Personal Injury and Social Security Disability Blog

Loya Insurance Fined $300,000 for Deceptive Practices

After 41 years practicing personal injury law, I have found there are very few insurance companies I enjoy dealing with. A few are right at the bottom of the list though, and Fred Loya Insurance is one of those. So it came as no surprise to me when the Dallas Morning News reported that Loya Insurance had to pay a $300,000 fine for deceptive advertising practices. That money really should have gone to the Loya customers who were tricked by the advertising, but the state said it was unable to determine the names and addresses of the customers, so the state took the money. Here are excerpts from the newspaper article:

Loya Insurance Co., a leading auto insurer in Texas, has been fined $300,000 by the Texas Department of Insurance for unfair and deceptive business practices and for failing to file accurate information on the rates it charges its customers.

A consent order issued by state Insurance Commissioner Eleanor Kitzman directed the company to submit to the department a report detailing how it determines its rates and discounts for the 210,000 drivers it insures in Texas.

Among the Loya practices cited by the agency as improper were claims made in radio commercials, billboards, fliers and the Yellow Pages that said auto insurance coverage could be obtained with no down payment and no fees.

“However, Loya only issues policies which require one month or more of premiums to be collected in advance … and Loya charges a policy fee for each policy issued,” the commissioner’s order stated.

The order noted that Loya has revised its advertising practices and no longer makes such claims in its promotions.

Loya also failed to follow the underwriting guidelines for determining discounts and “preferred” customers that it filed with the insurance department, according to the order. The company used additional requirements that made it more difficult for customers to receive lower premiums.

“Loya’s policy files do not clearly demonstrate which criteria were considered or how the ultimate determination was made whether to apply the discounts to a particular applicant or policyholder. Loya’s computer files for each policy issued also did not contain electronic fields to identify which criteria were met to apply the discounts,” the commissioner said.

Loya declined to comment on the order, which said the company consented to the state’s terms “to settle all allegations against it and to avoid the expense and uncertainty of litigation.”

Although the company agreed to revise its business practices, the commissioner’s order said the lack of information about policies makes it impossible to order refunds for customers.

Loya has been near the top of the state’s complaint list for major auto insurers for several years, although in 2011 it dropped to the fifth highest complaint “index” among the 25 largest insurers in the state — those with more than 100,000 policies. In 2011, Loya had a complaint index of 1.58 — or 58 percent higher than the state average.

Some North Texas drivers have lodged complaints with the insurance department contending that Loya refused to pay for damages caused by its policyholders. In one case, the insurer denied a claim by saying that a driver who produced a Loya proof of insurance card after an accident didn’t really have coverage with Loya.

The company with the worst complaint record among the largest auto insurers is Old American County Mutual, which had an index nearly four times the state average.

Complaints lodged by Texas drivers included practices such as delays in processing claims, “lowball” offers and settlements, denial of claims and liability disputes.

Software Helps Auto Insurance Companies "Low-Ball" Claimants

I've been writing here since 2006 about the Colossus software program used by most insurance companies to evaluate auto injury claims. The basic effect of the software use has been to tie the hands of insurance adjusters and prevent them from taking into account subjective issues that, in the old days, might have altered the evaluation of the case. A recent article in ComputerWorld, of all places, expresses some concerns about the use of such software in the evaluation of claims. Here are excerpts:

Claims software used by many large auto and homeowners insurance vendors in the U.S. has allowed the companies to manipulate claim payments and "low-ball" customers, according to a new report from the Consumer Federation of America.

Injury evaluation software, including CSC's Colossus package, allows insurance companies to "tune" payment perimeters and reclassify injuries as less serious than the diagnosis from a doctor, said the report, by Mark Romano, a former Colossus expert at Allstate Insurance, and Robert Hunter, a former insurance commissioner for Texas.

The claims software, adopted by many U.S. insurance companies in the past 15 years, "has enabled many insurers to increase profits by reducing the amount paid to consumers who filed bodily injury liability claims," the report said.

Some insurance vendors have touted savings of about 20% after moving to claims software from using human adjusters, the report said.

