Many years ago GEICo was revealed to be a disgusting schoolyard bully when handling legitimate damage claims. A schoolyard bully, as you know, picks on little kids who not as strong or can’t fight back. Perfect description of GEICo’s behavior in 2013.
After intense activity on behalf of the injured consumers of Florida, a dedicated group of trial lawyers discovered documents showing that GEICo routinely provoked unnecessary lawsuits against its insureds by failing to pay reasonable compensation to people injured by their customers. It got so bad that there were news articles about how bad and outrageous GEICo’s conduct was. GEICo was even lying to other insurance companies so their customers wouldn’t go to competitors.
Why do we care about that? “It’s a business, don’t they have a right to do anything to make a profit?” some might say. Well, no. Gambling is a regulated business because gambling houses have a reputation for stealing from the gamblers and gamblers, likewise, have a reputation of blowing their rent, car payment and children’s milk money. Opioid drugs are regulated because they have an ability to devastate people’s brains and thus their lives and gut a community of productive citizens. The stock markets are supposed to be regulated to protect the average investor (though, at the moment they are not). Regulations exist to protect the public from businesses, businesses just like insurance companies which are rich, large and concentrated power that can exert a great deal of influence over regular people and state legislatures. As I wrote in another post, insurance companies fought and won to be excluded from federal regulations instead being covered under state law. They claim to be a special type of business. What happened then was, with their teams of well-paid lobbyists and relatively unsophisticated state legislators, the insurance industry has over the years passed very favorable laws in every state, reducing their risk and thus, increasing their profits. Every legislator has a price. It is no wonder that Florida legislators become richer the longer they serve in the state legislature.
So back to what GEICo did a few years ago. After a lawsuit was filed, plaintiff’s lawyers enforced the rules requiring GEICo to produce its business documents. The lawyers were able to get internal memorandums between the bosses, management and adjusters explaining and GEICo’s claims handling practice. Now, “claims handling practice” is what an adjuster does. It is when a claim is submitted, the adjuster investigates it, -look at medical bills, property damage estimates, repair receipts, etc. Then the adjuster is supposed to evaluate the claim and offer that money to the person making the claim. That’s not how GEICo was doing it. The documents GEICo had to turn over revealed that, contrary to what the Florida adjuster’s code of ethics requires, GEICo was more interested in forcing people to have to hire trial lawyers and file lawsuits. Basically, GEICo was forcing the court systems of the state of Florida (for which you pay for with your taxes) to handle legitimate claims that GEICo could have easily resolved had it acted fairly and reasonably toward its insured which is what the law requires.
Some of the more choice quotes from the memorandum the trial lawyers obtained are:
- “I firmly believe that for every time we take a case to trial, we send a very strong and clear message to the plaintiffas was thes bar about our attitude and our capabilities. This is and of itself is a tremendous deterrent to filing new suits from those [plaintiffs attorneys] that may not be as aggressive as others…”
- “Most proud of our trial results with 89 cases going to trial, (50 more than a year ago) and a win ratio of 80%.”
- “We will never know how many suits were not filed because our no willingness and ability to try case.”
- “2014 was disappointing in terms of the number of trials conducted by staff. Only five trials the entire. Compared with 11 2013. This was an extreme disappointment for me.”
What kind of executive at what insurance company wants to force people to file suit rather than pay fair and reasonable claims? GEICo and its managers apparently are. This is the kind of company actions that force people to hire lawyers.
Why do we not know more about in the public square? Well, there’s a reason… advertising.
You probably know that these online reputation companies don’t really “fix your reputation.” what they do is bury the bad news with a lot of fluff posts, entries, “news clips,” “press releases” that are all positive and just happens to include your business or personal, name, phone number or address. That is exactly what GEICo does with its constant commercials. Just turn on the television, radio, the Internet, a podcast or look at a billboard or their flying advertisements in large cities. GEICo has spokespersons (“spin doctors”), advertising executives and promotional campaigns constantly covering up its nasty deeds and reputation. Just look at the website “Ripoff Report” and search “GEICo. It’s not the business its advertising tells you it is. Based on its behavior, even its mascot is the wrong animal.
