Last week saw a couple of entertaining developments in the war of Dickie Scruggs versus State Farm. First, State Farm sought to have Scruggs disqualified from participating in a Katrina suit over misconduct arising from their handling of confidential files from State Farm. Then, we learned of Scruggs’ new tactic of pursuing RICO action against State Farm, due to the alleged thuggishness of the Good Neighbor’s claims handling (or some other slightly less wacky rationale).
Scruggs group’s blog has finally caught up to recent events in its latest post. While the bulk of the post is standard-issue “argue the case before the court of public opinion” blather, worth reading nonetheless if you’re amused by the spectacle as I am… there is one passage that merits highlighting:
Ironically, State Farm and its Commissioner for Insurance George Dale have been saying for the past year and a half that these claims are “settled” and “closed”; I guess they forgot to tell the 200 new Plaintiffs who just filed suit. I find it ridiculous that State Farm, Commissioner Dale, and the rest of the industry are commenting that 99% of cases have been settled, when they know this is not true. (See Mississippi Attorney General Jim Hood’s description of State Farm’s use of misleading statistics here.) They wrongfully classify a claim as “settled” and “closed” once a denial letter is sent to the policyholder, regardless of whether anything is actually paid (in most people’s case nothing was paid).
On this point, it’s entirely likely that both sides are correct.
I can easily believe that the industry has officially closed 99% of its Katrina claims. However, “officially closed” doesn’t necessarily mean that the case has been resolved to the satisfaction of the policyholder; it just means that a determination has been made of no coverage, or payment has been made to the point that the insurer feels its obligations have been satisfied, and the insurer feels there’s no outstanding coverage questions or threat of suit to justify holding the file open, expending resources to maintain the file, etc.
That “closed” doesn’t imply “resolved to the claimant’s satisfaction” opens the door to the phenomenon blogged about, the number of suits arising from officially closed files.
Often I think that the industry’s PR machine leaves a lot to be desired. There seems to be a tendency to lock on to a good-sounding statistic without considering how the metric can be shot down. It would be a far more powerful message to be able to say that xx% of Katrina claims have resolved in the minds of the claimants, if such a statistic were available (say, via phone survey).
My gut says that the “xx” value of resolution is still a fairly large number. However, given the tremendous number of claims filed in the wake of Katrina, even a small fraction of claims can lead to a large number of suits.