Recent verdicts from across the nation in disability, life and health insurance policy cases must be alarming for big corporate insurance companies. The trend is for jurors to award individual plaintiffs astronomical punitive damage verdicts, showing their general disdain for insurance companies and tendency to empathize with policyholders, particularly where a person’s health is at issue.
That trend in juror attitudes is supported by jury consultant research. For example, Mark S. Sobus, Ph.D., J.D. of EDGE Litigation Consulting, LLC, found insurers are at a great disadvantage when trying to persuade jurors to side with them because jurors tend to have a negative attitude toward insurance companies. Dr. Sobus in his research asked jurors, “In a dispute between a policyholder and his/her insurance company, are you someone who without knowing any facts would automatically side with the policyholder or the insurance company?” Dr. Sobus found no one ever said they would side with the insurance company, but around thirty percent of jurors admitted that they would automatically side with the policyholder. That thirty percent of jurors can almost never be persuaded to change their minds.
Dr. Sobus also found:
- While most jurors believe policyholders make fraudulent claims to insurance companies and that such conduct is wrong, this rarely leads to jurors adopting such a position when they decide a case, even where the insurer presents strong evidence the policyholder made misrepresentations to the insurer.
- Jurors hold insurance companies to an incredibly high standard of constructive knowledge. Jurors very often forgive misconduct by the insured when they conclude (as they most often do) that the insurance company could have and should have independently learned about “missing” information left out by the insured on his application for insurance.
- An example of this happened in a life insurance dispute in which the insured was murdered. The murder happened during the policy’s two-year contestability period, which allowed the insurance company to rescind the $5 million policy if it found material misrepresentations in the application. The insured omitted that he was bankrupt on his application. He misrepresented his assets. And he failed to disclose he had been turned down by other insurance companies. In this case and similar cases, according to Dr. Sobus, jurors consistently found in favor of the beneficiary. The jurors concluded that the company did not adequately investigate the insured prior to issuing the policy. The common refrain from jurors was the company wanted the premiums and didn’t care about the insured’s material financial history until he died and the insurance company’s assets were on the line. Only then did the company properly investigate the underwriting risk, when it should have done so before it sold the policy.
Jury consultant conclusions that jurors are predisposed to side with individual insureds over their insurance companies are borne out by recent jury verdicts against insurance companies. In Latham v. Time Ins. Co., No. 2006-cv-1040 (Boulder Colo. Dist. Ct. Jan. 2010), after just six hours of deliberating, a jury awarded a thirty-nine year old teacher and her two children almost $50 million in damages, mostly punitive damages. Her health insurer, the defendant, had rescinded her insurance policy after she submitted a claim for $185,000 in medical bills for the broken bones, internal injuries and brain damage she and her children suffered in an automobile accident caused by a drug dealer fleeing from police. The insurer decided not to pay the claim and rescind the policy because it discovered the insured had failed to disclose certain medical information on her application for the insurance.
The insured’s omission did not matter to the jury, which emphasized the lack of humanity and concern by the insurance company for the insured mother of two. Indeed, the insured admitted she failed to disclose the medical information on her insurance application. But, according to the local news report, jurors contacted after the verdict stated that the defendant insurance company failed to show that plaintiff deliberately misrepresented her health on her application for insurance or that the company had conducted a reasonable investigation before revoking her coverage. Another juror stated:
Most of [the insurance company’s] witnesses seemed dishonest, defensive and just showed a basic lack of humanity. It was kind of frightening. I was blown away by just how much they acted like robots.
The jury foreman even stated that he had been in favor of awarding as much as $150 million to the insured, “as a way of punishing the company and sending it a message.”
The message of this case to insurance companies is obvious. Do not discount the role emotions play on jurors involving a dispute between an insurance company and individual insured over her medical condition. Jurors will tend to side with the insured based purely on their emotions. Jurors will give the insured considerable grace and big damage awards whenever the evidence will remotely allow it.
Another example is Hull v. Ability Ins. Co., No. 1:10-cv-116 (D. Mont. April 6, 2012). In that case, an insurance company stopped paying an elderly woman’s benefits, after two years of paying them, under her long-term care insurance policy. The company claimed her dementia did not qualify her for the benefits under the policy’s terms. The insured presented evidence the insurer had not obtained information from her treating physician and had not obtained her medical records before denying her claim. She also presented evidence that the insurer’s claims manual recommended claims representatives avoid relying on information from the insured’s treating physicians. The jury awarded the elderly woman $250,000 in benefits for the insurance company breaching its insurance contract and $32 million in punitive damages (later reduced on appeal to $10 million).
No doubt, as these and other cases illustrate, there is a trend developing among jurors to punish recalcitrant insurers with large punitive damage awards, particularly in cases involving an individual insured’s claim for disability, life or health benefits. The lesson to “big business” insurance companies is unmistakable, don’t discount the human element juries use to decide cases. That element puts corporate insurance companies at a distinct disadvantage from day one of a jury trial involving an individual and his or her health problems.
