Unfair and Deceptive Insurance Practices

Unfair and deceptive insurance practices are prohibited by law. That doesn’t mean it doesn’t happen.

Consider the case of Odin Anderson, crossing the street in Boston on a clear, sunny afternoon, when he was hit by a 13 ton shuttle bus making a left turn. The bus driver told his insurance company he was looking the opposite direction to see if there was traffic and never saw Anderson before impact. The pedestrian suffered catastrophic injuries including skull fracture and intra cerebral hemorrhages.

Boston Police cited the bus driver for hitting a pedestrian, a charge never contested.

Insurance Investigation and Claim Handling

The insurance company investigated. The bus was in city traffic waiting to turn left. When an opening appeared, the driver began turning without looking where the bus was headed. The driver admitted making “no attempt to avoid the collision”.

Based on the investigation, an insurance attorney noted in the claim file there was no viable liability defense.

But at some point, the insurance company reversed course. In the court’s words, “what happened over the ensuing nine years presents a disturbing tale of irresponsible and over aggressive defense work” by the insurance companies.

The bus and driver were insured by National Union Fire Insurance Company. The claims were handled by AIG Claims Services, Inc. and AIG Technical Services, Inc. We refer to them as the insurance company to avoid confusion.

Trial of Accident Case

The case was tried. The jury awarded $2.2 million to the pedestrian. But the insurance company appealed.

Years after the accident, 16 to be precise, the trial court found “three tactics that were dishonest and highly improper” by the insurance company.

The first was suppressing the results of the initial accident investigation conducted by the insurance company itself. The second was creating an alternative accident scenario based on made-up facts. Third was improperly manipulating critical witness testimony.

Insurance company operatives claimed Mr. Anderson entered the street from between parked cars. This was, the court found, a wholly made-up fact reflecting “wishful thinking”.

Heavily coached, the bus driver significantly revised his testimony on a range of critical issues. Initially the driver explained he was looking to the right, away from the pedestrian crosswalk. Later deposition and trial testimony claimed that he was looking to his left “to make sure everything was clear to keep going.” The original statement that the driver didn’t see Anderson before impact changed.

Now the driver claimed seeing Anderson crossing from right to left. Soon after the accident, the driver stated he had no idea where the pedestrian had come from. Now he claimed the man walked out between two cars.

The driver was “prepared” by insurance attorneys for a combined total of more than 16 hours. Part of a “mock deposition” was videotaped, revealing multiple instances in which insurance attorneys, the court found, inappropriately coached the driver to modify or “completely change” his testimony in material ways. Finding it “deeply disturbing” the court labeled the conduct impermissible witness manipulation.

Unfair and Deceptive Insurance Practices – The Law

Massachusetts law prohibits insurers from failing to pay claims without conducting a reasonable investigation based on all available evidence, and failing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. The law prohibiting unfair and deceptive practices in the business of insurance is M.G.L. c. 176D.

That law, coupled with the Massachusetts Consumer Protection Act, M.G.L. c. 93A, allows a court to impose multiple damages to “penalize insurers who unreasonably and unfairly force claimants into litigation by wrongfully withholding insurance proceeds”.

The court said it had no difficulty finding violations where the insurance company here ignored, suppressed and manipulated evidence. The court found the insurance company and its attorneys knew full well that the “running between parked cars” scenario was fictional, “nothing but a chimera”.

A chimera is defined by the Merriam Webster online dictionary as a monster from Greek mythology that breathes fire and has a lion’s head, a goat’s body, and a snake’s tail, something that exists only in the imagination and is not possible in reality.

Original damages were doubled, the highest penalty allowed. Double damages, the court noted, are generally reserved for egregious cases in which an insurer has engaged in intentional misconduct, has made knowing misrepresentation, or has acted with “studied indifference”. The case is Anderson v. American International Group, Inc., et. al., decided April 8, 2014 in the Middlesex County Superior Court, Massachusetts. Superior Court orders are subject to appeal. This blog will monitor future developments.

THE COURT REVISITED THIS CASE, TUNING UP ITS FINAL ORDERS

AN UPDATE IS AVAILABLE HERE.

Two final notes: Anderson was an attorney. Whether or not this played a role in the insurance company’s decision to reverse course and fight would only be speculation. Also, he was returning from lunch, during which alcohol was consumed. The insurance company attempted to make an issue, but the only independent eye witness to the accident said he observed no signs of intoxication.

Laws regulating insurance practices vary widely from state to state.

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