Insurance Company Bad Faith & Violations of Insurance Consumer Fraud / Unfair Practices Statutes

Warning: Case decisions are often subject to further review by other courts and thus may be affirmed, overturned, or modified in later proceedings; therefore the reader should exercise caution in the reading and interpretation of these cases as the current status of case law and/or statutory law may have changed by the time you read this. Please consult with a licensed attorney in the proper jurisdiction before you take any action based on what you read on this or any other website.

Representative Cases

Jennifer Ritthaler v. I D S Property Casualty Insurance Company

Maricopa County Superior Court, CV2007-007472

United States District Court, CV07-01233-PHX-DGC

Brief Background of Claim:

IDS Property Casualty Insurance Company, Amex Assurance Company, and Ameriprise Auto & Home Insurance Company are subsidiaries of Ameriprise Financial, Inc. For at least eighteen months (June 2006), IDS Property Casualty Insurance Company, Amex Assurance Company, and Ameriprise Auto & Home Insurance Company have been selling automobile insurance, including Medpay (medical payment) benefits coverage, through an arrangement with Costco. These insurance companies recently extended this contract with Costco in the latter part of 2007.

As of June of 2006, advertisements, including mailings, directed at Costco members inform them that Costco members can "save up to 20%" on their auto insurance premiums" and/or that "Costco members report saving up to $400 on their auto insurance when they switch." Such ads direct Costco members (and others) to a toll free 1-888 number or to Costco's website.

During the sell of automobile insurance these insurers ask for a copy of the potential policyholder's declaration page, they then represent that the potential policyholder could save on their insurance premiums without cutting their coverage with their current automobile insurance carrier.

Problem is that they are selling a type of "killer bee" insurance with respect to the medical payment insurance benefits. These insurance companies represent that the potential policyholder will have medical payment benefits if they switch. However, when an insured actually makes an insurance claim which includes medical payment benefits, these insurance companies argue that the medical payment insurance benefits are only "excess" benefits.

The insurers make the following representation regarding medical payment benefits to all potential insurance buyers, "this covers reasonable expenses for your medical and funeral expenses because of injuries caused in an auto accident." As of June 2006, these insurance companies do not provide an option for a potential insurance policyholder to choose medical payment benefits which are "excess" only, at a reduced cost, as opposed to primary coverage. These insurance companies do not allow an insured who has insurance to skip this coverage for a reduced premium. In fact, in Arizona, as of June 2006, these insurance companies make this "killer bee" insurance mandatory. It is automatically included in all Arizona policies as of June 2006. It is listed as "included" in the premium for liability coverage, BUT THERE IS A CHARGE FOR IT (these insurance companies  just don't disclose it to the potential insurance policyholders).

After a policyholder makes a claim for medical payment benefits, these insurers, for the first time, disclose their position that policyholders only have medical payment benefits as "excess." This argument is made despite the fact that the declaration page clearly shows that the policy benefits are not excess (sometime in 2007, IDS Property Casualty Insurance Company, Amex Assurance Company, and Ameriprise Auto & Home Insurance Company changed their declaration pages to show "excess" coverage only after Ms. Ritthaler had filed her lawsuit alleging insurance bad faith and violations of Arizona's consumer fraud and insurance unfair practices and deceptions statutes.)  It is IDS Property Casualty Insurance Company's, Amex Assurance Company's, and Ameriprise Auto & Home Insurance Company's position that every single policy sold in Arizona is only "excess" medical payment benefits. When a policyholder makes a claim for these needed insurance benefits, these insurance companies send out a letter to insureds threatening that these insurance companies will not issue any medical payment insurance benefits unless the policyholder signs an affidavit "to confirm that [policyholder] understand[s] that the Medical Payment Coverage afforded [policyholder] under the automobile insurance provided by AMEX Assurance Company [or IDS Property Casualty Insurance Company depending upon which subsidiary underwrites the policy] is excess over: 1. Premises insurance affording benefits for medical expenses; 2. Individual, blanket, or group accident, disability or hospitalization insurance; 3. Medical, surgical, hospital or funeral services benefit or reimbursement plan; or 4. Other available valid and collectible automobile medical payments insurance. As of June 2006, none of this language is disclosed during the sell of the product and none of the language is contained in the actual insurance policy. As of June 2006, the actual policy has an ambiguous one line sentence in the Other Insurance portion of the policy.

