Insurance fraud is insurance fraud

By Alan Shanoff ,Toronto Sun

First posted: Saturday, May 04, 2013 07:00 PM EDT

Updated: Friday, May 03, 2013 07:51 PM EDT

Ontario has made significant changes to the auto insurance system – capping benefits and streamlining the process – but it’s not yet clear what impact that’s had on limiting fraudulent claims.

If it’s insurance fraud for injured people deliberately exaggerating their injuries to inflate insurance claims then shouldn’t it equally be considered insurance fraud if insurance companies deliberately deny or delay payment of valid claims? To examine this question let’s take a look at the recent decision of Saskatchewan Queen’s Bench Justice M. D. Acton when he recently awarded aggravated and punitive damages in the sum of $4.95 million to be paid by insurance companies American Home Assurance and Zurich Life Insurance for their reprehensible treatment of welder Luciano Branco.

Here’s what these 2 insurance companies did to incur the wrath of Justice Acton. AHA was under contract to provide the equivalent of workers’ compensation benefits to Branco. In order to exploit what they thought was Branco’s vulnerability they withheld monthly benefits for periods of 18 months, 6 months and a whopping 8 years. All this to push Branco into accepting a low ball lump sum cash settlement. They even had the nerve to suspend payments when they were unable to receive a medical update from the doctor they appointed to assess Branco!

Zurich was under contract to provide disability benefits to Branco. Zurich delayed payments for 7 years after approving Branco’s claim. During that period Zurich, also made low ball offers to Branco.

This wasn’t even a close case. Branco was a dedicated, hard-working employee who had a perfect attendance record prior to suffering 2 injuries to his right foot. He underwent unsuccessful surgery and was left with a well documented, but rare disorder causing chronic severe pain and significantly reduced function of his right leg. By refusing to make the contractually obligated payments, the insurance companies made it impossible for Branco to cover his living expenses. His marriage suffered and he was forced to rely on handouts from his daughter. His daughter in turn was forced to move into smaller, less expensive accommodations in order to fund the payments to her father. He was forced into moving in with his 79 year-old mother. Branco was fortunate that his lawyer agreed to postpone payments of legal fees until conclusion of the case.

You’d think the insurance companies would have come to court and explained or tried to explain their egregious conduct but no, they didn’t. No witnesses were called by either insurer in any attempt to explain their actions —that speaks volumes. There was no reasoning given for the bad faith conduct of the insurance companies, other than the obvious — they were trying to take financial advantage of someone they thought was vulnerable.

Insurance is intended to provide peace of mind. Disability insurance is intended to provide an element of financial security to an injured person. Disability payments are intended to replace a portion of the disabled person’s lost income payments. For many, as with Branco, the payments are necessary to provide funds to pay for shelter, food and clothing. Denying payments for years for no reason other than to attempt to push someone into a low ball settlement deserves the court’s condemnation. The court took pains to condemn the conduct of both insurance companies and wondered how frequently this type of conduct occurs and how often claimants have buckled under and accepted insurance companies’ unreasonably low offers. We’ll never know. The numbers are buried in the files of insurance companies.

That leaves insurance companies and their lobbyists to spin the story that the examples I pull from the courts and arbitrations are the exceptions, that most claims are handled in a professional manner by insurers.

But is such conduct fraud? Surely the deliberate denial or lengthy delay in payment of a valid claim in order to force an unreasonably low settlement is as bad if not worse than injured people deliberately exaggerating their injuries to inflate insurance claims.

Fraud is fraud no matter on which side of the ledger it occurs.

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