Many policyholders think that insurance company adjusters get an individual bonus on each claim for paying less than a certain amount. They distrust the insurance company adjuster and often creatively claim more, fearing that the property insurance adjuster will wrongfully reduce the eventual settlement. The truth is that collectively, many insurance companies pay bonus incentives to claims personnel when they hit certain objective claims goals which also involve paying less on a claim.
Accordingly, when policyholder attorneys ask for this internal information, insurance company attorneys fight and object. They do this virtually in every case because it is harmful evidence. Most would suggest that the decisions and actions of the claims personnel who have such incentives indicate a strong bias and most would agree that it is unethical. Yet, this legal maneuvering by insurance company lawyers is routine.
University of Nevada insurance law professor Jeff Stempel authored a book on the issue in Litigation Road: The Story of Campbell v. State Farm. It is a study of the landmark wrongful claims practice case against State Farm. The case went to the United States Supreme Court, but only after years of stonewalling and objecting to the production of documents. State Farm eventually, by court order, turned over personnel files and company goals which showed how insurance claims handlers and claims management were paid bonus money to lower the average amount paid per claim.
A recent example of this discovery stonewalling is found in last Friday’s order by a federal judge who ordered the production of insurance claims handler personnel files, insurance company financial goals and objectives, the address of a former adjuster, regulatory proceedings, and the identity of an information technology individual so the plaintiff can find what and where to look for information and financial information regarding the repeated retention of an alleged biased expert. The case is Stephen M. Gowan vs. Mid Century Insurance Company, A Division Of Farmers Insurance Group.1 The court noted the following regarding adjuster personnel files:
The court begins with the basic premise that personnel files in bad faith actions have routinely been found to be relevant and discoverable. Lyon v. Bankers Life & Cas. Co., 2011 WL 124629 at *8 (D.S.D. Jan. 14, 2011). ‘Personnel files may reveal an inappropriate reason or reasons for defendant’s action with respect to plaintiff’s claim or an ‘improper corporate culture.’ . . . Furthermore, in cases where the insurance company tried to limit discovery to the claims handler and his or her immediate supervisor, that attempt has been rejected. See Nye v. Hartford Acc. & Indem. Co., 2013 WL 3107492 at *11-12, Civ. No. 12-5028 (D.S.D. June 18, 2013). . . .
This topic was also covered in our blog, Insurance Carrier Bonus Incentive Plans-Dynamite Discovery Decisions.
Merlin Law Group’s Jeffrey Greyber did a 24-part series on the topic of discovery in bad faith cases which you can find here.
Watch out for those objecting insurance company lawyers. They will object, withhold, and argue anything to keep the truth from seeing the light of day.
Positive Thought For The Day
I’m for truth, no matter who tells it. I’m for justice, no matter who it’s for or against.
—Malcolm X
1 Gowan v. Mid-Century Ins. Co., No. 5:14-cv-05025 (W.D.S.D. Sept. 11, 2015).
