Monday, December 22, 2008

An Example of Why I Don't Like Insurance Companies Sometimes


Or, alternate title, make sure to read the fine print when you're signing a deal with the devil

Below is a link to a news story that is all too familiar for folks that do business with or against insurance companies. Let me be clear, I'm not saying that all insurance companies are bad or that the people that work for them are evil, just like I don't think that every plaintiff's attorney is a saint. Insurance companies and plaintiffs' attorneys are in it to make money. However, it's stories like these that make me wonder how plaintiffs'/trial attorneys are looked down upon but insurance companies, at least to some, are on the people's side. Also, this type of story illustrates why it's not a bad idea to retain an attorney when you have to make certain types of claims against insurance companies whether you are the injured party or the party that purchased the insurance policy.

Here's the background: Three people were killed in a Houston office fire in 2007. The three families of the victims hired an attorney and sued, presumably the office building owner (side note: in Texas you don't sue the insurance company directly, you sue the person or entity that is insured. In fact you will never hear the word "insurance" in front of a jury in a personal injury/wrongful death trial because saying "insurance" in front of a jury would make the jury more inclined to give more and larger awards to plaintiffs, at least that's what insurance companies argue, and that's the argument they've successfully used to convince the Texas legislature and courts). The building owner had insurance with Great American Insurance Company. In this instance, the insurance company has stepped in (the article doesn't say but, probably by filing a declaratory action). Below is an excerpt from the article detailing the relief that the insurance company is seeking:

Great American Insurance Co. has asked U.S. District Judge Lee Rosenthal in Houston to rule that the deaths caused by the smoke, fumes and soot will not be covered by the policy because there is a specific exclusion for pollution and it mentions smoke, fumes and soot.

You see, the people that perished in the fire did not burn to death. They died of smoke inhalation. The policy that the building owner signed with Great American specifically excludes coverage for deaths caused by smoke, fumes and soot. If the judge goes by the letter of the policy the judge will likely have to rule for the insurance company if the policy does indeed exclude coverage for deaths caused by such injuries. The problem is most people, even office building owners, don't know what is covered in the insurance policies they sign and pay for. Moreover, two parties to a contract, even if it's Joe Buildingowner and Big Insurance, are deemed to have read and understood a contract when they sign it. In this instance the building owner was sold "fire" coverage. The building owner probably didn't read the fine print and just assumed that the policy covered any and all deaths and injuries caused by any future fire. Of course, you know what happens when one "assumes". Is it right that this building owner thought there was coverage? Is it right the Great American sold the building owner "fire" coverage knowing full well that this exclusion existed its policy? Is it right that the building owner would be left holding the bag if the court goes Great American's way? Of course I don't think it's right. I think it should be against public policy to let insurance companies write policies like this that cover "fires" but don't really cover things associated with fires. But it's not up to me, it's up to a federal judge for now. And even if this judge rules against Great American is there any doubt that Great American would appeal? And why wouldn't Great American appeal an adverse ruling. They have nothing to lose and all to gain by having a court rule that these types of policies are OK. It's just the policy holders and those that are hurt that have nothing to gain and a lot to lose.