Allstate Insurance Forced to Pay $22. Million Dollars on a $250,000 policy, for Bad Faith Toward It's Policyholder

Unfortunately, most consumers purchase insurance on the basis of a television commercial or by though price comparisons. Yet, not all insurance companies are equal, and some have a reputation for providing meager loss payouts. The problem may be exacerbated after a calamity such as a hurricane where several hundred claims are made at once.

Contesting the amount offered by an insurance company to cover a loss may be a daunting task. Insurance companies are, after all, large companies. Most consumers do not fully understand the terms of an insurance policy that may be fifty pages long. One alternative to poor service, is to file a complaint with the state insurance commission, who will try to mediate the complaint.

You can also sue an insurance company for breach of contract, but that's also a poor solution. The insurance company can afford to hire a law firm who may then file a multitude of motions and other legal papers driving up the price of litigation. Should the consumer prevail, even if they hire an attorney on a contingent fee basis, they must still pay the costs of litigation. This may leave a consumer with an insufficient amount to do the necessary repairs. Should the consumer hire an insurance adjuster who takes 25%, and then hire an attorney who takes a 33% contingent fee, they’re left with very little money to perform repairs.

 

Fortunately, Pennsylvania and most other states have a law called a “Bad Faith Statute” which penalizes insurance companies for failing to make good on the policy they sold to the consumer. Pennsylvania’s law is found at 42 Pa. C.S.A. § 8371, and it provides that if an insurer does not comply with the terms of an insurance policy by paying according to the terms of the policy, the policyholder may be entitled to : (1) Interest on the amount of the claim at the prime rate + 3%; (2) Punitive damages against the insurance company; (3) Court costs and attorney fees paid. 

Although not our primary area of practice, our firm has handled a some of these cases in the past. The insurance company will usually try to remove the case to federal court to avoid the wrath of a local jury, and litigation can take years. 

This Bad Faith statue cited above recently played out in a case in Philadelphia, where the insurance company had to bear the wrath of a local jury. Allstate was required to pay a record $22 million dollars in punitive and delay damages for not living up to it’s promise to place it’s insured “In good hands” by paying the $250,000. benefits under an insurance policy. The local jury jury was incensed by Allstate’s refusal to pay $250,000. benefits to a man whose leg was crushed following an auto accident by their insured, and then using frivolous delay tactics in the case brought against it by the insured, so they added punitive and delay damages to the $250,000. policy held by the insured. 

There is an added twist that may have something to do with the verdict, and that is the fact that the insured became so exasperated trying to get Allstate to pay under the policy, he assigned his rights under the policy to the man whose leg he crushed. So the $22. million dollar award went directly to the man who’s leg was crushed following the accident rather than to the person who bought the policy.

It is never a good idea to buy insurance simply on the basis of a television commercial or lower rates. If the insurance company will not repair your home after a hurricane, or pay your benefits after an auto accident, it is not a bargain after all. It is always better to talk to family and friends about their experiences with their insurance company. The case cited above was Hennessey v. Alltate Insurance, Philadelphia Court of Common Pleas Case No. 131001095.

Stay well until the next post.

Bob Gasparro, Esq.

Some Tips for Medicare Open Enrollment Ending December 7, 2015

It’s that time of year again to choose a Medicare supplemental plan. Remember that it isn’t necessary to have Medicare additional insurance and those with Medicare coverage can choose to cover the 20% Medicare co-pay by themselves. In general, however, most seniors opt for supplemental insurance.

Unfortunately, most seniors are so overwhelmed by the complexity of choosing the right supplemental plan that they just choose a name they know such as AARP or Blue Cross. While both are good plans, most seniors might save money, and be better served, by finding a plan which is the best fit for them. 

There are several ways to find the best plan: We perform that service and we consider the insurance that your current physician accepts as well as your current physician's ease in working with various insurance companies. We also consider the Plan Quality and Performance Ratings posted on the Medicare web site. In addition to that, we consider your current list of prescriptions and we try to forecast your needs in the future (not an exact science by any means). The fee is generally a few hundred dollars, but it is possible to save much more. We recommend at least three insurance companies and do not sell insurance.

Another alternative is an independent insurance agent who specializes in Medicare supplemental plans. While in some cases the determination is made only on the basis of annual premiums, at least you will be presented with a few choices. A good agent will go beyond price considerations. The best part about this option is that it generally costs nothing and the agent is compensated by earning a commission on the insurance sale.  

