Insurance Claims Increasingly Fought in Court

by Mark Friedman  on Monday, Nov. 11, 2013 12:00 am  

Supporters of the insurance industry disagree.

“There is always an unscrupulous element of the plaintiff’s bar that is willing to exploit well-intentioned laws to take advantage of them, and to essentially extort money from what they feel are deep-pocket companies who can afford to pay it,” said Darren McKinney, a spokesman for the American Tort Reform Association, whose members include insurance carriers.

Among the recent lawsuits filed in federal court in Arkansas is one by Lyon College of Batesville, which sued its insurance carrier, Lexington Insurance Co. of Boston, for refusing to pay claims in connection with a 2010 fire that caused $9.3 million in damage. Lexington paid $5.7 million but refused to pay the rest of the amount of Lyon’s alleged damage. In court filings, Lexington said it fulfilled its obligations under the policy. The case is pending.

In addition, Lion Oil Co. of Brentwood, Tenn., sued several of its insurance carriers, including National Union Fire Insurance Co. of Pittsburgh and Great Lakes Reinsurance UK PLC, for denying coverage following an oil pipeline rupture near Torbert, La., in April 2012 that resulted in more than $80 million in damages at its oil refinery in El Dorado, Lion said in the lawsuit.

Lion Oil said in its filing that its policy covered the damage. The insurance companies asked that the case be dismissed because they had already filed a federal lawsuit in Tennessee. In the Tennessee case, which was filed in September, the insurance companies wanted a ruling that Lion Oil’s polices don’t provide coverage for the alleged damages it suffered. Both cases are pending.

Deciding to Fight

Even for insurance companies, fighting lawsuits can be costly. Citizens Property Insurance Corp. of Tallahassee, Fla., released a report last month that said it spent $109.7 million on attorney’s fees to defend itself in lawsuits between Jan. 1, 2012 and Aug. 31, 2013.

“Nobody likes to pay attorney’s fees,” said Michael Peltier, a Citizens spokesman.

However, Peltier said, the fees were less than 2 percent of the premium the company collected annually from its approximately 1.2 million policyholders. It received $2.8 billion in earned premium in 2012 and $2.7 billion through Aug. 31.

He said the company decides on a case-by-case basis which claims to pay fast and which ones will be disputed.

“Our overall goal is we want to pay the justifiable claims as quickly as possible,” Peltier said. “But also [we want to] make sure that we’re paying what we owe, but we’re not paying more than that.”

He also said that a vigorous trial bar existed in Florida, “as there are in other states.”



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