Phoenix Personal Injury Lawyer - Consumer Law

Jury to Begin Deliberations in Unfair Settlement Practices Lawsuit Against Allstate

Staff Writer — Tue, 09 Oct 2007 21:50:18 GMT

A Kentucky jury will begin deliberations Wednesday deciding whether Allstate Insurance Company violated the Kentucky Unfair Settlement Practices Act by systematically lowering valuation of minor injury claims and bullying claimants into accepting artificially low settlements. The Plaintiffs alleged that Allstate systematically undervalued claims relying upon a consultant who, according to the on-line publication Bloomberg:

developed methods for the company to become more profitable by paying out less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident.

The Plaintiff Geneva Hager, who filed the bad faith suit against Allstate,

[S]uffered neck and back injuries in July 1997 after the vehicle she was riding in was rear-ended by a truck hauling firewood on Man o' War Boulevard. The truck's driver, Thomas LaPointe Jr., was insured by Allstate.
Hager's injury claim did not settle until December 1999, four days after her lawsuit was scheduled for trial.

The jury will now consider whether the insurance company intentionally delayed resolution of the claim relying upon the consultant recommendations to become profitable by getting ""boxing gloves" and describing claims handling as a "zero sum economic game" in which "Allstate gains" and "others must lose.""

Allstate routinely relied upon a computer program known as Colossus to evaluate claims based upon data entered into this computer system. The Plaintiff alleged that Allstate claims representatives regularly manipulated data input into the Colossus program to lower payouts and then delayed and even harassed claimants into accepting artificially low settlements. Allstate argued that it simply used consultant recommendations to root out claimant fraud and identify inflated claims. The jury will now decide whether Allstate's practices were appropriate.

I have previously written about insurance bad faith practices which may raise profits at the expense of policy-holders. Carriers engaging in systematic behavior to maximize profits betray contractual promises made to policy-holders should be held accountable to policy-holders for broken contractual promises. The Kentucky jury will decide whether Allstate's business practices were simple tactics to root out claimant fraud or bad faith conduct by a powerful insurance carrier with unequal bargaining power.

For more information on this subject, please refer to the section on Car and Motorcycle Accidents.

Originally posted at InjuryBoard by Staff Writer

Are On-Line Pharmacies Trafficking Narcotic Drugs?

Staff Writer — Wed, 29 Aug 2007 18:22:14 GMT

Perhaps you have seen stories or received spam e-mail messages from on-line pharmacies offering instant access to prescription drugs at low cost. You want a percocet or vicodin but your family doctor did not prescribe it for you? No worries. Just log onto your spam-friendly Internet pharmacy, fill out a brief questionnaire, pay for your medication with a credit card and in no time, you will receive your narcotics. Recently, according to a story on MSNBC, on-line pharmacies are making millions selling controlled substances.

Without Internet pharmacies, you must visit your doctor in order to receive a prescription for medication. Your doctor issues the prescription to be filled at the pharmacy. At the pharmacy, you can verify the authenticity, purity and dosage. Your pharmacist must also counsel you on the use, dosage, side effects and any other important details of the medication before you take it for the first time. You also have the opportunity to ask questions and you, your doctor and your pharmacist act together as a team to administer your medication safely.

If you order medication on-line, you lose the effectiveness of medication counseling, and in-person consultation with your physician and team approach to medication safety. You lose the opportunity to confirm the dosage and purity of the medication. In short, the safety systems in place to prescribe and administer medication safely are for the most part lost with fly-by-night Internet pharmacies. As MSNBC reports,

The Drug Enforcement Administration, which reported the additional parcel delivery trucks in southeastern Kentucky, says about 95 percent of products sold by online pharmacies are controlled substances. By comparison, controlled substances amount to roughly 11 percent of the dosages dispensed by legitimate pharmacies.

