As a lawyer who has been exposed to many insurance company practices over the past 30 years, my senses may have numbed to insurance companies’ claim settlement practices. Adjusting an insurance claim often involves delay, procrastination and eventually paying a pittance of what is owed under the policy. A new book by J. Fineman titled, “Delay Deny Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do about It” exposes the devastating and pervasive effects of the insurance industry’s switch from underwriting based revenues to claim based revenues.
Professor Fineman cites cases and provides concrete examples of scams that insurance companies have perpetrated and the consequences these have caused for consumers. The result is an intentional failure to honor promises to its claimants. Although policy holders are insurance company customers, they buy a promise instead of a product. The promise is to pay the loss when the insured event occurs. When this promise is broken, the policy holder suffers significant harm:
“When insurance does not work, the consequences are more severe than when any other kind of company fails to keep its promise. If a homeowner hires someone to paint his house and the painter never shows up, the homeowner can take his money and hire someone else. However, if the insurance company refuses to pay a claim, it is too late to go elsewhere for another policy. No company will write a policy that will pay for fire damage that has already occurred.”
Fineman theorizes that insurance companies are not our friends (or our “good neighbors”) but are also not our enemies either. Instead, they are simply businesses whose purpose is to make a profit. Insurers take this goal too far by holding back money that they should pay to claimants. Insurance companies increasingly delay payments of justified claims, deny payment entirely, and defend those actions by forcing claimants into litigation.
In the past few years, this practice has been brought home to contractors involved in construction defect cases, instances in which the insurance company should clearly step in and pay the loss. Instead, however, the insurance company picks apart the policy fine print and fights. Major insurance companies have shifted their focus to claims processing and can reap substantial revenue by drawing out the claims process. “An insurance company
Fineman’s book should be an interesting read for contractors who are frustrated by ever-increasing premium costs, but whose insurance company wants to debate and fight, rather than pay, when an insured event occurs.