Policyholder May Reject Reservation of Rights by Insurance Companies

Insurance companies have an obligation to defend and indemnify an insured under a typical liability policy. When a company is notified of the claim or suit the company should start performance of the contractual obligation which would include speaking with the insured, investigating, gathering facts, protecting evidence, hiring counsel for the insured, and responding to the claim. Sometimes under the policy language the insurance may have an exclusion under which the company does not have an obligation to defend and indemnify the insured. This is a problem for the insured, but insurance companies don’t have to keep promises they don’t make. Unfortunately companies don’t always take a fair view of the facts or policy language and will not defend and indemnify the insured even when they should.

Many companies simply use a reservation of rights as standard operating procedure. This practice has become common and insurers often respond by sending letters reserving the right to deny coverage for as many reasons as possible and for any reason they can think of or discover in the future. Under a reservation of rights the insurance company is saying, we will defend for now but we can still sue you in another lawsuit to get a court to decide that we don’t have to defend or indemnify you. Many insurance companies also fail to honor their obligation to fairly consider settlement when a reservation of rights has been issued. Unfortunately for the insured this means massive uncertainty, possible loss of the opportunity to settle, financial risk and additional litigation. If the insured loses both the liability and coverage lawsuit they will be liable for the judgment from the first law suit and will also have to pay the insurance company for the legal fees and expenses of the insurance company. This can lead to ruinous financial consequences and bankruptcy for most people.

The sharp practice of issuing a reservation of rights is happening even when an insurance company receives coverage opinions favorable to the insured. To gain leverage insurance companies try to squeeze the insured by including language that expands the reservation of rights not only to the reasons stated in the letter, but reserves the right to expand the reason for denial for any reason. The insured is also reminded that they have a duty to cooperate and if they fail to cooperate they will lose their coverage. This means the insured doesn’t know what is coming next.

Insurance companies will often also use favorable dates ins such letters so that the conditional obligation that they assume under the reservation of rights is not the date they first became aware of the claim, but a date that positions the company best for future litigation. This is particularly true if the insurance company has failed in its duty to settle before the insured made a formal demand for defense and indemnity. In Missouri many of the bad things that can happen when a reservation of rights is issued can be avoided by rejecting the reservations. Missouri law prevents insurance companies from using threats and leverage to bully insured’s to accept a reservation of rights. Under Missouri law and insured is entitled to treat a reservation of rights as a breach because a reservation of rights is anticipatory repudiation of the contract. Although the insurance company still has the upper hand because of its financial strength and expertise, this gives the insured the option of walking away and controlling the litigation without the insurance company’s involvement. This also gives the insured a chance to resolve the claim by negotiating with the company on more equal footing, or the insured can defend or settle the underlying lawsuit on its own and then suing the company for breach of the contract. The insured can also settle the claim so that the plaintiff has the obligation to pursue the insurance company, so that the insured can settle can get out without any further risk.

The decision to accept or reject a reservation of rights depends on many factors, and may or may not be a good decision depending on the situation. These decisions can be particularly complex for businesses as the reservation of rights may have implications that are not immediately apparent and must be thought through with extreme care. Anyone who has received a reservation of rights from their insurance company should consult with a private attorney knowledgeable in this area of the law.

Personal Injury and Bad Faith – Insurance Companies Behaving Badly

In routine personal injury cases, there is a limit to how much money can be recovered. Insurance policies have “policy limits”. If the car that hit you has a $50,000 insurance policy, that’s the maximum that can usually be won in a lawsuit or settlement. The insurance company will not settle with the injured person for more than the policy, and any settlement will have to release the driver and owner from further liability. While it is possible to go after the owner and/or driver, this is usually much more difficult and is extremely rare.

In bad faith cases these limits can be exceeded. Bad faith occurs when the insurance company does something wrong, leading to a verdict of more than the policy limit and exposing the insured to personal liability.

For starters, let’s be clear on the insurance relationship. You pay car insurance. The car insurance company then owes you certain duties. If you have an accident, they are supposed to investigate and take care of claims that come out of that accident. If you get sued, they have to provide you with a lawyer to defend you. And if you lose the lawsuit, they have to pay the amount awarded, up to the policy limit. One of the most important duties they have is to negotiate in good faith. If it’s clearly your fault and the person is really hurt, then they have to consider the situation, evaluate it, and try to settle the claim within the policy limits. There’s more, but that’s a good beginning.