Finally, as part of the Medicare program, money is allocated for a program called APPRISE and volunteers under this program will help you choose a supplemental plan. Each county in Pennsylvania has it’s own APPRISE counselors.  Whatever you do, it is very important to obtain supplemental insurance within six months of attaining age 65, because then your insurance will cover pre-existing conditions. The rules of Medicare supplemental insurance are different from the rules under the Affordable Care Act (Obama Care).

Another separate but related consideration is whether a senior should choose a Medicare Advantage plan or regular Medicare supplemental insurance. 

Advantage plans operate like Health Maintenance Organizations (HMO's) and are generally less expensive. These insurance plans presume that a senior will spend most of his or her time in a particular area. They are definitely not for seniors who travel a lot. Although Advantage Plans have a more restrictive provider list (the list of physicians to treat you), they usually provide more preventative medicine support. You may receive visits from a nurse practitioner who will assist you in maintaining your health and/or free transportation to a clinic. And so, if you are just now Medicare-eligible (i.e. 65 to 70 years old) and in good health, an Advantage Plan is probably a good choice because of the low cost and the preventative support. 

Under traditional Medicare nothing  happens unless you visit a doctor first, and there may be a tendency for doctors and hospitals to bill for as much as possible while they have you. Advantage Plans cut costs through monitoring your health and preventative medicine. Advantage plans may also offer additional services such as dental, hearing or vision, and most cover prescription drugs. They may also include health club fees. 

On the other hand, if you are frail and may require rehab after an injury, Medicare Advantage plans will be more restrictive. When it comes to rehab, Medicare itself allows 100 days of rehab and only pays in full for the first 20 days. The remaining days are subject to the supplemental insurance 20% co-pay. An Advantage Plan will pay close attention to your progress during therapy, and if they do not see adequate progress, will cut of payments for continued rehab. We have had experience with Medicare Advantage plans that denied some testing due to cost, and that initial determination had to be appealed. Another possible problem with Medicare Advantage plans is the wait time to see a physician. While you can visit any doctor who takes Medicare if enrolled in a supplemental plan, Medicare Advantage policyholders are restricted to physicians and testing centers in the network. Also, some “no premium” Advantage Plans have large co-pays. 

To reiterate, if you are young and need preventative support, a Medicare Advantage Plan will have a low premium and may be a good fit. If you are on Medicare because of a disability, or are on Medicaid for long term care, or if you’ve had a rehab stay anytime in the past, you should consider a supplemental plan instead.

And don’t forget to re-evaluate your plan each year. For example Bravo Medicare Advantage was later bought by Health ‘Springs and then that new entity was bought by Cigna. The atmosphere and quality of service changed during the evolution. Your prescription needs may also change. As with all insurance, you should review your needs and your coverage.

Stay well until the next post:

Bob Gasparro, Esq.

The Pennsylvania Depatment of Welfare Receives a New Name

The Pennsylvania Department of Welfare is very much involved in Elder Law. It is this agency that governs and regulates personal care homes and assisted living facilities. While skilled nursing facilities (nursing homes) are regulated by the Pennsylvania Department of Health, DPW reviews applications for Medicaid made by nursing home residents. The department has more than 16,000 employees and oversees 94 county assistance offices statewide

On September 24th, 2014, the governor signed a law that changed the name of the agency to The Department of Human Services. The change will take effect beginning in November and be phased in gradually. For example, stationery will not be replaced right away, but the new stationery and deliverable will bear the new name as the old ones are replaced.

Philadelphia Area Alzheimer's Walk. on November 9, 2014. Would You Like to Pledge?

The Philadelphia 2014 Walk to End Alzheimer's takes place on November 9, 2014, in South Philadelphia. If you would like to pledge, please contact the office at 484-451-6612.

For those willing to pledge $100. or above, I, Bob Gasparro, take you there live. You will receive an internet address so you can watch a live broadcast on YouTube, and feel as though you are in the middle of the march. I did this last year and you should know that the reception quality is not guaranteed throughout the walk, but it certainly was fun. Also, the broadcast will extend from the beginning of the walk to either the end of the walk, or the end of the battery. No refunds, but the money goes for a great cause.

There are some promising research studies that may prevent, end, or mitigate the effects of this disease. Treatment regimens learned from recent researched has already helped to make life more comfortable for those afflicted. When one considers that over 40%  of those past the age of 85 are afflicted with the disease, you can appreciate how important the work done by the Alzheimer's Association is.

Bob Gasparro