Benefits delayed are benefits denied. The essence of stonewalling is to drag out an insurance claim for a period of months or years before paying a reasonable settlement. The sections below describe some common areas of stonewalling. An insurer’s delay and failure to respond to a claim may make the insurer liable to pay damages for bad faith.
When a claims representative is dealing with a multi-part claim, the claims representative may refuse to pay any of the parts of the claim until the claimant agrees to settle all parts. For example, if the claimant has an automobile damage claim and a bodily injury claim pending. The claims representative may refuse to pay the damages on the automobile claim until the claimant settles the bodily injury claim. This puts the claimant over a barrel and forces him or her to prematurely settle the bodily injury claim in order to get the automobile repaired.
The claims representative may force the claimant to use his or her own medical coverage and take credit for that coverage before allowing the claimant’s medicals to be paid by the insured’s insurance company.
A claims representative may refuse to offer to advance payment to the claimant for food, rent, or living expenses. The idea is to pressure the claimant and force an early and low settlement.
A claimant is financially vulnerable. The claimant may be injured, disabled and have no means of support other than the expected insurance benefits. An insurer who takes advantage of the insured’s vulnerable position, in order to force him or her to accept an unfair settlement is guilty of gross bad faith.
One stonewalling technique is to tell the claimant that the claim must go to a claims committee or back to the home office for review when there is no claims committee and the case is well within the office authority. This is another structural barrier put in place by insurance companies to delay payment of claims, and to test the resolve of the claimant to pursue payment in full of the insurance claim. Such a statement is false but will buy time for a busy claims representative.
Another stonewalling technique is to delay the insurance claims process at the initial stage by requesting that the insured repeatedly sign claims forms already requested and received by the insurer.
Need insured’s cooperation first
The claims representative may reject a claim because the insured will not cooperate in the investigation, even though the claims representative already has enough facts to pay the claimant. While the policyholder should cooperate in the defense, investigation and settlement of the insurance claim, insurers sometimes improperly assert the “cooperation clause” as a method of intimidation.
Nickel and dime the claimant
Requesting information from the claimant bit-by-bit is a common practice. Rather than making the request of the claimant for all usual information and documentation necessary to settle the entire claim at one time, the claims representative can ask for a little at one time and a little more at another time and drag the settlement process out over a period of months.
Musical chair claim adjusters
Another technique of stonewalling is to bounce the claimant from one claims representative to another until the claimant is confused, frustrated, and will take any settlement in order to get off the merry-go-round. As stated above, this is one of the structural organizational techniques used by an insurance company to delay or avoid making claim payments. Insurers intentionally move claim files on a monthly or bimonthly basis to new claims adjusters.
Alternatively, some insurers who pay and treat their adjusters badly usually have very high turnover, which also results in multiple claims adjusters for each file. Whatever the cause, the effect is the same: the claims are not promptly adjusted because each new adjuster has to get up to speed on each new claim and the claimants are often forced to resubmit information and explain all the facts to each new claims adjuster.
A claims representative may force the claimant into arbitration without good cause which may also run up the claimant’s cost of processing the claim. This will buy time for the claims representative to further negotiate for a lesser sum than the claimant would probably receive as a result of an award through the arbitration proceedings.
Waiting for the insured’s contribution
A claims representative may refuse to settle the claimant’s claim unless the insured makes a contribution towards settling that claim.
Stonewalling on the statute of limitations
A claims representative may allow the statute of limitations to run without telling the claimant that he or she must take steps to protect the case. When the claimant comes back to negotiate after the statute has run, the claims representative can sometimes apply the statute to deny further consideration of the claimant’s claim.
In most jurisdictions, the insurance company must advise the claimant of the applicable statute of limitations (typically two or three years). This means that the insurance company must inform the claimant that the claim will be barred if the claimant fails to settle the claim or file a lawsuit within the applicable limitations period and the claimant will receive nothing. In these jurisdictions, the lack of notice from the insurer tolls or suspends the limitations statute.
Most state insurance claim regulations clearly prohibit an insurer from misleading policyholders on when any applicable statute of limitation will expire. Therefore adjusters must, as part of the claim process, inform the claimant if a statute of limitations will apply to the claim and clearly disclose and explain what date this statute of limitations will take effect.
The claims representative may tell the claimant that the claimant doesn’t have a claim when the claims representative knows either (1) that the claimant does, in fact, have a claim or (2) that the claimant may have a claim and the claim should be compromised at a minimum. Many claims adjusters know that as long as they do not put statements in writing, they may be able to orally intimidate the claimant or policyholder into giving up on the claim. This type of conduct is highly improper and a violation of industry custom and practice, and as such, should be reported to the adjuster’s superiors immediately.