These details suggest that fly-by-night Internet pharmacies are dispensing controlled substances at an alarming rate and the alarming implication suggests that some of these apparent business cover up illicit drug trade. So long as on-line pharmacies dispense medication in a safe and effective manner and supplement regular in-person physician and pharmacist counseling requirements, on-line pharmacies serve a useful purpose. However, based on the DEA statistics, it appears that several rogue pharmacies may be using the Internet to traffic and sell narcotics while attempting to use a designation as a pharmacy to justify illegal drug trafficking.

What do you think about on-line pharmacies? Do they provide a useful service? Or are a large number of them simply a tool to sell illegal substances? If you have had a bad experience with an on-line pharmacy, share your story. Also, you may consider filing a consumer complaint with the Arizona State Board of Pharmacy who will conduct an investigation to determine compliance with Arizona law.

Originally posted at InjuryBoard by Staff Writer

Insurers Profits Rising Based on Bad Business Practices?

Staff Writer — Fri, 10 Aug 2007 21:00:00 GMT

A recent article in the on-line publication Bloomberg suggests that anti-consumer insurance industry practices have led to a stark increase in insurance profits in recent years. According to Bloomberg, consumers have been bearing the burden of bad-faith insurance industry practices:

Insurers often pay 30-60 percent of the cost of rebuilding a damaged home -- even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show.
Paying out less to victims of catastrophes has helped produce record profits. In the past 12 years, insurance company net income has soared -- even in the wake of Hurricane Katrina, the worst natural disaster in U.S. history.

According to Bloomberg, some insurance companies have spared no detail in their efforts to increase profitability at the expense of the policyholder. For example, in 1992 Allstate Insurance Company hired business consultants McKinsey & Company for advice on improving its efficiency and profitability. After working with McKinsey, Allstate's loss ratios, the ratio of claims paid to premiums received dropped significantly from approximately seventy-nine percent in the 1990's to fifty-eight percent in 2006. Such a major dip in loss ratios led to major increases in profits and stock value. How did the company increase its profits? The Bloomberg article states that Allstate adopted several McKinsey recommendations to minimize claims payouts and reduce loss ratios:

When a policyholder files a claim, first make a low offer, McKinsey advised Allstate. If a client accepts the low amount, Allstate should treat the person with good hands, McKinsey said. If the customer protests or hires a lawyer, Allstate should fight back.

According to various Powerpoint slides apparently prepared by the McKinsey group, these consultants recommended focusing cost-control efforts on minimizing or delaying coverage payouts throughout the claims process:

The slide says Allstate can discourage claimants by delaying settlements and stalling court proceedings.
By postponing payments, insurance companies can hold money longer and make more on their investments -- and often wear down clients to the point of dropping a challenge.

Bloomberg even documented efforts by Allstate to encourage its claims representatives to lie about covered claims rewarding them with merchandise for representatives who denied coverage for claims without any truthful justification. This agressive approach in the claims process outlined in the news article apparently led to a 140% increase in Allstate profits. Other companies have been identified in the article as having engaged in similar conduct. For example, Farmers Insurance Company apparently awarded some type of financial bonuses to its claims representatives who paid out the smallest amounts to insured claimants. Likewise, according to Bloomberg, after State Farm hired McKinsey and engaged in similar cost-cutting moves, its profits doubled to $4.8 billion dollars last year.

Insurance companies like any other for-profit business have the absolute right to earn a profit. However, like any other business, carriers should do so responsibly. I believe carriers should be held accountable for bad-faith decisions which betray the commitments an insurance company makes to its policyholders in its insurance contract. Do you agree? Have you had a bad experience with your insurance carrier? Have you had a good experience with your carrier? If you have had a bad experience with your insurance company, you may consider filing a complaint with the Arizona Department of Insurance. The Department will not represent you but will investigate possible violations of Arizona law. Let me know about your good or bad experiences. I'd like to hear from you and what you think about the insurance industry.