Imagine if you hit someone in a crosswalk and they suffer a broken hip. You tell your insurance company that it was your fault and plead guilty to a traffic violation. It’s your fault. The injured person ends up getting hip replacement surgery two weeks after the accident. They were really hurt.

An attorney contacts your insurance company and demands $50K – the limit. He tells them, in a letter, that if they don’t pay up within three months, he’s going to sue you and will no longer accept the $50K. If that happens, you could be on the hook for anything over $50K, and that might be $50K or more with an injury like that.

In most cases, insurance companies will settle that kind of case quickly, probably even before the three-month demand. We settled one vaguely simliar case with a $50K policy after sending only a couple of letters. From the insurance company’s perspective, these cases should settle quickly.

But there are times when insurance companies don’t do so well. In some situations the person assigned to the case is inexperienced, incompetent, or both. In others the company’s home office adopts an unrealistic policy that doesn’t work in the field. And sometimes they just drop the ball and there’s no explanation.

Personal injury lawyers who know what they’re doing will make a record of the bad faith. This means sending letters documenting the efforts to settle and the insurance company’s failures to act in good faith. It may mean an appearance in Court and having a settlement conference with the judge, recorded by a court reporter (also known as a stenographer).

Typically the plaintiff’s attorney will set a deadline to settle the case. If the insurance company comes around after that deadline, and offers the policy limits, the injured person will have to make a decision. Either take the money now or take the long road and try to get more through a bad faith claim. This decision depends on the risks faced and the potential gain. If it’s a $100K policy, the injury is worth an estimated $150K, and there is a substantial risk of a verdict below $100K, then it may make sense to take the money. If it’s a $10K policy and a million dollar injury, there’s not much to lose in the bad faith route and a lot to be gained.

From personal injury to bad faith

If the case doesn’t settle and the verdict is larger than the policy (an excess verdict), the personal injury case is now over and the bad faith part of the case is about to begin. It’s important to understand that the “bad faith” is not how the insurance company treats the injured person – it’s how they treat their own customer. The duties discussed above are duties the company owes to its customer – the one who paid for the insurance policy.

The questions in a bad faith case turn mainly on how the insurance company dealt with its customer, and its contractual duties. Did the insurance company investigate the claim properly? Did it keep the customer informed about the status of settlement negotiations? Did it defend the case to its fullest? If they didn’t settle, did they have a good reason? If they breached any of these contractual duties to their customer, then the customer has a claim against the insurance company, for the amount of the verdict in excess of the policy.

If there’s a $50K policy and a $150K verdict, the insurance company pays the injured person $50K. Now the injured person files a judgment against the person who hit them (the insurance customer) for $100K. The customer now owes the plaintiff money and risks losing their house, other assets, having their wages garnished, and suffering a major hit to their credit rating.

At this point, the injured person and the customer will typically make a deal. I won’t go after your assets and in exchange for that, you assign me your claim against the insurance company. The injured person generally does not have a direct claim against the insurer in personal injury cases. Now, effectively, they have bought the customer’s claim against the insurance company.

The personal injury lawyer would then commence a whole new lawsuit. The first suit was against the insurance customer, the person that caused the accident. The new suit is against the insurance company for bad faith. After the process works its way through, a judge and/or jury will decide whether the insurance company breached its duties to its customer, and if so, require the insurance company to pay the excess to the injured person.

Conclusion

The modern reality of bad faith cases is that it’s a hard road. In many states judges just don’t like these cases. From a plaintiff’s perspective, there appears to be a bias in favor of protecting insurance companies and limiting claims to the policy limits. In my opinion these decisions mistreat the customer. Bad faith claims should be treated for what they are, simple breach of contract cases. If the insurance company breached the contract, then they have to pay the consequential damages – they should have to clear the judgment that has been filed against their insured. Since the courts do not follow this path, insurance companies have been emboldened. They are more prone to breach duties to their customers in order to save a buck here and there, adding up to millions a year in extra profits. The end result is that more of the costs get passed onto the injured person and settlements are delayed for no good reason, other than for insurance companies to earn more interest while they hold the cash. The insurance customer suffers too, as the case that should have been resolved hangs over their head indefinitely.

Life Insurance Companies Fleece & Deprive Insurance Agent Income 4 Ways

Do not believe for a second that life insurance companies have a halo above. To the contrary life insurance companies deprive an agent of income earned. Discover the 4 ways insurance agent income is fleeced by the companies. Do you honestly believe that you represent only one of the best insurance companies in the United States? Then you have not witnessed how agent income disappears.

