Insurance Claims

* Re “Justice Served at Courthouse,” July 7.

It is no surprise Los Angeles County was required to sue its insurers to obtain payment for losses suffered (in the Northridge earthquake) to the San Fernando Courthouse. The largest area of insurance fraud is the fraud perpetrated by insurance companies in refusing to pay claims which they know are legitimate. If an entity as powerful as Los Angeles County has to resort to litigation, what chance does the average person have against the insurers that hold the checkbook?

Until a few years ago, one damaged by another could sue the other’s insurance company if it refused to negotiate settlements in good faith, where it was reasonably clear that the damaged person was lawfully entitled to recover. That kept insurance companies somewhat in check.

Now, due to a California Supreme Court ruling, such remedy for insurance bad faith is no longer available. This had emboldened insurance companies to refuse to settle even the clearest of legitimate claims. Fair settlement then typically comes only on the courthouse steps, just prior to picking a jury. By such unfair practices, insurance companies are able to make large profits on the interest earned on money they delay paying in settlement. Even though the bad faith remedy still exists when one’s own insurer refuses to deal in good faith with its insured, courts’ protection of insurance companies encourages the companies to negotiate in bad faith, even with its own insureds.

If insurance companies are expected to start settling claims, reasonably and without necessity of litigation, it is time for the Legislature, or the electorate, to restore insurance bad faith as a remedy, to guard against unfair claims practices.

KENNETH M. STERN

Stern is an attorney in Woodland Hills