The insurers will refuse to consider a policyholder's medical payment benefits claim until the policyholder submits all their medical expenses, including those out of network, to their health insurance carrier. This obviously creates a problem with treating providers who had agreed to treat on a lien and opens up a can of worms with respect to ERISA subrogation / reimbursement health insurance claims.

In addition to this mess, these insurers use a computer program called Mitchell Medical Decision Point "to assist adjusters process and adjust claims." This is another long story regarding unfair insurance practices and insurance bad faith.

Ms. Ritthaler filed a complaint against Defendant IDS Property Casualty Insurance Company in Arizona state court.  Ms. Ritthaler's complaint alleged insurance bad faith and violations of Arizona's consumer fraud and unfair insurance statutes for the conduct described above.  Because IDS Property Casualty Insurance Company's counsel filed a legally improper notice of removal to the United States District Court, the matter briefly spent time in the United States District Court for the District of Arizona prior to being remanded with costs and fees being assessed against IDS Property Casualty Insurance Company.  The matter eventually settled.

Carmen and Jesus Araceli Rodriguez v. The Progressive Corporation and Progressive Classic Insurance Company

Maricopa County Superior Court, CV2008-050412

United States District Court, CIV 08-494-PHX-ROS

Allegations contained in the Complaint:

That Plaintiffs are, and at all times relevant hereto were, residents of Maricopa County, State of Arizona.

Defendant The Progressive Corporation ("Defendant Progressive") is the management company for Defendant Progressive Classic Insurance Company ("Defendant Progressive Classic).

Defendant Progressive is a holding company that has insurance and non-insurance subsidiaries.

Defendant Progressive does not have any revenue producing operations of its own.

Defendant Progressive creates and dictates the national claim policies, processes and practices utilized by Defendant Progressive Classic on the policies sold by Defendant Progressive Classic.

Progressive Agency Holdings, Inc., a subsidiary of Defendant Progressive, owns all outstanding capital stock in Defendant Progressive Classic.

Defendant Progressive Classic shares common officers with Progressive Casualty, Gregory Trapp (Chairman of Progressive Classic and Progressive Casualty, and President of Progressive Classic), Terence W. Fibbi (Treasurer of Progressive Classic and Progressive Casualty), and Dane E. Shrallow (Secretary of Progressive Classic and Progressive Casualty).

Defendant Progressive Classic and Progressive Casualty share common directors.

Management of Progressive Casualty is headed by Peter B. Lewis and Glen M. Renwick.

Peter B. Lewis is the Chairman of the Board of Defendant Progressive and Glen M. Renwick is its President and CEO.

Defendant Progressive's annual reports set out retirement plans to which the company contributes post-employment benefits, and describes its incentive compensation plans for its "employees" including "a cash gainsharing program" for certain employees.

The Gainsharing program is a nationwide program administered by the Executive Committee of the Board of Directors of Defendant Progressive.

The Gainsharing program is based, at least in part, on Defendants' profits and growth.

Defendant Progressive Classic is, in effect, a sales agent for Defendant Progressive.

Defendant Progressive Classic sells insurance under the name and logo of "PROGRESSIVE."

Defendant Progressive and Defendant Progressive Classic share the same principal office and principal phone numbers.

All premiums written by Defendant Progressive Classic are assigned to a holding company, Progressive Agency Holdings, Inc., a subsidiary of Defendant Progressive.

Defendant Progressive Classic is an insurer authorized to transact insurance business and transacting business within the State of Arizona. Defendant Progressive Classic is a subsidiary of Defendant Progressive.

* * *

The Defendants issued to Plaintiffs' household a certain type and style of insurance policy known as a Progressive Direct plan form 9608 AZ (02/02), and more particularly identified as Policy Number 70752948-1 and Claim Number 055854203.

That, among other things, the aforesaid policy provided for certain protections and benefits in the event Plaintiffs suffered injury due to the fault of an underinsured driver in an automobile collision..

That on May 14, 2005, Plaintiffs were injured in a serious automobile collision and required medical treatment. Nicolette Lavalette was the driver who caused the collision. Ms. Lavalette was insured through State Farm and had bodily injury limits of $25,000.00.