The United States is the land of opportunity. This is especially true for annuity, health, and life insurance companies. You have heard lots about petroleum companies draining their customers’ wallets at the gas pump. Life insurance Companies leave the source of pumping customers alone. Instead, their dirty deeds done dirt-cheap are reserved for their own insurance agent representatives who are finding more and more new customers for them.

Some insurance company plots are very well know . Yet some are planned out to happen at lightning speed so that you do not know what hit you. This article exposes some common misdeeds along with ones so rotten they make dirty diapers smell like they came from heaven.

The Premium Plot

Hundreds of thousands of new insurance trainees will be hired this year. Sure, life insurance companies appear initially glad to have you aboard. They will help train you. Training (in reality) means assisting in milking as many of your family members, relatives, neighbors, friends, and casual contacts until this source dries up. At every meeting, you will be asked how much new money you just collected. You quickly realize that selling relatives can be high pressure. Finding a new prospect is about as difficult as sitting in the dentist chair, as your dentist whistles while drilling your teeth.

Well over 250,000 newer insurance trainees that fall by the wayside this year will fall into the insurance agent income premium plot. The minute they leave, the life insurance companies lay claim to all policy owners,. They directly collect their first year premiums and all the money each year they renew. This could be called reverse lottery profitable. If the agency has only 10 dropouts that could mean an easy profit of $500,000 over the next few years. You went into reverse, because you had to borrow money to pay expenses the company never reimbursed you for.

The Handcuff Plot

Numerous career life insurance companies have money fleecing contracts, like yours may have. Their contract contains a hidden pitch fork awaiting you. Over a course of several years, if you have written a fair amount of policies, you will be collecting renewal money. These agent money renewals start after the insurance policy payments begin a new year. The amount of renewals could accumulate over time to be in the thousands. So this provision does not sound like the work of the devil.

However suddenly you see a much more lucrative opportunity that matches your abilities. As soon as you make the switch over, the pitchfork jabs you in the pocketbook. It is a bloody, unfair, and one-sided mess. You are then reminded of your lengthy contract you have not read in years, if ever. The life Insurance companies contracts with you state that renewals terminate if you leave the insuer. Your former life company grins and takes every dime of your renewals you were counting on for income.

The New Rate Plot

This rate (or rat) plot had to have been designed by a master of illusions, or a team of them. Purposely cruel to agents it happens when ABC insurance company, buys out all current business of DEF insurance company. ABC insurance has two intentions in mind. One is to start the stoppage of paying agents their renewal premiums, and the other is to raise rates on people having coverage. Agents are notified that the new company is cancelling their insurance representative contract and not writing this kind of insurance anymore.

Imagine if this insurer accounted for 80% of your income. Overnight you would have to start Plan B. However, you never had a Plan B. You have been poisoned by the new company rats.

The Guillotine Plot

Agent marketing recruiters spend years and vast amounts of money finding other agents to at least occasionally sell their company products. The recruiter commonly has a contract entitled MGA, Managing General Agent. He provides the insurance writing agent with a GA, general agent, or broker contract. The insurance company may pay the MGA 95% commission on the policy money collected. In turn, he might pay a GA 75% on the policy money the general agent collects. The broker could be paid 65%.

The marketing MGA makes his money on overrides. He is rewarded 20% of a general agent and 30% on a broker. If there are enough producers writing business for him. The MGA has the opportunity to build a very respectable income from his recruiting. This lures too many new MGA’s to try it. That is why at any time there is an over abundance over 15,000 recruiters of insurance product marketers of all types in the United States.

The life insurance companies decide to get richer off all the hundreds of thousands of insurance policies payments to producers the easiest and nastiest way possible. The guillotine plot is put into action. The Managing General Agents, and General Agents are all sent the same head chopping letter. The insurance company has “decided” to have one contract level only, that of a broker. This is not redistribution of wealth. It is talking all the excess wealth and distributing it directly back to the already wealthy life insurer.

These are just four of the plots, that are used. Myself, I have been victimized by every single one of them and more. The only prevention pill is to have company number 2 already set up at slow cruise. This way Plan B could kick into action before the lack of insurance agent income knocks you out of your career.

The life insurance companies have plenty of anti-agent rotten time-bomb eggs at their disposal. To many of them it is all about money, your insurance agent income.

Well published author, Don Yerke likes to concentrate on what you don’t know or what no one else dares to print. Tell it like it is.

Watch for his new paperback book debuting on Amazon early this summer. It is loaded with great insurance marketing and recruiting information.