CSC said Colossus helps insurers assess the severity of injuries, but does not make payments.

"Because the Colossus application helps insurance adjusters bring fairness and consistency to the claims process, we do not believe that consumers should be concerned about the potential for 'low-ball' claims," Ed Charlton, a vice president in CSC's property and casualty insurance division, said in an email. "Payments are negotiated between the insurance company and its claimants."

The software contains a large knowledge base of medical and insurance-adjusting information, he said. The software brings consistency to claims, "while still allowing the claims professional to consider and factor in unique claim attributes before determining the fair value for any individual claim," he added.

More than half of the 20 largest auto and property insurance companies in the U.S. use CSC's Colossus, and many others use similar products from competitors, Hunter said. The claims software market is largely unregulated by state insurance agencies, and "I'm convinced there are millions of Americans still at risk," he said.

CSC originally marketed Colossus as a cost-savings product, but shifted to talking about the software as a way for insurance companies to achieve consistency in claims payouts, the report said. Some insurance companies were uncomfortable with the software marketing as a money-saving package, said the report, referencing CSC materials made public during a class-action lawsuit against the software vendor settled in 2009.

"Consistency, in and of itself, is a legitimate goal," Romano said. "However, insurers aren't investing millions of dollars in this software just to achieve consistency. They're looking to save millions more by underpaying injury claims."

Insurance companies can tweak Colossus and similar software packages in several ways to lower claims payouts, the report said. Insurance companies can use the software to reduce payments by a predetermined percentage, and they can exclude high-cost claims from original tuning results used to determine the costs of injuries, the report said.

Insurers can also use the software to downgrade, en masse, the diagnosis of certain injuries, or pair the claims software with medical repricing software that reduces the "usual and customary" medical costs to be reimbursed, the report said.

The Consumer Federation of America called on state insurance commissioners to investigate claims software vendors and insurers for unfair business practices or unfair claims settlements.

Allstate v. Former Allstate Adjuster

This guest post is from my friend Maryland Personal Injury Lawyer Ron Miller:

U.S. District Court Judge Catherine C. Blake issued a fascinating opinion this week in Allstate v. Warns, denying a former Allstate adjuster's motion for summary judgment in a "we think you stole our documents and provided them to the plaintiffs' lawyer" case. The facts are juicy. It is more than worth the time to lay them out. Get some popcorn and head back over here.

Welcome back. Defendant was an Allstate claims adjuster for 33 years, handling only lead paint cases during the last 5 years of her Allstate tenure. Seemingly, the very definition of a company gal. I would think that if you stay at Allstate for 33 years, you would be ordering extra glasses of the Colossus Kool-Aid and all the other noxious potions they are concocting in the lunch room over there.

The first clue that this adjuster had fallen of the wagon is that she invited a number of plaintiffs' lawyers - including the plaintiffs' lawyer, that is going to hire her in a second, who she had ongoing lead paint cases with - to a party at her house. Allstate, probably monitoring the cameras it has installed at the homes of all its employees, found out and confronted the adjuster. Later, Allstate - alleges anyway - that this same plaintiffs' lawyer had sent her flowers, gifts, and cards while she was at Allstate. Allstate says the adjuster quit, claiming she was going through personal issues. The adjuster was next seen by Baltimore Housing Authority lawyers, no strangers to controversy themselves; passing what someone thought was a confidential Allstate instruction manual on lead paint cases at the trial table of the flower/card/gift sending plaintiffs' lawyer. (That might not be exactly how Allstate found out. Humor me. The story reads better that way.) So Allstate sued her.

Allstate's lawsuit brought claims for breach of fiduciary duty and breach of contract, and requests both monetary damages - including punitive damages probably just to try to scare the woman senseless - and injunctive relief for the claims adjuster to stop doing these things. To stick with the insanity, the plaintiffs' law firm that hired her is defending her in this case.

What a great story! The end. No, wait, I forgot, the court actually issued a really well reasoned opinion supported by law. But the fun part of this post isn't over.