Plaintiffs promptly notified Defendants of the collision and the fact that they would be entitled to benefits under their insurance policy.

On July 14, 2005, Plaintiffs provided copies of their medical expenses for the emergency room hospitalization ($25,976.00 for Plaintiff Araceli Rodriguez and $33,730.40 for Plaintiff Carmen Rodriguez) to Defendants and made a claim for the medical payment benefits to which they were entitled.

On July 15, 2005, Defendants confirmed with State Farm that the liability limits for Ms. Lavalette were $25k/$50k.

On July 20, 2005, Defendants transferred the handling of the claim to Defendants' claims representative David Maxwell.

On August 11, 2005, Plaintiffs informed Defendants that their claims would require underinsured motorist benefits. Defendants requested that Plaintiffs provide them what records Plaintiffs had received thus far. Plaintiffs provided these records to Defendants on August 29, 2005.

On or about September 21, 2005, Defendants indicated a refusal to begin evaluation of the underinsured motorist claim until Plaintiffs had provided proof to Defendants that State Farm's policy limits were only $25k/$50k.

On November 16, 2005, Plaintiff Carmen Rodriguez provided Defendants additional medical and billing records which she had received for treatment due to the collision of May 14, 2005. Plaintiff Carmen Rodriguez's medical expenses to date were in excess of $38,876.67.

On November 16, 2005, Plaintiff Araceli Rodriguez provided Defendants medical and billing records for treatment, which she had received to date, due to the collision of May 14, 2005. Plaintiff Araceli Rodriguez's medical expenses to date were in excess of $29,770.46. Plaintiff Araceli Rodriguez also presented lost wages of $988.80 at this time.

On November 17, 2005, Plaintiff Araceli Rodriguez provided Defendants medical and billing records for treatment with Physicians Physical Therapy due to the collision of May 14, 2005. Plaintiff Araceli Rodriguez's medical expenses to date were in excess of $31,315.46.

On December 16, 2005, Defendants' agent/employee David Maxwell represented during a phone call that he needed further information to evaluate the claims. Mr. Maxwell refused to tell Plaintiffs' counsel what specific information was needed, but assured Plaintiffs' counsel that Defendants would put this in writing.

On December 30, 2005, Plaintiffs' counsel left a voice mail message for David Maxwell regarding Defendants' promise of December 16, 2005, to specifically identify what information was needed. Mr. Maxwell did not return the phone call.

On January 4, 2006, David Maxwell called Plaintiffs' counsel regarding another claim unrelated to this lawsuit. Plaintiffs' counsel inquired as to Defendants' promise of December 16, 2005. Mr. Maxwell promised that Defendants would send a letter tomorrow, January 5, 2006, explaining what additional information was needed to evaluate these claims. Defendants did not send the letter.

On January 17, 2006, Plaintiffs' counsel left another voice mail message for David Maxwell asking for Defendants' letter outlining what additional information was needed to evaluate the claims. Mr. Maxwell did not return the phone call.

On January 19, 2006, Plaintiffs again requested that Defendants explain what information, if any, is necessary for the evaluation of Plaintiffs' UIM claims. Plaintiffs also requested a copy of their insurance policy with Progressive.

On January 24, 2006, David Maxwell represented that he was forwarding Plaintiffs' claims file to his supervisor for review. Defendants did not indicate that any additional information was required to evaluate Plaintiffs' UIM claims.

On February 8, 2006, Defendants presented an offer of $500.00 in UIM benefits for settlement of Plaintiff Araceli Rodriguez's claim. Later during the same phone call, Defendants indicated a final offer of $1,500.00 in UIM benefits for settlement of Plaintiff Araceli Rodriguez's claim. Defendants did not indicate that any additional information was required to evaluate the claim.

On February 8, 2006, Defendants presented a final offer of $4,766.00 in UIM benefits for settlement of Plaintiff Carmen Rodriguez's claim. Defendants did not indicate that any additional information was required to evaluate the claim.

On February 8, 2006, Defendants' represented that they conducted a medical review of its insureds' medical records and bills with respect to these claims. Defendants also told Plaintiffs that if they disagreed with the evaluation and these "final offers," Plaintiffs should arbitrate the claims.