Missing Persons Investigations of a New Age

George Orwell’s novel Nineteen Eighty-Four was first published in 1949. You’d have thought that his vision would no longer be up-to-date 65 years later. The world he described was a world where Big Brother was watching people, constantly seeking information about crime think or any other kind of offence against the glorious super state of Oceania.

Edward Snowden showed us, that what Big Brothers these days are doing is not all that different from what Orwell described. Sure, the technology is quite different from what he had envisioned, but Orwell’s novel is not about science and technology, but about the horrible world where governments might monitor our every move, observe us in our most intimate moments and know about everything we do. Modern day supercomputers, satellites and all sorts of technology make that easily possible for various government agencies.

Yet there is so much information out there that is easily accessible without any spying satellites, supercomputers or without bugging mobile phones. It’s the information millions of users are putting online every day of their own free will, just to get some likes, re-tweets or shares. People tell themselves that they are doing this to stay in touch with each other, but they fail to realize how much of their personal information they are giving away every moment of every day.

With more than half of Australians being active on Facebook, it seems like this would be the most promising social network to start an investigation. The information found on Facebook is truly varied. There are photographs, comments as well as check-ins that give away a person’s current location. Furthermore there is a time stamp on everything, which makes it easy to create a collage of events a person went through at a certain time. No special equipment is needed for all of this with much of it capable of being performed with a simple smart phone.

Of course people tend to forget, that social media doesn’t mean just Facebook and Twitter. Apart from other household names like LinkedIn, Google+ or Pinterest, there are dozens of other smaller, niche websites that cater to all sorts of profiles. Finding information across all of these platforms can turn into a large investigation on its own.

Investigating social media is not only about snooping either. People tend to forget, that Facebook is first and foremost a platform for communication. As many people from the younger generations no longer even have a landline and choose not to publicly reveal their mobile number, Facebook and other social media may be an easy way of tracking them down for communication or to even serve court documents.

Being a private investigator and not knowing anything about social media is something that has become unimaginable in this day and age. While traditional methods such as surveillance are still very effective, they are considerably supplemented with comprehensive desktop investigation based on extensive social media profiling and as the next generation moves more of their life onto the internet the value of this brand of profiling is only going to increase.

Ecommerce – The Importance of Having a Privacy Policy

A privacy policy, also known as an information management policy, is an agreement between a website operator and a website user that determines how the operator intends to use, collect, store, share, and protect the data that the user shares through interactions with the website. Even a little more than a decade ago, some commercial websites did not have privacy policies, but now, virtually all websites have one. These policies, which should be separate from the website’s terms of use agreement, are a necessity for several different reasons.

The Policy Can Foster Transparency and Trust between Operators and Users

In connection with privacy policies, website users usually want to know two things: what information the website collects and how that information is used. Best business practices dictate that website operators let users know the answers to those two questions and let them know how to control that use.

Some websites inform users that they simply collect information for their own use, and other websites disclose that they provide that information to third parties under certain circumstances. eBay’s privacy policy, for instance, tells users that it does not “disclose your personal information to third parties for their marketing and advertising purposes” without the user’s explicit consent. The policy says eBay may share personal information to third parties when it is necessary to prevent fraud or use the eBay website’s core functions. The extended version of eBay’s reader-friendly policy could be improved by specifically informing users at what points of service the information is collected and how it is shared at each point.

A website should also update users whenever the privacy policy changes. It should let the users know when the new policy will go into effect, and it may allow users to agree to the changes, explicitly through a dialogue box or implicitly through continued use of the website.

The Policy Can Help Shield You from Legal Liability

Although there is no general federal law outlining privacy policy requirements for websites that collect information from adults, several state laws and minor-specific federal laws exist. For instance, the California Online Privacy Protection Act of 2003 (OPPA) requires that website privacy policies must contain certain information, including: “personally identifying information collected, the categories of parties with whom this personally identifying information may be shared, and the process for notifying users of material changes to the applicable privacy policy.” The Children’s Online Privacy Protection Act (COPPA) requires operators to maintain a privacy policy if the website is directed to children under the age of 13 or knowingly collects information from children under the age of 13.

Read for more for additional information regarding privacy policies, terms of use agreements, internet business, and eCommerce.

Darin M. Klemchuk is an intellectual property (IP) trial lawyer located in Dallas, Texas with significant experience enforcing patent, trademark, copyright, and trade secret rights. He is a founding partner of Klemchuk LLP. He was selected to be included in the Internet Lawyer Leadership Summit, a group of lawyers in the US focused on Internet law issues. He also practices commercial litigation and business law, social media law, and ecommerce and IP licensing.