations page outlines specific details describing the coverage you purchased. Make copies of this information and keep it safe! If you later need to make a claim, you can rely on your own copies to determine what coverage is available. Also, after presenting a claim, you have an obligation to cooperate with your insurance carrier. However, this does not mean that you are obligated to reject any coverages available to you. Read everything that your carrier provides to you and asks you to sign. Don’t sign anything until you understand the implications.

Lastly, if you suspect that your own insurance company is not treating you fairly, you have a several options. One simple option is to file a complaint with the Arizona Department of Insurance who will investigate the complaint on behalf of the State of Arizona and punish the insurer in case of wrongdoing under Arizona law. Also, you have may have a separate claim against your carrier for bad faith or breach of the covenant of good faith and fair dealing if it turns out that your insurance company made a decision to place its profits ahead of your best interests. Our firm has handled a variety of lawsuits against a variety of different insurance carriers arising out of decisions made in bad faith which disregarded the best interests of its policy holders. While I hope that all insurance companies will act in the best interests of their insureds, unfortunately we see a variety of actions by carriers which in certain circumstances, rises to the level of bad faith because the conduct ignores an insured’s best interests. Hopefully you will never be in a position to question your insurance company’s conduct because you will never have to make a claim for benefits under your auto, home, health, disability or life insurance policy. However, as the monsoons continue this summer, make sure that you keep copies of all relevant policies, applications and coorespondence if you ever find yourself frustrated by your insurance company’s behavior in a time of need.