On February 8, 2006, Plaintiffs requested an explanation as to how Defendants evaluated these claims. Plaintiffs requested a copy of the medical review. Plaintiffs inquired as to whether or not Defendants used some type of claim valuation software program to place a value for these claims. Plaintiffs asked if Defendants needed any additional information to evaluate these claims.

On June 7, 2006, Plaintiffs made a second request for the information outlined in paragraph 44 above.

On June 26, 2006, for the first time, Defendants explained the "basis for [Defendants'] evaluation of Ms. [Araceli] Rodriguez's Underinsured Motorist Claim." Defendants did not explain the basis for the evaluation of Plaintiff Carmen Rodriguez's Underinsured Motorist Claim. Defendants did not provide a copy of the medical review or respond as to whether or not a software valuation program was utilized. Defendants did not indicate that any additional information was required to evaluate either of these claims.

On February 24, 2007, Plaintiffs confirmed Defendants' final offers and demanded arbitration for these claims.

On March 7, 2007, Defendants informed Plaintiffs that their claims had been transferred to Defendants' Senior Claims Specialist Kellie Chov.

On March 13, 2007, Plaintiffs confirmed Defendants' final offers and again demanded arbitration for these claims.

On March 23, 2007, Defendants' in-house counsel Shelley Pysell acknowledged Plaintiffs demand for arbitration. Defendants requested, for the first time, that Plaintiffs be subjected to an Examination Under Oath.

On April 2, 2007, Defendants served Uniform Interrogatories; Non-Uniform Interrogatories; Request for Production of Documents; and a Notice of Examination Under Oath, on Plaintiffs. Defendants noticed Plaintiffs for Examinations Under Oath on July 17, 2007.

On May 16, 2007, Plaintiffs presented Defendants with a disclosure statement plus Plaintiffs' discovery responses.

On July 12, 2007, Defendants filed a Rule 35 request compelling Plaintiffs to be examined by Dr. John K. Bradway on October 9, 2007.

On July 12, 2007, Defendants filed a Rule 35 request compelling Plaintiff Araceli Rodriguez to submit to a psychological examination with Robin Ford, Ed.D. Because Plaintiff Araceli Rodriguez was not currently suffering from any psychological difficulties with respect to the collision, and Plaintiff was not making a claim for future psychological or emotional injuries, Defendants cancelled the psychological examination.

On August 1, 2007, Defendants offered $5,000.00 in underinsured motorist benefits to Plaintiff Araceli Rodriguez. Defendants refused to explain the basis for the change in position from the offers presented on February 8, 2006.

On August 1, 2007, Defendants' agent/employee Kellie Chov stated that she understood why Plaintiffs felt forced to demand arbitration based upon Maxwell's offer. Ms. Chov also indicated that Maxwell had lost some previously provided records for Plaintiff Carmen Rodriguez and requested an additional copy. Ms. Chov indicated that these allegedly missing records did not affect the evaluation of these claims.

On August 1, 2007, Plaintiff Araceli Rodriguez requested the basis for Defendants' re-evaluation of her claim from the $1,500.00 offer to the $5,000.00 offer of payment of underinsured motorist benefits.

On August 6, 2007, Defendants subjected Plaintiffs to an Examination Under Oath.

On August 6, 2007, Plaintiff Araceli Rodriguez again requested the basis for Defendants' re-evaluation of her claim.

On August 22, 2007, Defendants denied that Plaintiff Carmen Rodriguez had suffered any injury because of the May 14, 2005 collision. Defendants denied that Plaintiff Carmen Rodriguez experienced medical expenses because of the collision. Defendants denied that Plaintiff Jesus Araceli Rodriguez suffered any injury because of the May 14, 2005 collision. Defendants denied that Plaintiff Jesus Araceli Rodriguez had experienced medical expenses as a result of the collision.

On September 21, 2007, Defendants offered $25,000.00 in underinsured motorist benefits to Plaintiff Araceli Rodriguez and $50,000.00, policy limits, in underinsured motorist benefits to Plaintiff Carmen Rodriguez. Plaintiffs accepted the offers.

