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Insurers Are Invited to Nitpick, Delay, and Underpay Claims If Consumers Have No Ability to Enforce Good Faith Obligations

United Policyholders recently issued an important press release, Whistleblower Sounds Alarm On Unfair Insurance Practices: Oregon Consumers Need Stronger Legal Protections. While the entirety of the press release is important, one particular sentence stood out:

As Oregon law stands today, it is not financially feasible for an average citizen or small business to retain a lawyer and undertake a lawsuit to challenge unfair treatment by an insurance company.

If there is no accountability in the law for breaking legal obligations that harm others, the wrongdoers will simply continue to act in a wrongful manner. If we do not have laws with consequences, the laws are meaningless.

The press release cites some examples of insurance company wrongful behavior. But the conclusion is significant:

An insured person or business that suffers a loss after having bought insurance to protect their assets is entitled to be fully indemnified as provided by the terms and conditions of their policy and applicable law. When one pays premiums for insurance, one pays for coverage and fair and reasonable claims handling. One should not have to file a lawsuit and pay a professional on top of that to collect what they’re owed on a loss. That is commercial fairness, common sense, and the basis of a healthy loss indemnification system.

But given the ever-present temptation for insurers to slow pay, low pay and intimidate policyholders and avoid paying what they owe in full and on time, the law must provide adequate remedies, penalties and rewards.

For the benefit of Oregon’s residents and communities, state law needs strengthening to make it financial unwise for insurers to unfairly underpay. As long as insurance companies face few to no negative consequences for delaying and improperly limiting payouts, it will remain in their financial interest to do so.

The problem with good faith laws in most states is there is either no bad faith cause of action or the standards to prove bad faith are so high that virtually no bad faith damages of any significance are ever recovered. This scenario invites wrongful behavior by insurers. The insurance industry hates accountability, and a private right of action publicly exposes their wrongdoings.

I applaud United Policyholders for bringing to the public’s attention the insurance claims problem in Oregon and in other parts of the country. Amy Bach and the United Policyholder staff are involved in supporting and making pro-policyholder laws throughout the country. They deserve our support.

Thought For The Day

Accountability breeds response-ability.
—Stephen Covey

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