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Big insurers, dirty tricks.

Article Excerpt
Insurance companies vow to protect their policyholders--for a price--then go to great, often underhanded lengths to avoid keeping those promises. They bank on consumers being elderly, unsophisticated, or unrepresented and unable to respond. Here, three attorneys talk about egregious cases where insurers deployed shady tactics and met policyholders who fought back.

'That's not my signature'

TERRENCE J. COLEMAN

There was always something funny about the policy endorsement Lloyd's of London relied on to deny it had a duty to defend my client in a catastrophic personal injury action. For starters, she did not recall receiving the endorsement when she bought the policy.

But Lloyd's claimed that she had signed an endorsement providing that the company was not obligated to defend her against personal injury actions. A struggling small-business owner, she could barely meet her regular expenses and could not possibly hire a lawyer to defend her through trial. So she was forced to accept a default judgment of $9 million against her.

Under California law, an insurer that wrongfully fails to defend its insured can be held liable for the entire judgment ultimately rendered against the insured. I filed a bad-faith suit against Lloyd's, expecting that the case would turn on the court's interpretation of the endorsement. But then discovery got under way, and I uncovered an evil deed.

After serving Lloyd's with the complaint, I demanded that it produce a copy of its underwriting file. Its counsel provided a copy of the file that was not Bates-numbered. I don't accept unnumbered documents, as they provide no record of what has been produced. So I numbered the documents and provided a copy of them to opposing counsel, who agreed that they represented a true and correct copy of the original file.

In reviewing the file, I found a copy of the policy, but the key endorsement was not attached to it. The endorsement appeared elsewhere in the file and it was unsigned, although this did not seem significant at the time. The signature line for the insurance company representative was blank. I assumed that the signed version had been sent to the insured and an unsigned version was retained for the file. Still, further inquiry was clearly necessary.

I served a notice to depose Lloyd's "person most knowledgeable" (PMK) to testify about the policy's issuance and the contents of the underwriting file, and I demanded that the...

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