On September 25, 2007, Defendants requested that Plaintiffs sign releases which stated that Plaintiffs "do hereby release, acquit, and forever discharge Progressive Classic Insurance Company, their agents, servants, employees, personal representatives, successors, heirs, assigns, insurers, and any other persons , firms, corporations, or entities (the 'Releasing Parties') from any and all claims, demands, actions, causes of action, damages, costs, expenses, losses and damages, including property damage, whatsoever, BOTH KNOWN AND UNKNOWN, FORESEEN AND UNFORESEEN, AND THE CONSEQUENCES THEREOF, WHETHER DEVELOPED OR UNDEVELOPED, sustained, claimed to have been sustained or claimed to have been sustained by the Releasing Parties. . . ." Defendants' releases also included an indemnification clause. Defendants' releases also attempted to expressly deny all liability.

On October 4, 2007, Plaintiffs requested an explanation as to why Defendants did not limit the release to UIM benefits only. Plaintiffs also asked for an explanation as to why Defendants were attempting to force Plaintiff Carmen Rodriguez to sign a release when she had recovered policy limits. Plaintiffs requested an explanation from Defendants as to why Defendants sought to obtain a release from Gilberto, Plaintiff Carmen Rodriguez's husband. Plaintiffs asked for an explanation as to why Defendants included an indemnification clause which was never discussed as part of the resolution of the Underinsured Motorist Claims and not a requirement in order for Defendants' insureds to recover the UIM benefits due them.72. Defendants have in place arbitrary goals for the reduction of claims paid.

* * *

Defendants have policies in place to encourage "loss payment reduction."

Defendants' claims departments have a goal of making and/or increasing profits for Defendants.

Defendants have internal incentives and measures driving claims decisions.

Defendants have nationwide bonus/reward programs known as the "Gain Sharing Program," "Casualty Cup," "Inventory Reduction Sales," and "Prog Buck Program."

Defendants' bonus programs, including the Gain Sharing Program, are tied, at least in part, to Defendants' employees' performance reviews.

Defendants' employees' performance reviews are based in part on Defendants' business units' results.

Defendants' employees' performance reviews are based in part on median bodily injury benefit payments towards claims.

Defendants' Gain Sharing Program is based upon business performance measures including profitability related to loss payouts.

Defendants do not disclose the Gain Sharing Program to potential policyholders.

Defendants have "institutionalize[d] the 'lowest ultimate cost' approach to file handling."

Defendants' performance evaluations for claims personnel are based, in part, on claims payments.

Defendants require employees to sign an oath pledging to "avoid being in a position where your financial or other interest conflict with those of Progressive."

Defendants' claims files are audited to come up with a quality/accuracy rating.

Defendants train their claims representatives to "continue to work on your negotiations techniques [and to] [r]efrain from creating the posture that there may be room for additional movement."

Defendants compile and publish bad faith standard operating procedures incorporating the lessons learned from past claims experiences.

Defendants maintain diaries, including "2729's" on all bad faith cases.

Defendants' claims representatives are told to use the concept of "lowest ultimate cost" (LUC) in making claims decisions.

Carmen and Araceli Rodriguez filed the above complaint against Defendant The Progressive Corporation and Progressive Classic Insurance Company in Arizona state court. Shortly after being removed to federal court by Progressive Insurance Company's counsel, this matter reached a confidential settlement.

Glass v. Progressive Insurance Company

On October 1, 2007, Mrs. Glass's high-end vehicle was stolen from her home.  Mrs. Glass immediately contacted the police department and notified her insurance company, Progressive Insurance Company, about the theft.  Progressive Insurance accepted the claim and requested pay off figures from Mrs. Glass's Credit Union three days following the theft.  Then, without any explanation whatsoever to Mrs. Glass, Progressive Insurance Company turned Mrs. Glass's claim over to their special investigation unit and forwarded Mrs. Glass a Reservation of Rights letter.  The letter provided no explanation other than that Progressive was investigating the incident.

Progressive Insurance Company did not respond to Mrs. Glass's requests to Progressive Insurance Company for an explanation as to why the claim had been transferred to the special investigation unit.  Mrs. Glass inquiry as to whether or not Progressive had simply turned this claim over to the special investigations unit to delay payment of this high-end loss also did not receive a response.  Likewise, Progressive Insurance Company did not respond to Mrs. Glass's request for prompt payment of the claim.

