You diligently pay your insurance premiums on time every month. You know not to be late because the last thing you want is for your insurance company to deny coverage because you missed just one payment. But despite your timeliness, why does it feel like your insurance company is in no hurry to pay the full value of your claim? Lawyers that regularly fight against insurance companies call this a “foot dragging case.”
In a “foot-dragging” case, an insurance company doesn’t deny its insured’s claim outright—it simply takes forever to make a decision, or perhaps make several low-ball offers designed to delay and discourage its insured. What is the insurance company’s incentive to drag its feet? Why not simply pay what it owes immediately? The answer lies in what is called the insurance “float.”
By the way, have you heard of Warren Buffett? The fame investor has used this “float” to become one of the richest people in the world. He explains the “float” and how it benefits insurance companies (and their investors) in his 2016 shareholder letter:
One reason we were attracted to the P/C [Proprty & Casualty] business was its financial characteristics: P/C insurers receive premiums upfront and pay claims later….This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit…This structure is by design and is a key component in the unequaled financial strength of our insurance companies. It will never be compromised.
You have now heard it straight from the horse’s mouth. Note that the “collect-now, pay-later model” is the key: your insurance company has every incentive to take as much time as possible to invest your premiums and collect the proceeds now—and then hopefully pay you little, or nothing, later.
So what hope is there for you, the loyal, premium-paying customer? Well, in Ohio, if an insurance company acts with “bad faith” towards its insured—including by dragging its feet—the insured can bring a lawsuit against its own insurance company and recover money damages. Your insurance company must have a “reasonable justification” for any insurance action it takes with you, the insured. The “reasonable justification” for dragging its feet cannot simply be that the insurance company is making a lot of money investing your premiums, as an Ohio Court held in Unklesbay v. Fenwick, 2006-Ohio-2630, ¶ 16, 167 Ohio App. 3d 408, 415, 855 N.E.2d 516, 521 (“We reasoned that the insurer’s foot-dragging in the claims-handling and evaluation process could support a bad-faith cause of action.”).
But how would you ever know the insurance company’s real reason for dragging its feet? Won’t the insurance company hide that information? Thankfully, the court in Unklesbay held that an insured that alleges that its insurance company is dragging its feet in paying a claim is entitled to the entire internal claim file of the insurance company up until the time that the company pays the claim. That means that a lawyer experienced in fighting insurance companies can force the insurance company to spill its secrets: how did it value your case internally? Did it determine internally that your claim was worth $100,000 while only offering you $10,000? Did it just want to pocket and invest the “float”—the other 90k? You are entitled to find out.
Bad faith insurance lawsuits are critical to keeping insurance companies honest and compensating those who have been harmed by unfair delay tactics. But these cases are not easy. A lawyer experienced in fighting insurance companies can help you ensure that your insurance company pays what it owes now, not later.