Insurers Behaving Badly

Posted on Tuesday, April 15th, 2014 at 1:00 am    

A Superior Court judge last week made quite a statement about his disgust for the claims handling tactics of AIG’s subsidiaries, slamming the insurance giant with treble damages for its prolonged crusade to avoid paying damages to a lawyer who suffered severe injuries when he was struck by a Partners Health Care bus

Local lawyer Odin Anderson was crossing Staniford Street in Boston on September 2, 1998, when he was struck by a Partners shuttle bus, which was making a left turn from Cardinal O’Connor Way onto Staniford Street. Although Anderson was returning from an extended lunch, which involved alcohol consumption, the sole independent witness described him as walking “briskly” and “with no apparent difficulty.”   Anderson was severely injured, and eventually brought suit against Partners.  The case was tried in June 2003, and Anderson and his family were awarded more than $2.2 million in damages.

Immediately after the accident, the Partners’ insurer, and AIG subsidiary, began an investigation, which included interviewing Norman Rice, the shuttle bus driver.  Rice’s original statement said that he had not seen Anderson before the impact, had no idea which direction he had come or where he was going, and that the impact occurred when Anderson was three-quarters of the way across the left-hand travel lane, “about three feet” from the traffic island.  Rice further stated that, at the time of the accident, he was not looking in the direction the bus was traveling, but rather was looking to his right back up Staniford Street.  Rice’s original version of events, however, didn’t last long.

AIG’s files originally reflected that the company viewed the claim as indefensible, but the tenor of the claims, like Rice’s story, soon began to change.  The claims handlers began to discuss a possible defense based on an assumption–unsupported by any evidence–that Anderson had darted out from between parked cars, and had been struck in the middle of Staniford Street.  By the time the case was tried, Rice testified that he was looking down (not up) Staniford Street in the direction he was turning, that he had seen Anderson walking across the street shortly before the impact, and that he thought Anderson had come from between two parked cars.  A defense expert further testified that, because of the “geometry of the intersection,” it would have been impossible for the bus to turn tightly enough to strike Anderson close to the median strip–an assertion later proved by the plaintiffs to be patently false.  The jury returned a verdict assessing 53% liability against Partners and 47% against Anderson.

A prolonged appellate process followed, eventually resulting in an order affirming the judgment, which by this time had reached $3.2 million with the addition of post-judgment interest.  Anderson then brought bad faith claims against AIG pursuant to G.L. c.93A and  c.176D.  Discovery in that case revealed that AIG had been both aware of and involved in the evolution of Rice’s testimony.  Central to the case was a DVD of Rice’s deposition preparation sessions.

In an extensive opinion, Superior Court Judge Brian Davis held that AIG had engaged in unfair and deceptive acts in its handling of the Anderson claim.  Characterizing the defense as one based on “fictitious evidence and wishful thinking,” the judge noted that AIG had suppressed the original statements of Rice and another Partners shuttle driver who was following directly behind Rice’s bus, created an unsupported scenario that had Anderson “ran” or “rushed” into the street from “between parked cars,” and induced Rice to alter his testimony.  The judge further noted that AIG’s handling of the appeals was based on a decision to “grind down” the plaintiffs, rather than on any realistic likelihood that a second trial would yield a better result for the defense.

Judge Davis held that the AIG claims practices were “egregious,” and not mere oversight.  He awarded the maximum penalty of treble damages under Chapter 93A, then crediting AIG for the single damage award already paid.  Thus, the total damages to Anderson and his family will approach $10 million.

The Anderson decision, although certainly likely to be challenged on appeal, sends an important message to insurers and defense counsel about investigation and trial tactics that are probably more common than those outside the system realize.  While the facts certainly are egregious, and well-detailed in the lengthy opinion, the underlying principles  are worth noting for all defense lawyers and claims personnel.