Progressive's special investigator, Ted Cimino, contacted Mrs. Glass's neighbors and showed up at Mrs. Glass's home unannounced.  Mr. Cimino described this behavior as "typical special investigations unit cold call tactics."  Progressive's investigator even went so far as to attempt to question Mrs. Glass's business partner at his home.  Again, Mr. Cimino showed up unannounced.  Progressive required Mrs. Glass to turn over private phone and financial records, including cell phone records, bank records, and income tax returns.  Progressive subjected Mrs. Glass to an examination under oath.  This is a process in which Progressive Insurance Company's attorney questions the insured in front of a court reporter and in the presence of the special investigation unit investigator.  Progressive refused to allow Mrs. Glass to have anyone, other than her attorney, present.  Progressive also refused to allow the examination under oath to be video recorded.  These tactics, and more, were extremely upsetting, embarassing and humiliating for Mrs. Glass.  Mrs. Glass felt compelled to obtain the assistance of an attorney because her insurance carrier, Progressive Insurance Company, was not treating her fairly and indeed was treating her as a criminal. 

On May 15, 2008, this matter resolved for $120,261.29 without the necessity of filing a lawsuit.

WHEN SHOULD YOUR HIRE A SCOTTSDALE INSURANCE BAD FAITH ATTORNEY?

There is no harm in contacting an insurance bad faith attorney immediately. We have offices in Phoenix and Scottsdale, Arizona and have handled claims throughout the entire state of Arizona with an emphasis in the Phoenix Metro area so give us a call at (480) 874-2918. The bad faith attorney can help you appropriately present your insurance claim to your insurance company so that you avoid potential problems, and the insurance bad faith attorney can explain to you your insurance rights and your contract obligations. However, if your insurance company starts making multiple document requests for the same or similar information, demands that you undergo a sworn statement or examination under oath prior to accepting your insurance claim, or an examination by an expert of the insurance company's choice, you should immediately contact a Scottsdale insurance bad faith attorney. If you believe your insurance company is delaying payment on your insurance claim or your insurance company has wrongfully denied payment for your insurance claim, you have a right to seek independent representation with an insurance bad faith attorney and to seek compensation for insurance bad faith from your insurance company.

Scottsdale insurance bad faith attorney Shane Harward represents the interests of insureds in all areas, including but not limited to, insurance coverage disputes, examinations under oath, subrogation issues, gap insurance claims, insurance policy limits stacking, underinsured motorist and uninsured motorist insurance claims, health insurance claims, property damage insurance claims, liability insurance claims, no fault insurance claims, medical payment insurance benefit claims, unfair insurance claims practice violations, and insurance bad faith litigation throughout the state of Arizona including, but not limited to, Phoenix, Scottsdale, Mesa, Tempe, Chandler, Glendale, Gilbert, Sun West, Sun City, Tucson, Flagstaff, Kingman, Bullhead City, Yuma, Lake Havasu, Fountain Hills, Anthem, Ahwatukee, Carefree, Cave Creek, Gold Canyon, Bisbee, Sierra Vista, Cochise, Paradise Valley, East Valley, Maricopa, Pima, Pinal, Gila, White Mountain, Heber, Payson, Prescott, Forest Lakes, Apache Junction, Avondale, Queen Creek, Benson, Black Canyon City, New River, Buckeye, Casa Grande, Coolidge, Cottonwood, Douglas, Florence, Gila Bend, Goodyear, Greer, Lakeside, Guadalupe, Holbrook, Huachuca City, Oro Valley, Overgaard, Avra Valley, Parker, Peoria, Pinetop, Pine, Prescott Valley, Quartzite, Strawberry, Safford, Show Low, Sun City West, Sun Lakes, Superior, Surpise, Snowflake, Tombstone, Wickenberg, Winslow, Wilcox, Williams, Young, Youngtown, and surrounding areas.

To learn what an insurance bad faith lawyer can do to help you, please contact us today for a free initial consultation. We offer reduced rates to those contacting our attorney through the Internet.

For immediate assistance of an insurance bad faith attorney call us at 480-874-2918. We look forward to helping you.

For more information about car accident insurance claims in the third party insurance setting, please visit our Motor Vehicle Accident Center.

Law Offices of Shane L. Harward PLC
Scottsdale and Phoenix Insurance Bad Faith Attorney
Arizona Wrongful Death Lawyer
10575 North 114th Street
Suite 103
Scottsdale, Arizona 85259

Phone: 480-874-2918
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