The court skeptically let the breach of fiduciary duty and breach of contract claims continue, although she openly questioned the viability of the claims. She underscored this doubt about Allstate's lawsuit by refusing their request for a preliminary injunction because it questioned Allstate's likelihood of success which is a key factor to consider in whether to provide injunctive relief. The punitive damage claims were, not surprisingly, dismissed. The opinion provides a lot of interesting analysis on these issues, but few Maryland personal injury lawyers will ever have to address these issues if they steer clear of trying to pick off insurance companies' claims adjusters.

Let's get back to the more interesting discussion of what happened here. First, let's take all of the allegations with a grain of salt: Allstate seeks conspiracies wherever it turns. But even setting aside what I suspect are some convenient distortions and downright fiction from Allstate - somehow, I doubt she was flouting documents she stole during a trial - there is a lot of strange stuff going on here. For example, our law firm has sent dozens of cards to adjusters who I know have been sick or lost a loved one. But sending cards, flowers, and candy? And then you hire them? Charitably put, we can all agree that is just weird. Allstate is pointing to a lot of smoke in this case. Whether there is actually fire or it is just Allstate being Allstate is anyone guess.

If Allstate is loaded for bear as they appear to be, this case will be just the beginning. I would look for Allstate and other defense lawyers to try to disqualify this law firm from future cases and I would not be surprised if some defense firm files a claim against the adjuster and this law firm on behalf of Stanley Rochkind, an often sued lead paint defendant in Baltimore, in light of Allstate's allegation that the adjuster stole a file and properties he owned. It will be interesting to see how this all plays out.

The court's opinion in Allstate v. Warns

Our analysis of dealing with Allstate on personal injury claims

Allstate's crazy e-mail to me last month

Consumer Group Seeks Texas Insurance Data to Identify "Junk" Policies

I've written before about the decrease in coverage of "standard" insurance policies in Texas, and the blind eye turned to this practice by the state agency charged with oversight. An update on this story has been reported in the Dallas Morning News. Here are excerpts:

A leading consumer group, trying to prove its argument that many Texas drivers and homeowners have “junk” insurance policies, filed an open records request seeking detailed information on all current policies sold in the state.

Texas Watch filed the unusual request with the Texas Department of Insurance, asking for all residential and automobile insurance policy forms and endorsements now in use. An endorsement is used by an insurer to add or subtract specific coverage in the original policy.

“Research conducted by the Texas Department of Insurance demonstrates that deregulation of policy forms in the state has led to significantly less coverage for most homeowners, who are being forced to pay good money for what are aptly described as ‘junk policies,’” said Alex Winslow, executive director of Texas Watch, referring to a department report from early 2011.

Winslow said the report indicates that when comparing current homeowner policies with the uniform, comprehensive policies used in Texas in the early 2000s, about 87 percent have less coverage for continuous leakage from plumbing or air conditioning.

Nearly 72 percent provide less coverage for backup of sewers and drains, and 67 percent give less coverage for damage to slabs and foundations. Some policies also offer less coverage today for damage caused by theft, freezing pipes, falling trees, mold and sudden discharge from AC systems.

“The bottom line is that consumers are hard-pressed to find a policy that offers the same level of protection they had 10 years ago” even though premiums have gone up, Winslow said.

Industry representatives disputed the criticism, saying that insurance consumers in Texas know upfront what their policies cover and don’t cover — and most are satisfied.

Mark Hanna of the Insurance Council of Texas said policies sold in Texas offer a variety of choices that have “all kinds of coverages, deductibles and rates” as well as a multitude of different companies to choose from.

The criticism of “junk” policies has gotten the interest of some lawmakers, including at a recent meeting of the Senate Business and Commerce Committee.

“Many consumers don’t know what they’re getting,” said Sen. Leticia Van de Putte, D-San Antonio. “All they know is they’re getting a raw deal.”

Texas Watch said one answer is to standardize policies using forms that provide comprehensive coverage for those who buy auto and homeowners insurance.

What Is a "Junk" Homeowners Insurance Policy?

