Farmers Insurance, The Law and Injured Patients as Units

By Adler Giersch PS

In a landmark trial court decision, Judge Prochnau found Farmers Insurance had violated its legal and contractual duty to its traumatically injured policy holders to promptly and fairly pay bills for medical care under the Personal Injury Protection (PIP) policy.

By way of background, all automobile policies of insurance are governed by a set of claims processing standards set out in Washington state statutory and regulatory law. The insurance companies are required to pay all medical treatment expenses that are reasonable, necessary and related to the automobile collision. Specifically as well, under WAC 284-30-330(4), they owe a duty to the injured person to do a reasonable investigation of all treatment submitted for payment BEFORE deciding to deny the claims. “Good Faith” requires the automobile insurer to give equal consideration to the insured’s interests when deciding whether or not to pay. They must have a reasonable basis in place for the denial.

During discovery leading up to the motion, the plaintiffs were able to obtain evidence of a systematic practice by Farmers Insurance of withholding, denying, or limiting claims prior to completing the claims investigation process. Farmers, which commonly referred to the injured persons as “Units” rather than people, would generate form letters to providers and “units” early in the claim without regard to the particular “units” case stating they were holding bills until after the insured had attended an Insurance Medical Examination by a doctor they selected and paid.

If the IME opinion was the typical negative opinion for the injured person, Farmers would refuse to pay any benefits from the date of the initial letter. If the insurance doctor said treatment was reasonable, necessary and related, belated payment would be made.

In practical effect, this served to preclude many insured’s from getting needed care, made providers more reluctant to treat PIP patients, and often discouraged individuals into early settlement of their claims. In finding this practiced violated Washington law, the court noted in it’s oral ruling in part that:

At the point the insured is requesting coverage and bills are being submitted, there is an implicit doctor statement that bills are RNR. Burden shifts to insurer to show that coverage is not RNR. Insurer must make reasonable investigation and not deny coverage on suspicion. …

What does it mean to deny, limit, terminate benefits? Use of all 3 words in the WAC 395 is an indication that insurance commissioner intended to capture all the artful practices that might be used. The insured is being denied speedy payment. It is of little use to the insured to find later that they will get coverage if they have been unable to use benefits in the meantime. …

Court finds Farmers owes insureds a per se duty to complete investigation before denying claims. Cannot pre-deny without first making reasonable investigation. It is clear that Farmers itself has determined the IME is necessary to deny the claim. If they do feel they have enough evidence, they have violated their duty to say why they are denying the claim.

The evidence in this case established with respect to this one carrier alone, harmful and wrongful practices that impacted payment decisions on 83% of claims. This decision is the first to deal with a business practice of this type in the PIP context by one of the big three automobile insurance carriers in the state and has wide ranging implications. It will be more difficult for carriers to avoid paying for treatment up to the time the insurance doctor’s report actually comes back.

When you or your patients have an issue with insurance companies denying payment for reasonable, necessary and related care, the experienced personal injury and insurance law lawyers of Adler Giersch are ready to assist. Adler Giersch ps with offices in Seattle, Everett, Bellevue and Kent serving the injured.

Arthur D. Leritz Joins Adler Giersch PS

We are pleased to announce that attorney, Arthur D. Leritz, has joined Adler Giersch ps. Mr. Leritz is a graduate of the University of Washington in 1996 with a Bachelor’s Degree in Political Science. He then obtained his Juris Doctorate (J.D.) from Willamette University’s College of Law in 1999.

Mr. Leritz comes to our firm after many years working for insurance companies handling complex cases including several trials in both state and federal courts. Richard H. Adler, managing partner at Adler Giersch ps notes that, “Mr. Leritz will be a tremendous asset for our traumatically injured clients and our law firm. He brings to us the ‘insider’s perspective’ as an attorney that worked for insurers. We have seen his tough advocacy in action and we know that he can be effective.” Mr. Adler added with some humor, “that despite working for the ‘dark side of the force’ Mr. Leritz always struck us as someone that at heart belonged representing those with traumatic injuries. And we were right. We are delighted to have Mr. Leritz at our firm. He will strengthen our know-how to effectively fight insurance companies that do not do the right thing for our clients.”

Mr. Leritz started at Adler Giersch ps in August 2010. He will be working directly with Mr. Adler and providing input to the other attorneys in the firm. When asked about the change from representing insurance companies to those with traumatic injuries, Mr. Leritz added, “I finally feel like I have returned to my true calling – representing those who have been injured. The last few years I had grown increasingly frustrated doing an outstanding job for insurance companies with the empty feeling that all I was doing was saving them money, at the expense of someone who was hurt. Now, I get to use my knowledge, training and ‘insider perspective’ to help those at a very fragile point in their lives.”

Mr. Leritz is married to his high school sweetheart, Desiree, and they reside in the Everett area. In his spare time Mr. Leritz enjoys restoring vintage Volkswagens. When you come to our office and see a vintage, but shiny green VW bug or bus, you will know that Mr. Leritz is in the house. He is also currently restoring a 1957 DKW 3=6 Sonderklasse.