D.C. Council Member Mary Cheh has sponsored a bill which would, finally, begin to hold insurance companies responsible to their own policy holders. You can see the bill here.
This bill would require insurance companies to pay claims when it becomes clear they have an obligation to pay. Read that sentence again, and think about it for a second. The bill requires insurance companies to pay claims when it becomes clear they have an obligation to pay.
In our fascinating system of insurance laws, right now, there is NO penalty for insurance companies when they do not pay claims. As a trial lawyer, I know there is a recourse -- sue them! This simple idea, however, denies the very real difference between what your rights are -- in theory -- and what your rights are in reality.
To get paid -- by your own insurance company -- you have to take them to D.C. Superior Court. The filing fee alone is $120.00. Serving the insurance company (delivering the papers to the correct legal recipient) will cost you another $50 to $100. You'll need an attorney, there goes 1/3 of your claim, and you have to wait for 12 months, average, to get your case to trial.
See the problem? The current insurance industry regime tilts unfairly to the insurance company benefit. Allstate, State Farm, Nationwide, GEICO... these companies have all the money in the world (and now maybe new TARP money). All of these property casualty companies have "staff counsel" offices, meaning their legal costs are fixed. Your claim does not cost them a nickel more to defend than what they already pay.
This bill would shift some of these costs to the insurance industry, and give them an incentive to start paying claims more promptly. Allstate devised a program, the Claims Core Process Redesign, to expolit this economic imbalance to even greater effect -- and I saw first hand how effective it was.
Please give Ms. Cheh's office all the support they can use in getting this important legislation passed.
