Insurance Claims Increasingly Fought in Court

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

The policy said that if a person couldn’t perform the duties of the occupation, that meant he was fully disabled, Hampton said.

Reliance officials “were trying to tell me, ‘No, that’s not it,’” he said.

He said that while the case was making its way through the courts he had to take a job as a grocery store bagger.

Some attorneys said they have seen insurance companies use the delay strategy. “There are a lot of financial reasons that an insurance company can choose to gamble” and delay or deny a claim, said one of Hampton’s attorneys, Neil Chamberlin of Little Rock.

He said that in disability cases, insurance companies don’t have to pay the attorney’s fees for any work done until a lawsuit is filed.

Nathan Chaney, an attorney in Arkadelphia, agreed that the insurance companies have little financial incentive to pay a claim early. He said if a plaintiff is successful on a breach of contract claim, the most a judge can award the plaintiff is the price of the policy plus a 12 percent penalty and attorney’s fees.

So an insurance company would be facing only a judgment of possibly about $150,000 for a $100,000 policy, said Chaney, who wrote, “A survey of Bad Faith Insurance Tort Cases in Arkansas” for the Arkansas Law Review in 2011.

And if an insurance company can drag out the litigation for three to five years or longer, “it’s a no-brainer,” Chaney said. “A 12 percent penalty isn’t enough to deter you from taking the case to court. … So [for] the breach of contract action, the insurance company doesn’t have much of an incentive to come off their delay, deny, defend strategy.”

Hampton said that he’s not surprised that Reliance appealed the ruling. The interest rate on Hampton’s judgment is just 0.11 percent a year.

“I know they had to spend more money now fighting against [paying the claim] than they would have if they just paid me,” Hampton said. “To me, that’s crazy.”

 

 

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