Executive Director’s Report

Dear Friends:

United Policyholders began our seventh year with a bang when the brief we submitted on behalf of policyholders was specifically noted in a United States Supreme Court opinion. The opinion came out favorably for policyholders. Through our Amicus Project, we are contributing to preserving and strengthening the legal rights of insurance consumers in California and throughout the United States.

The theme of this issue is: "WHAT’S UP WITH YOUR LEGAL RIGHTS." The laws that govern insurance companies have a direct impact on the way they treat their customers. When legal protections are eroded, insurer abuses follow. When legal protections are strengthened and enforced, claims are handled better, consumers are treated better, and there are fewer lawsuits.

Although the focus of this newsletter is legal issues and legal rights, UP’s position remains, you should not have to hire a lawyer and go to court to get your rightful policy benefits or a fair claim settlement. However, if you do, we want to make sure there are laws to protect you and experienced, knowledgeable attorneys to assist you.

After some dark days, the future looks bright for policyholders’ legal rights in California. Governor Davis promises to be pro-consumer and has solicited input on insurance issues from UP in the past. Attorney General Lockyear is knowledgeable about insurance issues and pro-consumer.

Policyholders fared poorly in Sacramento and in judicial decisions during the past two administrations.

Those of you who fought for passage of the Homeowners Bill of Rights only to have Governor Wilson veto it to placate the insurance industry know he was no friend to consumers. Neither was former Attorney General Lundgren. Lundgren was a leading advocate of so-called "tort reform", which is a code name for the campaign to wipe out important civil rights and legal protections.

Governors Wilson and Deukmejian appointed judges during their administrations who will remain on the bench for years to come. Many of them rarely rule against insurance companies and will overturn pro-policyholder jury verdicts. Predictably, insurers became cocky and claim abuses increased dramatically over the past ten years. Restoring lost legal rights and balancing the judiciary will take many years and hard work. It is important that we not become complacent as a result of last November’s election.

As always, we welcome your input on UP’s various projects, and on insurance issues of interest to you. We need your financial support. We need funds so we can contribute to restoring lost consumer protections, set up our own Website, and continue UP’s important work. Please return the enclosed card with a generous, (tax-deductible) contribution today!

On a personal note, I am the proud mama of a delightful baby girl. We recently caught up with Ina De Long, UP’s co-founder and a pioneering policyholder advocate. She is living and working in Sacramento as an insurance consultant and sends regards to old friends.

Amy Bach, Executive Director

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UP Recognized in Supreme Court Decision

A United Policyholders brief was recently cited by the U.S. Supreme Court in its opinion in Humana Inc.v. Forsythe. In that decision, the Court held, as was advocated by UP, that insurance companies can be held liable under RICO, (a federal law), when they defraud consumers in certain cases. We are pleased to have contributed to this important decision.

Friend to Courts and Policyholders

By filing what are called "amicus" briefs, UP is helping to educate judges on the policyholder's perspective and correcting a longstanding imbalance. The laws that cover insurance come from judicial decisions in real life cases and the bills that are enacted by the legislature. Each year, new decisions are published in insurance cases, and those cases become the law. When a judicial decision has been appealed, and a higher court is reviewing it, interested groups can file what are called "amicus curiae" (friend of the court) briefs for the reviewing court to consider.

Policyholder’s Perspective Buried

Insurance companies routinely hire law firms to file amicus briefs arguing their side of an issue. The policyholder's perspective gets buried. Thanks largely to the heroic volunteer efforts Eugene Anderson, Esq. of Anderson, Kill & Olick, this is changing. Over the past five years, United Policyholders has filed over thirty amicus briefs in cases all around the United States. A, K & O has generously volunteered to draft many of these briefs. Other attorneys who have volunteered to write amicus briefs, include Amy Bach, Christian Garris, Jim Linford, Art Newman, Cal Thur, and Scott Turner. UP is making a big impact.

UP Amicus Project Needs Your Support

We need to raise funds to properly finance The UP Amicus Project. While we are fortunate to have volunteers to write and file pro-policyholder briefs, this may not always be the case. If you understand the importance of educating the judiciary from the policyholder's perspective, please donate to support this project.

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UP Honors Policyholder Attorneys

In November, 1998, UP held a fundraiser in San Francisco honoring attorneys who are in the trenches against insurance companies on behalf of policyholders. These attorneys face difficult odds in taking on giant conglomerates that have almost unlimited resources.

The guest of honor was Bill Shernoff, an attorney whose outstanding work on behalf of policyholders has established many of the most important laws that protect insurance consumers in California. Bill is a true champion of consumer rights and the author of several books, including the recently published Fight Back & Win - How to get your HMO and health insurance To Pay Up. Bill is also the author of Payment Refused - How to Make Insurance Companies pay Your Claims, which has a forward by consumer advocate Ralph Nader.

Bill and his partners at Shernoff, Bidart, Darras and Arkin handle high-profile cases, such as a recent one against Allstate for using non-licensed engineers to evaluate Northridge earthquake damage, and a suit against State Farm for failing to adequately notify insureds about a reduction in their earthquake coverage. Bill is a former member of UP's Board of Directors and has been a generous supporter of United Policyholders since our inception.

Policyholder attorney Doug De Vries generously donated the space for the event. Doug's firm has offices in Sacramento and San Francisco. His areas of expertise include ERISA, health and disability claims, and he has volunteered his time in the fight to change the outrageously unfair laws that make it so difficult to hold insurers accountable for misconduct on claims consumers file under employer-provided health policies.

We thank all who attended and look forward to continuing to work with the many outstanding attorneys who do battle with insurance companies on behalf of policyholders.

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Are Punitive Damages Against Insurers Excessive?

