A Maryland insurance company has recently been placed squarely on the defensive in the press due to it recent defense of an uninsured/underinsured motorist (UM) insurance claim in court. Actually, that is not entirely accurate. The insurance company does not find itself this position because of the outcome in the court case. Rather, the public scrutiny it now faces results directly from the evils of social media – the dreaded blog post. Although to be fair to blogs (as I kind of have to be), the situation could have come from one of the many relatives of the blog, be it the Tweet, the Facebook post, the YouTube rant,
MySpace, the message board comment, etc. Despite having done nothing wrong, the insurer finds itself in a public relations nightmare, which in the internet age, maybe should not be all that surprising.
I will not identify the insurance company here or the specific case because (1) the company’s actions were completely appropriate; and (2) it does not matter which insurer it was – other insurers handle UM claims the same way, and any one of them could have found themselves in the same position.
The basics: a horrible accident in which one of the drivers is killed. The other driver has little or no liability insurance, so the injured driver’s family looks to her insurer for benefits under his or her UM coverage. The complicating factor is that there are factual questions as to how the accident happened and who may have been at fault. In order to recover UM benefits under an auto insurance policy, the insured must demonstrate, as a condition precedent to receiving any benefits, that he/she would be legally entitled to recover from the uninsured/underinsured driver. In some cases, this condition is easily met because the basic facts of the accident are not in dispute and demonstrated that the other driver was at fault. However, if there is evidence that the insured may have been at fault for the happening of the accident, the insurance company would be smart, and in some ways obligated, to investigate the claim and determine whether its insured is entitled to benefits. In Maryland especially, where the doctrine of contributory negligence acts as a complete bar to recover if a plaintiff is even slightly negligent, it will often times be a very reasonable and prudent decision for an insurance company to contest a UM claim. Sometimes, the alleged tortfeasor will contest the claim, and the UM insurer can sit in the background and let the case play out. However, in cases where the alleged tortfeasor has no insurance or has offered to the plaintiff the full limits of its liability coverage, which the plaintiff would like to accept, the UM insurer is now faced with the prospect of paying the UM claim or taking an active involvement in the tort case against its own insured.
In the present circumstance, the UM insurer found itself in such a position and decided to defend the case and argue that the plaintiff (its insured) had been negligent in causing the accident. Unlike the insurer’s obligation to defend its insured against liability claims, the insurer owes no fiduciary obligations to the insured in the UM context. A UM claim is a first party contract claim, and it is well established law that a UM claim is adversarial in nature between the UM insurer and UM insured. Statutes have been enacted to ensure that the UM insurance carrier handle the first party claims in good faith, and exercising a lack of good faith can subject the insurance carrier to penalties and damages. In this case, however, the insurer appeared to have exercised good faith, but simply had legitimate questions as to whether its insured was entitled to benefits.
The problem arose because the insured’s brother did not see it that way. Rather, at the trial, what he chose to see was the insurance company “defending” the driver against his sister’s claims and doing anything in its power to avoid providing the coverage for which his sister had paid premiums. This man was surely not the first person who has ever taken issue with an insurance company contesting a UM claim. However, he decided to blog about it, providing his side of the story in very unflattering terms toward the insurance company. His blog gets reposted by others over and over again, gets picked up by a local television station, then many of the larger news websites, then newspapers, and it all snowballs into a very public rebuke, causing the insurance company to issue a press release explaining its actions. The insurer’s press release causes the blogger to issue another blog, again lambasting the insurer and arguing that it is all a matter of semantics, but the bottom line was that people should not use this insurance company. Then that blog gets reposted over and over again, then…well, you can see where this is going.
Were the poster’s comments accurate? Were they fair? Were they understandable? Frankly, the answer to all these questions is that it does not matter. The damage has been done. One person, with one blog post, may have cost an insurance company thousands of dollars due to bad publicity. The insurance company, legal experts, and even legal non-experts like myself can articulate the very legitimate rationale behind every step the insurer took in this situation, but that does not matter. The public perception is all that matters, and this case presents a stark reality as to how one person can now cause an insurance company a very large headache with very little effort, all through the magic of the internet and social media.
All insurance companies, heck – all companies or even all persons, shold heed this story as a cautionary tale. Insurers in particular should consider the potential public perception that could emerge from bad publicity and, perhaps even consider revising the decision-making process in claims management decisions to expressly consider the potential impact of social media. In many ways, the insurers themselves are to blame for the public perception that they are supposed to take care of their insureds. The insurance industry is one of the largest advertisers in the country, and the public is constantly being told that they are in “good hands” or that the insurance company will be there for them “like a good neighbor” would be. Every insurance company has multiple mottos and slogans trying to convince potential buyers to choose them. A byproduct of this marketing effort is that there is a large segment of the public who sees their insurer as owing them far more than that which the insurance contract provides. These unrealistic expectations can lead to unhappy insureds, and we are now living in a time where it only takes one unhappy customer to create a large headache for the company.