One of our firm’s clients was in the news recently because he got
a rude shock from his insurance company, Geico. He found out the hard
way how insurance companies really operate.
The story begins in August. At that time, Ricky Melendez was driving to
work in the morning on U.S. 19. As he passed through the Tampa Road intersection,
a stolen car full of teenagers ran a red light at more than 100 mph and
smashed into his car. He came close to being killed and is still recovering
from the serious injuries he suffered.
Three of the four teenagers in the stolen car were killed. The story was
all over the news in Pinellas County.
Imagine our client’s shock and surprise when he found out a few weeks
ago that Geico was paying his insurance policy limits to the families
of the three dead car thieves. That’s
right. Apparently, because Geico was worried that someway, somehow, our
client might be just the tiniest bit at fault, it paid out every dime
of his insurance limits. Geico did this before the parents of the juvenile
car thieves even asked for the money.
This decision by Geico was outrageous, but it was not unprecedented. People
who have auto insurance find out quickly that they have little to no control
over what their insurance company does when they face a claim. Insurance
policies are written so that the insurance company has complete control
over whether, when, and how to defend a claim - or settle it. An insurance
company can basically decide to dispose of a claim in any way it likes.
Its decisions are final and it has no duty to consider input from its
Insurance companies don’t just pay sometimes when they shouldn’t.
That’s just one side of the coin. Even more common is the situation
where an insurance company puts their policyholders at risk by failing
to pay when it should.
In a bid to save a few dollars, an insurance company might lowball a legitimate
claim and force it into a courtroom. Then, when the jury’s verdict
blows up in the insurance company’s face, there’s no guarantee
the insurance company will pay for all the damages.
This sounds crazy, but it really happens. An insurance company who writes
a $50,000 policy might gamble and try to get a verdict for less. Then,
when the trial goes badly and the verdict comes back at $200,000, it pays
the $50,000 limit and abandons its policyholder. The insurer refuses to
pay the $150,000 difference, leaving its own customer stuck with the bill.
The only recourse for the customer at this point is a “bad faith”
claims against their own insurance company. Those are long, difficult,
and uncertain, but the only alternative is to get stuck holding the bag
for a bad decision.
The truth is that the deck is stacked against the policyholder when it
comes to making decisions about claims. It’s not all good hands
and good neighbors out there in the real world. Insurance customers should
pay close attention to what their insurance companies do with their claims,
and get independent legal help when they have concerns about what’s going on.