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An article came across my desk that the United Services Automotive Association of San Antonio, Texas (USAA) is once again defending itself against charges that they utilize a "cost containment program" to improperly reduce or deny medical payouts to insurance customers injured in auto accidents. USAA denies these allegations.

In a nutshell, their strategy is like so many other insurance companies. They sell you a policy, collect premiums, but then minimize payment of claims. When you need your insurance company most, its number one priority it to employ the “Three D’s” – delay handling your claim, deny you were injured, and defend this position in a long legal battle. It profits from your money by paying out as little as possible when you need it most.

Here is how it works. Let’s assume you are injured in an auto accident and are unable to work. Your damages are $125,000 in medical expenses and lost wages. USAA tells you a second opinion is required but, you must use its third party who concludes that some of your medical treatment was not necessary. USAA offers you $75,000. You have two choices – accept the offer or file a lawsuit. USAA hopes you take the money and walk away. You choose to file a lawsuit. Let’s assume the defendant convinces the jury that the accident was partially your fault and that you could have returned to work sooner than you did. Let’s also assume you still win your case, but the jury awards $54,000. That is 72% of the insurance company’s offer. Hold on; it gets better. Texas proposed a new bill which just passed the House. I wrote about it last week. It is H.B. 274, also known as “loser pays”. Under this bill, if a plaintiff rejects a settlement offer and the jury verdict is less than 80% of the offer, the plaintiff must pay the defendant’s attorney’s fees from the time the offer was rejected. Because you only won 72% of the insurance company’s offer, you now must pay the insurance company’s litigation fees EVEN THOUGH YOU WON!!

As I was writing this, the Texas House and Senate reached some kind of compromise on the “loser pays” legislation. I don’t have the full details, but the changes made will supposedly allow judges in civil court cases to rule on whether a case is without merit much sooner, limit discovery, hasten hearings and assess court costs more equitably. Although winners of lawsuits may still be required to carry some of the burden of legal costs, on the surface the compromise appears to be a better alternative to the version that the House passed on May 9. But, is it enough to protect innocent victims? Mike Gallagher, a trial attorney who helped negotiate the consensus bill believes so. "You can be assured that you can go to the courthouse and not face the prospect of ruination by pursuing a constitutional right," he told the committee. That the Texas trial lawyers had a seat at the negotiating table gives me some comfort, but I will have to wait and see about the particulars of this new round on Texas tort reform.

Texas trial lawyers have been fighting for the rights of innocent victims while politicians like Governor Rick Perry has been touting tort reform. Insurance companies have made a killing under paying claims because they know only a small fraction of their policy holders will fight. USAA and other insurance companies are already limiting and screwing the injured public with their deceitful claims handling practices. Will this compromise be enough to stop the government from further screwing Texan citizens? Since it is in Texas, it leaves me dubious.

Texans should contact their state representatives for complete details. Make sure that passing of this bill will not strip away precious Constitution rights. Insurance companies will continue to deny, delay, and defend legitimate claims unless the taxpayers do something about it – NOW!

Mark Bello has thirty-three years experience as a trial lawyer and twelve years as an underwriter and situational analyst in the lawsuit funding industry. He is the owner and founder of Lawsuit Financial Corporation which helps provide legal finance cash flow solutions and consulting when necessities of life litigation funding is needed by a plaintiff involved in pending, personal injury, litigation. Bello is a Justice Pac member of the American Association for Justice, Sustaining and Justice Pac member of the Michigan Association for Justice, Business Associate of the Florida, Tennessee, and Colorado Associations for Justice, a member of the American Bar Association, the State Bar of Michigan and the Injury Board.


  1. Gravatar for E

    This sounds like more of a judicial issue than an insurance company issue. Why would an insurance company overpay claims? There is such a huge amount of fraud that it is necessary to minimize losses to assure company success. This doesn't appear to be USAA's fault, but loopholes in the system that all insurance companies leverage to maximize profit. It's a capitalistic country folks...

  2. Gravatar for Owen

    Having done business with USAA for more than 40 years, I can assure you that it is a great outfit that provides an exceptionally high level of service to its members/customers.

    I can also assure you that tort reforms of almost all varieties are in the best interests of consumers--not in the best interests of ambulance-chasing lawyers, but certainly in the best interests if insurance consumers. "Loser pays all attorneys'fees for both sides" sounds great to me--it just means the plaintiffs' lawyers would have to do their job of evaluating the merits of the lawsuits they file on behalf of their clients.

  3. Owen: I'll defer to your experience with USAA; perhaps this is an exception, not a rule. But, on what basis do you "assure me" that tort reform is in the "best interests of insurance consumers"? And who are these "ambulance chasing lawyers" you refer to? What evidence do you have to suggest that anyone is chasing ambulances or that lawsuits are on the rise or that a "crisis" exists? The opposite is true; do some real research. The lawyers and lawsuits that I am familiar with pursue serious accidents and serious injuries for those who are being jacked around by corporate defendants and/or their insurance companies. If there are "ambulance chasers", they are a miniscule exception, not a rule. The "ambulance chaser" is a myth, perpetrated by those who wish to increase insurance company profits at injured citizen expense.

    "Loser pays" in Texas did not apply to both sides, as you suggest. Until the recent compromise, spearheaded by the Texas Association for Justice (lawyers who actually work for and try to protect the interest of individual, seriously injured, citizens), it was a bill that made plaintiff's pay defense costs, not the other way around. Under Governor Perry's version of the bill, the defense paid nothing if it lost. Is that justice? What experience do you have with the civil justice system that you can make the outrageous accusations you make in your comment? Insurance companies, USAA included, systematically deny or delay claims that they should pay. Why? To create desperation in the plaintiff, hoping for a lower pay-out; they save millions this way, at citizen expense. When have you seen a premium reduction as the result of this dishonest and deliberate, anti-consumer behavior? If tort reform is in the "best interests of the insurance consumer", why does it never result in reduced premiums? Why do tort reform advocates always tie "damage caps" to "frivolous lawsuits"? Why would a "frivolous lawsuit" need a "damage cap"? If you introduce a concept like "loser pays", why not tell the truth and discuss "frivolous defenses" and how seriously injured people are jacked around for years, just so some insurance company can save a few bucks off their desperation? Tort reform is not and has never been in the "best interests" of anyone except businesses (and those who insure these wrongdoers) that injure, kill, and maim our citizens. In what capacity do you do business with USAA? As an employee/executive? Give me a break!

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