I've written recently about the sorry state of homeowners insurance in Texas. With laws favoring the insurance companies and with an insurance department that consistently sides with the carriers, homeowners don't get much for their money — despite the fact  we always rank number one or number two for highest homeowner rates in the country.

The consumer group Texas Watch has been keeping an eye on recent insurance hearings, and has written about it:

So, just what is a junk insurance policy? Sen. Leticia Van de Putte said she’s been hearing from constituents who are fed up with junk policies with what she called “luscious exclusions” and “skyrocketing” deductibles. She asked Insurance Commissioner Eleanor Kitzman about this at a recent committee hearing. Kitzman was unaware of the problem.

Well, we are aware of the problem. So, we sent Sen. Van de Putte a letter outlining the problem (and we sent a copy to Commissioner Kitzman too).

Texas’ New Insurance Chief Being Watched by Consumers, Lawmakers, and Industry

Texas has long had one of the weakest insurance departments in the nation — a department controlled by the insurance industry, and not at all helpful to consumers who have complaints. But now there is a new head of the department, and we can at least hope for improvement. However, so far there does not appear to be much reason to expect a shift from protecting insurance companies to protecting insurance consumers. The Dallas Morning News ran a profile of Eleanor Kitzman. Here are excerpts:

Five months on the job as Texas’ top insurance regulator, Houston native and former insurance executive Eleanor Kitzman is under close scrutiny by consumer groups, lawmakers and insurers as she deals with the first major rate filings of her tenure.

As head of the agency that regulates the state’s multibillion-dollar insurance industry, Kitzman will make decisions that directly affect the pocketbooks of most Texans — those who buy auto, home, health or other types of insurance — as well as the business fortunes of hundreds of insurers.

Her lengthy background in the industry — including the auto insurance business she started in South Carolina — gives her a leg up in overseeing the market, but also makes some consumer groups skeptical about whether she will hold companies accountable for anti-consumer practices.

“I have a different agenda than I did when I was running my insurance business or working as an attorney for insurance companies,” Kitzman said in a recent interview. “I know how the business works, so I know what insurance companies can do.”

Kitzman insisted her background and knowledge of insurance put her in position to “better serve consumers in every way.” But, she added, “having a robust, competitive market is very good for consumers.” She added: “I can also recognize gratuitous whining [by insurers] when I see it.” But consumer advocates fear she’s already shown her tendency to favor insurers.

In her first major decision last fall, Kitzman approved a rate plan by the state’s largest insurer, State Farm, that will begin switching many of the company’s homeowner policies to a higher deductible. Policyholders will have to shoulder a greater share of their property losses — while paying slightly higher rates. The overall rate increase was only 2 percent in North Texas, but Kitzman acknowledged to a Senate committee that State Farm customers will be getting less coverage for their money because of the new deductible.

A leading consumer group, Texas Watch, accused her of giving in to the “biggest bully” in the Texas insurance market. “This was Commissioner Kitzman’s first big test, and she failed miserably,” said the group’s Alex Winslow. “Insurance companies and their lobbyists are crowing over the decision.”

Study: Insurers Often Cry Wolf to Boost Profits

To those of us who represent personal injury clients, this story is no surprise at all. It's all a part of the phony "tort reform" movement that has swept the country in recent years. But the Raleigh News & Observer has an interesting article on the subject. Here are excerpts:

A new study produced by consumer and public-interest groups claims insurance companies create periodic crises to drive up profits.

The Americans for Insurance Reform study says these crises, where coverage becomes unaffordable or unavailable, are known as "hard markets," sending premiums sky-high. Authors of the study further claim the insurance industry uses these supposedly manufactured crises to support their calls for "tort reform" - asking legislators for new laws making it more difficult to sue.

Sound familiar? North Carolina's General Assembly passed legislation this year restricting the ability of people who claim they have been injured to seek compensation through the courts.

The report, titled "Repeat Offenders: How the Insurance Industry Manufactures Crises and Harms America," also concludes the country has been in a soft market since 2006, with rates stable and dropping in every state. Now, according to the report, some in the insurance industry are using Hurricane Irene to justify jacking up rates, even though the storm wasn't as bad as predicted.