Originally posted at InjuryBoard by Staff Writer

Frivolous Lawsuit Against Dryclear Dismissed

Staff Writer — Wed, 27 Jun 2007 10:00:00 GMT

In early May, I wrote about an example of a likely frivolous lawsuit. If you recall, the drycleaning business in that case lost a pair of pants and the Plaintiff originally demanded compensation totalling $65,000,000 even after the business compensated him for the lost pants. In my earlier posting, I suggested that our system of justice has legitimate safeguards to prevent frivolous litigation from moving forward indicating that:

I can only hope that we focus the same attention on this lawsuit when it gets dismissed so that we can confirm that our judicial system works.

Well just this week, the judge assigned to the case dismissed the frivolous lawsuit. The judge also directed the drycleaning business to submit briefs on the question of whether the plaintiff should face sanctions and attorney's fees to repay the defendants' litigation costs.

The judge reviewed the allegations in the lawsuit and made a reasoned decision to dismiss it and give serious consideration to sanctioning the Plaintiff for demanding such outrageous damages and proceeding forward with frivolous litigation.

If the evidence shows that a case is frivolous and should never have been filed, fortunately, the offending litigant can be sanctioned to prevent future frivolous conduct. The result in this case reinforces my opinion that our system of justice works and does not need wholesale changes. Plaintiffs who file frivolous cases should face sanctions but this drycleaner lawsuit does not mean that our judicial system faces a large number of frivolous lawsuits. In my opinion, frivolous drycleaner cases do not clog our courts. In fact, to the contrary, I believe that the overwhelming number of civil lawsuits in our court system today involves claims which have merit. Additionally, I believe that this drycleaner lawsuit presents an example of why our system of justice works. Do you believe differently?

Originally posted at InjuryBoard by Staff Writer

Insurer and Its Attorneys Sanctioned in 9/11 Litigation

Staff Writer — Mon, 25 Jun 2007 10:41:04 GMT

In an unfortunate series of events, recently two law firms and an insurance company client involved in coverage litigation concerning the aftermath of the 9/11 tragedy have been sanctioned a total sum of $1.25 million dollars. The judge sanctioned these parties for failing to disclose various key documents concerning applicability of insurance coverage and other discovery abuses which have:

added years and millions of dollars to the cost of prosecuting suits on behalf of people who died or were injured or suffered property loss in the 2001 attacks.

Pending insurance coverage litigation over the last several years involved whether private insurance carriers ever intended to insure various entities or persons who suffered property loss or loss of life in the September 11 tragedy. Usually the question of coverage involves a detailed review of the terms and conditions of an insurance policy together with other materials or memoranda prepared prior to issuing a policy and binding coverage.

One law firm representing Zurich Insurance Company in the coverage litigation suggested at a hearing in December, 2003 that:

"We have plenty of evidence that, believe me, we can invoke on this issue of whether [the Port Authority] is an additional insured at all."
The judge said those representations were contradicted by the 62-page document and other evidence showing that Zurich employees knew the liability insurance coverage sought by Larry Silverstein's World Trade Center Properties was meant to include the Port Authority.

The practice of destroying relevant documents or omitting disclosure of relevant information should never occur in any context in any litigation by any party. Unfortunately, this series of events occurred in the context of litigation involving a dark event in our nation's history. Kudos to the judge for identifying the issues and sanctioning the offending parties. Hopefully exposing the conduct and sanctioning the offending parties will curb further discovery abuses and lead to a prompt resolution of these coverage claims.

Originally posted at InjuryBoard by Staff Writer

Have You Been Victimized by Mortgage Fraud?

Staff Writer — Mon, 18 Jun 2007 13:18:47 GMT

This past week, the Arizona legislature passed a bill criminalizing mortgage fraud. Specifically, the bill criminalizes so-called cash-back financing in which a prospective buyer pays an artificially inflated price for a home, receives a loan for the high sales price, and pockets the difference between the loan amount and the actual residential home value. According to the Arizona Republic,

the deals can hurt lenders financially and inflate other house values.