Now, we come to latest behavior by GEICo. Its conduct, despite being sued several times has not improved.
In the latest example of corporate misbehavior by it we find out GEICo applies pressure to its own employees, the adjusters. In Florida, adjusters must follow a code of ethics. This code comes is created by the Florida Insurance Commissioner from Florida laws which require insurance companies to treat fairly customers and claimants alike. However, fair treatment means fair claims valuations which requires fair and reasonable payments to claimants and customers which reduce corporate profits. Reduced corporate profits reduces the shareholders’ income and the CEO’s and upper management’s bonuses.
The case of Gonzales v. GEICO General Insurance Co., is the latest exposé of our state government failing to properly regulate the Florida’s insurance companies. Lisa Anderson was injured in a crash caused by a GEICo customer. She was young at the time and sustained an injury to her low back which required surgery. A report of the surgeon recommending surgery was sent to GEICo. It offered $2,581.16 to settle. With a little more documentation, the offer went up only $400. GEICo’s limits were $100,000. GEICo was given several opportunities to settle the case and protect its insured but refused. Miss Anderson had the surgery. GEICo increased its offer to $22,500. The cost of the surgery itself was $24,000. After the plaintiff sued GEICo offered its limits of $100,000. A verdict came back against the insured (whom GEICo was supposed to protect) for $398,097.82. This sum which would financially devastate GEICo’s insured. GEICo had a choice. This choice is one that is supposed to protect its injured. It didn’t make that choice. It chose its financial welfare over the person it was supposed to protect.
Fortunately, Florida has a bad faith law and a lawsuit was brought against GEICo because of what it did.
An expert at trial, Peter Knowe, a former insurance industry executive and adjuster said Ms. Anderson’s claim was greatly in excess of the hundred thousand dollar policy limit and GEICo knew it. It’s offers “grossly deviated from insurance industry custom and practice. GEICo admitted that its initial offer was at the “bottom end of the negotiation range.” The expert stated a even a “reasonable evaluation” of the case would “never yield a valuation of $22,500” (GEICo’s top offer).
The interesting part is what happened when the lawyers and judge forced GEICo to produce the basis for its offers. It wasn’t what you think or what is allowed under law. Instead of looking out for its insured, GEICo is looking out for its “Average Loss Payments.” What are those you ask? More below, but first, more disturbing details.
GEICo’s former regional claims manager in charge of the adjusters who handled Ms. Anderson’s claim testified GEICo should: ” “hold the line” and refused to settle when GEICo believed it had “any rational basis” for its lower valuation. He said paying more on one claim “simply because an attorney asked for it” could ” set the value of the next 100, 1,000, 5,000 claims” higher. Even where GEICo’s evaluation was a “couple of grand opening” less than the claimant’s offer, GEICo would force the insured claimant’s attorney to file a lawsuit against GEICo’s insurance without regard for the exposure its insured faced.
Think about that. Rather than paying $1,000 or $2,000 more, GEICo’s told its adjusters to force the plaintiffs lawyers to file suit even if it exposed its insureds to a verdict greater than the limits of GEICo’s protection (policy) This exposed the GEICo insureds to possibly pay thousands tens of thousands or in this case hundreds of thousands of dollars because GEICo wanted to save “a couple of grand.”
This practice of focusing on the average payments for a claim is called “Average Loss Payments.” GEICo, and many other insurance companies look at other things to determine how much to pay for a claim besides the injuries their customers caused. GEICo considered an adjuster’s “average lost payments” in its performance evaluation of that adjuster. The expert at trial stated this was a deviation of industry standard because it “puts pressure on adjusters to artificially create a lower average loss payment as a result of underpaying claims.” The expert stated that GEICo’s constant request for more information, like Anderson’s employment records and information related to any prior injury, were unnecessary to evaluate the claim against its insured.
This is not “adjusting a claim” which we pay and regulate and trust insurance companies to do; this is putting profits before people both your customers an insurance company is supposed to protect and the people they injured.
Whenever you hear an insurance company talking about “frivolous lawsuits” or “fraudulent claims” you are listening to propaganda that is covering up what the insurance industry is doing because it can. That’s what trial lawyers like me are about.
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