When your twelve year old takes advantage of a babysitter to disobey your ban on pre-homework television, you dock her allowance as punishment. Without her allowance, she can’t join her friends for an activity, so she really misses the money and won’t do it again. When an insurer with a $2 billion surplus is caught trying to increase its profits by instructing adjusters to intentionally delay payment on claims, the penalty must be large. Large enough to provide a real disincentive to continue the illegal practice. Otherwise, the insurer will simply do the math, absorb the penalty as a cost of doing business, and resume cheating.

That is the reality of insurance economics. What this means is that the threat of punitive damage awards in lawsuits is perhaps the most effective insurance consumer protection in existence. Insurance regulators do not have the authority to levy the kind of fines that truly deter misconduct.

Punitive damages are generally set as a fraction of the net worth of an insurer,

typically 1%. Newspaper headlines that scream about large awards can be shocking, but they must always be evaluated in the context of the insurer’s conduct and its net worth. Some important facts about punitive damage awards:

1. They are only entered after an impartial jury has sat through a full trial with witnesses and evidence and reviewed information about the company’s net worth.
2. They are almost always substantially reduced on appeal, by which time reporters are no longer following the story.
3. In most states, the insurer’s conduct must be very, very bad and meet a high legal standard or punitive damages can’t be awarded.

Are punitive damage awards excessive? Insurers and their lobbyists say YES! Ask any policyholder who’s been beaten down by an insurer or endured years of litigation to get a legitimate claim paid - they’ll say NO! There are many legal safeguards that prevent excessive awards, so we say -NO, too.

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Who You Gonna Call?

Consumers should not need to hire professionals to get fair claim settlements. But the reality of insurance economics is that they often do, particularly with large claims. Experienced and reputable attorneys can be critically important in securing a fair claim settlement. Policyholder attorneys are those who specialize in representing insureds. The phrase "policyholder attorney" is not a common term, but it describes the kind of attorney a consumer should hire if they have an insurance problem.

For more information on hiring an attorney to help get your claim paid, request a copy of UP’s publication "Hiring an Attorney: When, Why and How" by sending a SASE to UP at 110 Pacific Ave, PMB 262, S.F., CA 94111, or read it on the Internet at www.insurance-information.org.

If after reading UP’s tip sheet, you conclude that you need to hire an attorney, here are some suggestions.

• Look in the yellow pages under Attorneys/Insurance.
• Call your local Bar Association and request the names of "Bad Faith" or insurance specialists.
• Call your local Trial Lawyers Association and ask for names of members who specialize in Insurance/Bad Faith.
• Call the American Trial Lawyers Association, and ask for the names of members of the Insurance Section that practice in your area.
• Recommendations from other claimants.

UP does not "endorse" or recommend any particular attorneys or law firms. We are a conduit for information. The following are attorneys who specialize in representing policyholders, and who have contributed to the advancement of consumer rights by either volunteering their time to promote pro-consumer legislation, assist disaster victims, or draft briefs in important insurance cases:

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CDI REPORT CARD:
Bourhis Oversight Still Needed

If you've ever filed a complaint with the California Dept. of Insurance, (CDI), against an insurer or agent, chances are you weren't too pleased with the result. You may have gotten a form letter back telling you that as long as the insurer didn't ignore your claim completely, they weren't violating the law. You may have spoken to a person who discouraged you from pursuing the matter or waited months to get an inconclusive response.

San Francisco attorney Ray Bourhis tried to fix the problem back in 1988 by suing then Commissioner Roxanne Gillespie to force her to effectively respond to consumer complaints. Bourhis won and was appointed "Special Master" to oversee the CDI's improvement efforts.

Last year, the current Commissioner Quackenbush and then Attorney-General Lundgren tried to have Bourhis removed, but the Court concluded the problem isn't fixed, and kept him on the job. UP Executive Director Amy Bach has worked with Bourhis on this project for many years. UP has also supported legislation in Sacramento to increase funding and staffing so the CDI has the resources to do its job properly.

Because the CDI is the only legal recourse for "third party" victims of insurance bad faith, and because many lawyers won't take on small claim disputes, it is critically important that the Dept. make whatever internal changes it needs to make to respond effectively to consumer complaints and prosecute wrongdoing.

If you’re having an insurance problem, you should still file a complaint with the CDI, if only to make a record. The CDI's toll-free consumer complaint hotline number is (800) 927-HELP. Complaint forms can also be downloaded from the CDI’s website at www.insurance.ca.gov.

COMPLAINED LATELY?

If you or someone you know has filed a complaint with the CDI, we want to hear your story...good or bad. Please write a brief description of your experience and fax it to Ray Bourhis at (415) 421-0259 or send to UP, 110 Pacific Ave. SF, CA 94111 This information will be used to help evaluate the CDI's performance, and will be kept confidential if you so request.

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"Fight Back and Win"

Fight Back & Win - How to get your HMO and health insurance To Pay Up
by William M. Shernoff. Bottom Line Publishing, Boardroom, Inc.1998.

You don't need to have a medical condition to benefit from this book. A quick read, it contains practical information on HMOs, traditional health insurers, and disability insurers; including how they actually handle claims and how they should handle claims, tips for avoiding disputes with them and tips for handling disputes when they arise. The author is a veteran policyholder advocate, (see article on page two), and very knowledgeable about the subject matter. The book covers the ERISA scandal, which is the federal law that took away the legal rights of most Americans to challenge bad conduct by health insurers. Bill Shernoff gives ample reasons why the law must be changed by describing some of the real life examples of victims of bad faith who've had no legal recourse thanks to ERISA. Call (800) 458-3351 to request a copy of the book or to get more information.

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