Apparently Arizona has recently been a haven for mortgage fraud problems,

Arizona ranks seventh in the country in the number of mortgage-fraud cases.

As a result of these recent mortgage fraud problems, Governor Napolitano signed House Bill 2040 last week on June 13 which states as follows:

A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:
1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Although many deals under this statute would be considered fraudulent and would help prosecutors and regulators stop deceptive practices, I am not sure that all cash-back financing deals involve fraud. In fact, I can envision at least one scenario when cash-back financing actually makes economic sense and creates value for the buyer, the seller, the lender and the real estate community. For example, I do not believe a buyer who pays a high price for a home and, based upon proper independent appraisals, intends to use cash back financing to construct property improvements which will in turn create value in excess of the purchase price should be charged with mortgage fraud.

In contrast, the statute should certainly apply to somebody who never intends to take possession of property and pay a mortgage, choosing instead to pocket cash back proceeds and disappear after leaving a trail of financial victims such as the mortgage lender. Perhaps the worst victims in this scenario are neighbors who had nothing to do with the financial transaction yet who suffer a reduction in home equity because foreclosure sales dramatically reduce property values.

I commend the state for passing this statute and believe it distinguishes between the appropriate and inappropriate real estate deal. I hope that in the context of enforcement actions, prosecutors and regulators are able to separate the good from the bad and only prosecute the real criminals. Do you think this statute will help homeowners in Arizona stabilize and protect their property values or has the damage already been done and does this really amount to too little too late? I'd love to hear your thoughts.

Originally posted at InjuryBoard by Staff Writer

Blue Cross of California Agrees to Settle Rescission Class Action Lawsuit

Staff Writer — Mon, 11 Jun 2007 11:00:00 GMT

Blue Cross of California recently entered a settlement agreement to resolve a class action lawsuit against the health insurer concerning the nature of its individual health insurance business practices. Blue Cross had been accused of using innocent mistakes on poorly worded insurance applications to rescind policies after insureds submitted costly claims. After concluding that it would lose money based on costly claims, the company allegedly undertook a campaign to find the slightest misrepresentations on the application for insurance and rescind the policy leaving individuals without coverage and with thousands of dollars in unpaid medical claims.

As a condition of the settlement, Blue Cross agreed to modify its health insurance application form to make it more readable and user friendly. Also, Blue Cross agreed to only rescind individual health insurance policies when policy applications contained intentional and wilful lies. In other words, insureds in California who make honest mistakes in an application for health insurance cannot have their policies taken away from them when they submit claims and need insurance the most.

According to the Los Angeles Times, Blue Cross of California agreed to a series of changes in business practices to help the consumer health insurance policy-holders:

The move is part of an effort to settle a class-action lawsuit on behalf of as many as 6,000 people canceled since late 2001. It is an about-face for Blue Cross in what had become known as "use-it-and-lose-it" health coverage because the cancellations were often triggered by patients' claims for treatment.
The insurer's new stance is aimed at ending rescissions based on policyholders' honest mistakes, inadvertent errors and other inconsistencies about their medical histories on applications for coverage. Consumers contend that the forms are purposely confusing, increasing the odds that applicants will make mistakes.
"This is a very significant consumer health victory ... something we believe they should have been following all along," said Cindy Ehnes, director of the state Department of Managed Health Care.
* * * *
"What we have tried to say to the plans is the process that you use to make those determinations is very flawed," Ehnes said. "First you go back way too far in someone's medical history. Most of us can't remember what we ate for dinner last night, much less what the doctor told us 20 years ago."
Among other changes, Blue Cross agreed to consult policyholders about application problems in deciding whether a rescission was justified.

