Beware COVID-Driven Lowball Offers From Insurers

By Mike Arias
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Law360 (April 9, 2020, 6:21 PM EDT) --
Mike Arias
There is an old saying: "Cash is king." With businesses, law firms and individuals alike scrambling to make sure they have enough resources to withstand the current closure of much of the world, there is a shameful trend emerging as some insurance companies try to take advantage of this crisis.

Even in the best of times, negotiating with an insurance company is challenging. Underestimating and undervaluing injuries, ignoring important case facts and aggressive legal tactics are the norm while negotiating a claim or litigating a case.

However, there is a dangerous and quite frankly offensive tactic being employed by some insurance companies — giving what would normally be viewed as offensive offers on cases that have significantly higher value — knowing that the victims are already in dire straits before this pandemic, but are now in need of any financial assistance they can get.

A number of plaintiff attorneys have reported that insurance companies and insurance defense lawyers are offering pennies on the dollar in settlement negotiations because they know people are hurting for cash. In cases where the clients are particularly injured, the need for financial stability is especially high. Some of the people trial lawyers represent have already gone through whatever savings they may have and are relying on government assistance or loved ones just to meet every day needs.

In some cases, these clients are counting on money from a settlement and — under the current circumstances — that need can force them to make decisions that they would not otherwise make due to the added financial pressures this pandemic is causing them.

As trial attorneys, our ethical obligation is to fight for the best possible resolution for our clients and to protect the interests of our clients — both immediate and long term. In a situation where a client is in desperate need of financial assistance and an insurance company is offering a settlement now, navigating this can be a difficult process.

However, I suggest a simple question each lawyer should ask and answer when evaluating these COVID-driven offers: What was the settlement value of this case before these suddenly imposed changes? I believe the answer to this question should be: the same value of that claim before all of these changes.

Unfortunately, even if the settlement offer is half what the case is potentially worth, many clients will eventually need the money that lowball offer can provide. I am hopeful that the recently passed stimulus bill — with the direct payments and the increases in unemployment payment amounts and the duration of the benefit — will help alleviate these immediate needs for many clients and lessen the need to accept these lowball offers. 

In addition, the immediate impact of these restrictions on our traditional way of working up, negotiating, mediating and settling many claims will be hard on many small law firms, solo practitioners and even some larger firms who rely on steady and consistent resolution of cases. However, settling a case well below value today just to bring cash in the door or put money in a client's pocket will ultimately harm the client, the firm and even other similarly injured individuals.

Face it, insurance companies are not your clients' friends, even if they may present a facade of a desire to help your clients in light of the current crisis. If they really want to help, there is a simple and easy way to do so. Extend a fair and reasonable settlement offer in the first place. That is all most trial lawyers I know will ever ask for and want. 

Remember, insurance companies have never hesitated to use any tool at their disposal to drive down settlement payouts. And I do not believe that these same insurance companies are going to pass up an opportunity to take advantage of this global human crisis. Insurance companies by their very nature and existence are created to collect premiums in as large amounts as they can and as quickly as they can — and inversely, pay out as little as they can, as slowly as they can. This global crisis will not change that business model.

For those firms facing these tough decisions, there are options available to them. First, reach out for help from our local, state and national trial lawyers associations. They can provide support, insight and maybe even some guidance on how to navigate through these unique and tough times.

Second, rely on your community of trial lawyers. Many of us collaborate with our fellow trial lawyers on many issues as a natural part of our practice. That collaboration is needed now more than ever. If an attorney has a case he or she knows is valued at $500,000 and settles today for $150,000 just to solve an immediate short-term cash need for the client, what happens when the crisis begins to pass and the client realizes $350,000 was left on the table?

These are not easy times, and Americans are left with extremely difficult choices in just about every area of life. Still, this is a moment when our commitment to justice matters most, and that includes our obligations to put our client's needs and interests above our own.

Mike Arias is the founding and managing partner at Arias Sanguinetti Wang & Torrijos LLP. He is the immediate past president of Consumer Attorneys of America and was the 2018 president of the Consumer Attorneys Association of Los Angeles.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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