The Truth About the "Litigation Crisis"

01/03/2011 | Unfair Insurance Practices/Bad Faith

Here is a great explanation of why the insurance spin machine has gotten it so wrong and the real facts about the ligitation explosion.

Why should we trust insurance companies?

By Gary Farmer

January 2, 2011

Earlier this month, the insurance industry spin machine started up again. If you believe them, every woe in our state — from traffic in South Florida to the cold weather in the Panhandle — is somehow the result of lawsuits. Some even call Florida a "judicial hellhole," claiming that Florida can lower costs for consumers and create jobs simply by reducing lawsuits.

Well, ask yourself this one question: Why in the world would you trust anything your insurance company says? Here are the facts:

"Trial lawyer" lawsuits make up a mere fraction of lawsuits in Florida. In 2009, nearly 90 percent of all lawsuits were either business versus business suits or home foreclosures.

"Malpractice" lawsuits make up an even smaller fraction. In 2009, out of the 547,194 lawsuits filed in Florida, just 1,286 were related to "professional malpractice"— including medical malpractice. That's less than 0.4 percent of all civil court cases.

The percentage of "trial lawyer" cases is dropping. Over the last decade, the percentage of civil cases related to malpractice, auto accidents and product liability has shrunk as corporate litigation and foreclosures are skyrocketing.

Punitive Damages are very rare and for only the most egregious cases. In 1999, Florida enacted restrictions on punitive damages and capped the limits in most cases.

For example, they want to change Florida's laws to bailout auto manufacturers after known defects in their automobiles led to serious injuries. Currently, an injured driver can hold an out-of-state car manufacturer accountable for knowingly selling a car with defects that result in occupants being seriously injured and killed. Ever since Ford manufactured the Pinto automobile with a known defect that resulted in car fires that killed consumers, courts have provided an avenue for consumers to seek accountability. Allowing automobile manufacturers to escape accountability will lead to one thing — reduced safety and greater risk and danger of injury to you and me.

Perhaps the most outrageous proposal is the insurance industry's demand that we further restrict the rights their customers have when they act in bad faith. Small businesses and individuals buy liability insurance to protect themselves from the potential for a catastrophic lawsuit against them. But too often, when the worst happens, the insurance company fails to promptly settle the claim. Now the insurance customer — who could have been fully protected if the insurer had acted in good faith — ends up losing everything they have worked for because the insurance company did not act in good faith.

If the insurance company acts in bad faith in failing to settle these horrible claims when they should, who should pay that excess? The customer who supposedly bought insurance to protect themselves? Or the insurance company that acted in bad faithIf there is a lawsuit problem, it is because out-of-state corporations use our courts to fight with those they contract with, and the banks use them to foreclose on homes — not because consumers use the courts to protect their own rights when negligent behavior has caused harm to them or their family.

Don't allow a dishonest industry to manipulate the truth just to avoid accountability to consumers.

Gary Farmer is an officer with the Florida Justice Association and attorney in Broward County .