An easier to read application makes it more difficult for an insurance carrier to claim rescission based upon poorly worded ambiguous application questions. Also, requiring the carrier to prove the consumer intentionally lied on the application before rescinding the insurance policy provides the consumer with protection for innocent yet incorrect application responses. Lastly, providing an appeals process after a policy has been taken away provides the consumer with an efficient tool to contest the company's decisions. All of these concessions negotiated in the context of a class action lawsuit against Blue Cross protect individual policy-holders and demonstrate the benefit of that litigation. I congratulate Plaintiffs' attorney William Shernoff, the California state Department of Managed Health Care and Blue Cross of California for their efforts.

I applaud Blue Cross of California's decision to change its conduct and hope that health-insurance companies in Arizona do the same thing. Hopefully Arizona health insurance providers will enact similar measures and abandon efforts to use innocent yet incorrect responses on poorly worded and confusing insurance applications as a basis to take away health insurance policies when consumers need protection the most.

Do you have an individual health insurance policy in Arizona? Have you had similar problems? What do you think about the settlement in California? Do you believe health insurance companies in Arizona should enact the same changes here?

Originally posted at InjuryBoard by Staff Writer

Health Insurance Coverage in Times of Need

Staff Writer — Tue, 05 Jun 2007 12:00:00 GMT

In May, I wrote about problems with health insurance companies in California. Specifically, an insured with Blue Cross and Blue Shield of California sued the company alleging bad faith arising out of the company's decision to rescind a health insurance policy based on high claims expenses. In the lawsuit, the plaintiffs alleged that the carrier accused the insureds of misrepresenting responses to questions contained in the application for health insurance only when it became clear the company would have to pay over $450,000 in medical expenses.

Across the country, health insurance companies make decisions to take away health insurance policies which have become too expensive based upon allegedly false statements contained in policy applications. If an insured truly misled an insurance company in the insurance policy application and in reliance on material misrepresentations, the carrier issued a health insurance policy, Arizona law allows the carrier to rescind the policy. I am curious whether carriers are using minor variations in application questions which have been prepared in good faith as a basis for decisions to rescind unprofitable health insurance policies.

Imagine diligently preparing an application for health insurance answering all questions as best as you can. You timely pay premiums believing that your carrier will provide benefits when needed. Suddenly, you suffer injuries in an accident and require costly medical care. When you or your medical providers submit these medical bills to the carrier for payment, the company decides that your claims expenses are just too costly. As a result, the insurance company undertakes a review of your policy application to see if you made any material misstatements in it. Why? The insurance company entered into a contract with you and promised to pay your medical expenses according to the terms of its policy. However, if a policy has become unprofitable, the company may decide to investigate to determine whether it may properly rescind your health insurance policy and eliminate claims payouts on this money-losing policy if you made false statements on your application for coverage. If you made a false statement of a material fact on your insurance application, the insurance company will likely attempt to deny your medical expense claims and rescind your insurance policy.

As I mentioned earlier, under Arizona law, an insurance company has the right to rescind a policy. A carrier may rightfully rescind your insurance policy if you intentionally misrepresented various opinion responses or provided materially incorrect factual responses on your insurance application. The inaccurate responses must have been material to the company's underwriting decisions and the insurance company must show that it would not in good faith have issued the policy had it not been for the misrepresentation.

Disputes often occur over whether insureds actually misrepresented responses on an insurance application, whether such alleged misrepresentation amounted to a material misstatement justifying a carrier's decision to take away an insurance policy and whether the carrier would not have in good faith issued the insurance policy if the alleged misrepresentation not occurred. Plaintiffs such as those in the Blue Cross case in California often argue that the decision to rescind a policy amounts to nothing more than a pretext used by the company to eliminate claims payments for money-losing health insurance policies rather than a good faith decision not to issue a policy based upon alleged misrepresentation.