Insurance Industry Accused of Making Huge Profits by Delaying Claims

The Huffington Post reported, "Unlike many other businesses, the insurance industry is bound by law to act in good faith with its customers." Insurance companies were considered "semi-public-trusts." Yet, that changed in the 1990s when their focus shifted from service to profit making. Allstate is credited with originating this trend by adopting a plan crafted by consulting firm McKinsey & Company. The strategy was simple: "Rather than adjusting claims the traditional way, which gave claims managers wide latitude to serve customers, insurers embraced a computer-driven method that produced purposefully low offers to claimants." Customers who accepted "low-ball offers" had their claims processed quickly, while those who refused were forced to wait. "As former Allstate agent Shannon Kmatz told the American Association for Justice, the trial lawyers' lobby, the strategy was to make claims 'so expensive and so time-consuming that lawyers would start refusing to help clients.'"

From the American Association for Justice press release.

 

Editorial: Complain to State About Unethical Auto Insurers

I wrote a few days ago about an investigation into shady auto insurance companies such as Fred Loya Insurance and Old American County Mutual Insurance. The investigation was done by the Dallas Morning News, and the newspaper has now followed up with an editorial about reporting sleazy insurance company tactics to the State of Texas. Here are excerpts:

Every time you pull out of your driveway, it’s a roll of the dice. You could be the most careful and reasonable driver in Texas and still find yourself calling a body shop or, worse, in physical pain because some less careful, less reasonable goof ran into you.

You take this chance because you have places to go, people to see. Almost always, fortune smiles and you arrive safe and sound.

When you don’t, you begin a new gamble. Does the other driver have insurance? The state requires it, but as you’ve read here and elsewhere, it’s about 1-in-4 that the other guy doesn’t. Even if he does — or appears to be covered — your long road has only begun.

If you’re lucky and not at fault for the wreck, the other guy calls his insurance company, which deals with you in good faith. You are made whole for damages to your car and person.

If you’re not lucky, that insurance company stalls. Or tries to low-ball your claim. Or disputes all evidence, including your witnesses, and refuses to pay, perhaps hoping you’ll take less or maybe even go away.

This may not be the rule in Texas, but it happens more than anyone should tolerate. A recent Dallas Morning News report highlighted the cases of a Mesquite woman denied her claim because the other driver was on his mother’s policy and a Rockwall man shorted $1,000 on a promised rental-car reimbursement.

Consumers filed more than 6,600 complaints last year against auto insurers in Texas, more than half by drivers who contended they were not at fault in an accident but had trouble getting an insurer to pay. Another 4,200 claims were filed in the first three quarters of this year, according to Texas Department of Insurance statistics.

Two companies, Fred Loya Insurance Co. and Old American County Mutual Insurance, have complaint rates far higher than the state average and are under department investigation. Potential penalties range from fines to the so-called death penalty — revoking a company’s license to write policies in Texas.

What can the rest of us do? Add this to your post-accident to-do list: File a complaint with the state insurance department. It may seem like one more waste of time, but your voice has value. Don’t let anyone tell you that you have no recourse, because you do.

The state needs your data on slow-paying or no-paying insurers, who build such cheating into their business model to undercut better insurers on cost. Reputable companies — they do exist — have little fear of state investigation because they tend to operate in good faith and pay what they owe.

The state needs your complaints on the other guys to build a pattern of unethical business practices against them that could chase them out of Texas for good. More complaints, clearer pattern. The sooner that happens, the better for everyone.

Texas Drivers Hit Roadblocks After Filing Auto Insurance Claims

Lawyers who represent victims of auto collisions in Texas have always known that insurance companies will use any legitimate means to deny a liability claim against their insured. But in recent years there has been a disturbing trend among some insurance companies of using means that stretch the boundaries of being legitimate. In fact, in many cases, these denials of coverage are just plain fraudulent.

