I get that plaintiff lawyers as far down on our culture’s popularity chart, seemingly neck-and-neck with politicians, used car salespersons and bankers. But what I don’t understand is how insurance companies, the quintessential example of corporate largess, have rocketed up the approval ratings. Over the past few years, large cap insurance companies have transformed to become friendly, pro-consumer institutions in the eyes of many. I place the credit, or blame, squarely on the shoulders of Madison Avenue and its marketing genius.
To emphasize my point, think of an insurance company and what comes to mind? I bet GEICO was one of the first names you thought of. What image pops up? How about a docile animated green gecko speaking in a cute British accent? And what about arguably the industry leader for this transformation change–the AFLAC duck.
I can think of no greater disparity between perception and reality than the insurance industry and its well-financed advertising campaign. Strip away the charming computer generated geckos and ducks, and the numbers reveal the truth about the insurance industry.
Year after year, the property casualty insurance industry (“P/C”) in America achieves record-breaking profits [I won’t even talk about the health care insurers under the Affordable Care Act]. But don’t take my word for it, here is what the Federal Insurance Office of the U.S. Department of Treasury reports in their “Annual Report on the Insurance Industry” (dated Sept 2016):
- For 2015, the U.S. insurance industry reported another year in a run of solid financial performance.
- The P/C sector was profitable with surpluses remaining at $687 billion as of year-end 2015.
- The P/C sector aggregate net written premiums increased three percent to a new record high level at $520 billion due to lower reinsurance costs and general economic growth.
Even in an era of historically low interest rates, P/C insurers continue to rake in billions of dollars in premiums and surpluses.
In light of these record-breaking profits, the insurance companies are paying out less and less in losses on claims against builders and developers. Within the past 24 months alone, several of my clients with construction defect claims in the seven figures, are facing limited contribution from insurance. The insurers have included stringent exclusions to policies, including no payment for losses involving “condominium” or “multi-family residential” construction. A couple of these developers and contractors did not realize there was no coverage for their construction projects. The developers and contractors obtained CGL policies and paid CGL premiums, but when it came time for the insurance companies to indemnify the insured for the losses, sued the policy holders in declaratory judgment actions in an attempt to avoid payment.
At Homeowner Law, we fight big insurers every day to force them to fulfil their contractual duties to our clients. But there are times when we cannot pull a rabbit out of a hat and create coverage where there simply is none under a specific policy. In these instances, homeowners may be left holding the bag with no source of recovery because builders have created single-asset LLCs and distributed all income once the project is sold off, with less and less available insurance.
The next time you are watching television and see the GEICO gecko or AFLAC duck prance across the screen, ask yourself on whose back and wallet do these large insurance companies pay for huge advertising budgets—it certainly isn’t on the CEOs or shareholders. More likely your neighbor or contractor friend.
Notwithstanding that in some instances third party insurance proceeds may not be available, Homeowner Law will exhaust all avenues to pursue coverage that does exist. Contact us with any questions you may have on either third party or first party insurance coverage or bad faith claims.