If you have a dispute with your insurance company and your dispute involves refusal to pay a claim rather than rescission of a policy, Consumer's Union, the publisher of Consumer Reports Magazine, published A Consumer Guide to Handling Disputes with your Employer or Private Health Plan containing details about applicable policies and laws governing claims disputes. Also, the Arizona Department of Insurance web site contains various consumer friendly resources to assist you in working through disputes with health insurance carriers. Additionally, the National Federation of Insurance Commissioners (NAIC) provides a database showing some information about consumer complaints. Please note, however, that consumer complaints tracked by this database only include those voluntarily reported to the NAIC by Insurance Departments throughout the country. The database does not include complaints consumers have not filed with a state department of insurance, complaints resolved in litigation, or informally resolved before litigation.

Have you had a bad experience with a health insurance carrier that rescinded your policy based on alleged misrepresentations? Describe your experiences. Were you able to resolve your dispute? How were you able to resolve the dispute. Did you file a complaint with the Arizona Department of Insurance? After a health insurance carrier rescinded your policy, were you able to find other health insurance coverage elsewhere? I'd like to hear from you and thank you in advance for sharing your stories.

Originally posted at InjuryBoard by Staff Writer

Senator Kyl Holding Up Modification to Freedom of Information Act

Staff Writer — Fri, 01 Jun 2007 14:00:00 GMT

Ironically, Arizona Senator Jon Kyl recently invoked a tool to secretly object and withhold from consideration in the United States Senate a bill modifying the Freedom of Information Act. In contrast to Senator Kyl's initially secret actions, the legislation known as the Open Government Act had been drafted to make government activity less secret and more open to public scrutiny. Senator Kyl anonymously objected to the bill amending the Freedom of Information Act (FOIA) which would close various loopholes in the Act and require payment of costs and attorneys fees in the event government responses to FOIA requests are untimely or incomplete. After public scrutiny, Senator Kyl revealed his actions:

Kyl revealed his identity Thursday, days after the bill's backers launched an e-mail and telephone campaign, urging supporters to help in "smoking out 'Senator Secrecy.' " They pointed out the irony that an open-government bill was being blocked using a rule that allowed secrecy.

In the past, I have written about the need for open access to public records which do not contain social security numbers, or other confidential and privileged information. Perhaps Senator Kyl's political decision to anonymously attempt to block the bill presents the precise reason why the legislation should pass. Public records which do not contain private, privileged or otherwise confidential information should not be withheld for political purposes. The key to democracy requires that we have access to and understand what our government does.

Originally posted at InjuryBoard by Staff Writer

Industry Lobbyist Withdraws Nomination to Head Consumer Product Safety Commission

Staff Writer — Thu, 24 May 2007 13:19:23 GMT

Based upon increasing public pressure, yesterday lobbyist Michael Baroody removed his name from consideration to head the Consumer Product Safety Commission (CPSC). In another post, I questioned whether a lobbyist for the National Association of Manufacturers (NAM) should head an organization which has conflicting objectives. The National Association of Manufacturers lobbies on behalf of many companies whose conduct is subject to oversight by the Consumer Product Safety Commission. According to Florida Senator Bill Nelson,

"If you want to guard the interests of the hens, you don't put the fox in charge of the henhouse,"

Increasingly, other Senators and organizations agreed. Illinois Senator Richard Durbin pointed to the following example of conflicting objectives between the CPSC and NAM:

Durbin pointed to the National Association of Manufacturers' efforts to fend off regulations that would have expedited recalls of dangerous children's products and toughened requirements for reporting product hazards.

I have previously suggested that perhaps Mr. Baroody would not be the best choice to head a consumer safety agency when his lobbyist position often required him to oppose CPSC objectives. While this person may be extremely competent and well-qualified to understand the issues involving the safety of consumer products, perhaps the mere appearance of a conflict of interest could have created subsequent problems heading this consumer protection agency. I applaud Mr. Baroody for withdrawing his name from consideration at this time and hope that whoever ultimately heads the Consumer Product Safety Commission in the future has the objective ability to assist the organization in:

protecting the public from unreasonable risks of serious injury or death from more than 15,000 types of consumer products under the agency's jurisdiction.

Originally posted at InjuryBoard by Staff Writer