Now the Dallas Morning News has exposed some of these tactics in an excellent article that identifies the suspect insurance companies by name. I encourage anyone who owns a vehicle to read this article. You do not want insurance with one of these companies. A denial of coverage means that you will be personally responsible for any damages you cause in a car wreck, while your insurance company will keep your premiums and say "tough luck" to you.

Some of these shady tactics include issuing an auto insurance policy in the name of a person who is not the owner of the car, with the owner listed as an "excluded driver." So the vehicle does have insurance coverage (which satisfies the police and keeps the vehicle from being impounded in case of a collision), but the owner of the vehicle is actually uninsured. The result is that if the owner of the car causes a collision, the innocent person he hits is out of luck. Another tactic is to claim the insured person is "refusing to cooperate" with the insurance company's investigation of the collision. This is actually a legitimate reason for denying a claim. But what the sleazy insurance companies do is just never try to contact their insured, and flat out lie when they say their insured is not cooperating. We have seen each of these situations multiple times.

Please read the newspaper article. Here are excerpts:

Pat Taylor of Mesquite was headed home after a typical workday this summer when another car jolted her Toyota Highlander from behind. The damage to her SUV was serious and, she said, the 20-year-old driving the other car clearly was at fault. Police arrived and the other driver showed an insurance card from a company that Taylor figured would cover her losses, estimated at $1,500.

But after several days, she said, the other driver’s insurer — Fred Loya Insurance Co. — told her that the policy was in his mother’s name and that he was excluded from coverage, and that the company would not pay for the damages.

“It was infuriating,” she said of the accident along U.S. Highway 80. The insurance card from Loya “let him get his annual inspections and license renewals. But when he got into an accident, all of a sudden he had no insurance coverage.”

Taylor’s case is not an isolated example for drivers in North Texas and across the state after accidents involving Loya or Old American County Mutual Insurance — two major companies at the top of the state’s complaint list for auto insurers.

The Texas Department of Insurance says Loya, which collected $271 million in premiums last year, had a “complaint index” of 2.4, nearly 21/2times the state average. The larger Old American, which had premiums of $575 million, had a complaint index of 3.96 — nearly four times the state average.

House Insurance Committee Chairman John Smithee, R-Amarillo, said he has had growing concerns about certain insurers who regularly refuse to pay claims in which their policyholders are at fault.

Typically, Smithee said, an adjuster for the company tells the injured party that if the claim isn’t paid, the person will have to hire a lawyer and will probably wind up with little money for the trouble. At that point, the driver feels forced to take 50 percent or less of the claim for damages. “It has been hard to make some of these companies behave,” he said.

Last year, consumers filed more than 6,600 complaints against auto insurers in Texas. More than half were filed by drivers who said they were not at fault in an accident but had trouble getting an insurer to pay their claims.

Alex Winslow of Texas Watch, a consumer group active in insurance issues, said unethical companies have an advantage because they undercut regular insurers on price largely because of the claims payment practices.

“The business model is they drag their feet and make it as difficult as possible for the claimant to collect in hopes they will take a low-ball offer or give up,” he said.

“I’m concerned the Insurance Department is not being aggressive in policing market conduct. They should be exercising more authority over these companies that are using questionable practices.”

AT A GLANCE: Complaints filed with state

HIGHER THAN AVERAGE

These Texas insurers had an above-average number of complaints in 2010, based on Insurance Department complaint index*:

AAA Texas County Mutual 2.06

ACCC Insurance 1.28

Allstate Fire and Casualty 1.16

Allstate Indemnity 1.29

Colonial County Mutual 1.64

Geico Indemnity 1.36

Home State County Mutual 1.58

Liberty County Mutual 1.33

Fred Loya Insurance 2.4

Old American County Mutual 3.96

Southern County Mutual 1.95

*The average index for all companies is 1.0; a higher number would indicate the insurer has more complaints than average filed with the state. A company with an index of 3.0 has three times as many complaints as the typical company. Eleven of 25 insurers with more than 100,000 policies in Texas had an above-average complaint index.

 

SOURCE: Texas Department of Insurance