It’s the fear every consumer has buying insurance. When it comes time to make a claim, your insurer will have some reason not to pay out.

The doomsday scenario isn’t just fantasy, it’s reality, say many people who fight insurance companies on a regular basis.

The issue was highlighted this week when a Saskatchewan judge awarded Luciano Branco $5-million, saying the actions of his insurance companies established “a pattern of abuse” — Justice Murray Acton noting he wanted to send a message to the industry.

The case could be a template for anyone paranoid about getting his or her claim cashed out.

The claimant in this case was a welder who was injured on the job. The judge noted the man, who suffered a permanent disability, was offered a “ridiculously low” settlement as the insurance companies dragged its feet for years on the claim.

While cases like this may not be the norm, Toronto lawyer Sivan Tumarkin has built a legal practice around getting insurance companies to pay up.

“I’m just getting more and more of these,” said Mr. Tumarkin, who used to work for insurance companies in a defense capacity. “I only started doing this because I had people coming to me who were having issues with insurance companies. You have a flooded home and they won’t cover. I have someone [who gets sick] in New York with travel insurance and they won’t cover.”

He says the insurance companies don’t out and out reject claims for no reason but their objections are in many cases for negligible reasons.

Mr. Tumarkin had an older couple as clients recently who put in a health claim for a fracture suffered by the wife while on vacation in the U.S. The claim was paid but the insurance company when back into their medical records and found out some of the information filled out in the application was incorrect and demanded $30,000 back.

The basis of many insurance claim rejections is something on a policy being filled out incorrectly, either on purpose or because of a misunderstanding.

You buy a life insurance policy and say you don’t smoke even though you have the occasional butt at a bar. One day you get killed in a car accident. If your insurer finds out about your occasional indulgence, there’s a good chance they’ll fight the claim.

“The law is you have to answer truthfully but it is ambiguous about the way you might answer the question as a lay person,” says Mr. Tumarkin. “They’ll look at absolutely everything they can to try and not cover you. I’m not saying in every case but a lot of them.”

He says insurance companies in property damage claims on car accidents will drag their feet on an investigation, knowing there is time limit to sue.

Out and out rejection of claims to meet some quota is probably more something you see in movies, says Mr. Tumarkin. “There is willful blindness on the part of adjusters,” he says. “There is never absolutely no reason they don’t pay. They’ll just use every excuse in the book.”

Pete Karageorgos, manager of consumer and industry relations with the Insurance Bureau of Canada which represents home and auto insurers, says there are no statistics on what percentage of claims get rejected.

But on the auto front, the industry has statistics that show in Ontario in 2010, the sector took in $9.4-billion in premiums and paid out $8.3-billion.

“It goes to show you the majority of money coming in goes right back out to pay claims,” said Mr. Karageorgos.

He adds insurance is a contract and any insurance adjuster will look at the conditions that could negate the agreement.

“Insurance companies are not just going to take your word for it,” said Mr. Karageorgos. “For any contract to be valid and effective, the conditions on both parties parts need to be satisfied.”

The issue for many people in hiring a lawyer is the up front cost. In the Saskatchewan case, the welder who sued his insurance companies had to be bailed out financial by family members.

One thing you can work out in some cases is an agreement whereby your legal bill is covered based on a contingency fee basis, your lawyer gets his bill paid from the winnings.

You can also consider taking your insurance company to Small Claims Court.

Another suggestion for consumers is buy insurance products from a broker, who is compensated by the insurance company but not employed by them. By using the broker, you have the added possibility of suing the broker if he or she gave you bad information when filling out your policy.

Some policies get reviewed by insurance companies before they are issued and people are rejected or assessed at a higher rate, such as in life insurance. But for low margin products like travel insurance, there is no investigation until a claim is submitted.

“You have the policy underwritten at the time of application not at the time of claim, so there is no surprises and it is completely on the up and up,” said certified financial planner Mark Halpern, of illnessprotection.com.

Sometimes he’ll get a client who wants to say he doesn’t smoke when he does occasionally and Mr. Halpern rejects that business because he doesn’t want to see the claim eventually dismissed.

In other cases, people make innocent mistakes about the type of medication or the maladies they have had in the past.

“It’s really important you keep a record of your medical history,” said Mr. Halpern.

He doesn’t dismiss the notion that insurance companies will reject claims for flimsy reasons and says a broker can be an important advocate on your behalf in that situation.

“If that doesn’t work, there is always [a lawyer],” said Mr. Halpern, noting in many cases the presence of lawyer leads to some type of settlement.

“The insurance don’t like to have bad press but they don’t want these things lingering if there is something [that could work against them]. In the worst case, you might get some settlement,” he says.

Alex Saltykov, founder of InsureEye Inc. which follows the industry, says there are no statistics to show what percentage of claims are paid out.

He says consumers really have to make sure they know what is covered and not because insurance policy are so complicated.

Mr. Saltykov found himself not completely covered for treatment he needed for physiotherapy because he had not read the terms of his insurance contract.

“You want it to be there in the worst moment of your life,” said Mr. Saltykov. “If you are not sure of what should be disclosed, you better disclose it even it makes your insurance go up. Otherwise you risk your company not paying.”

The article below obtained from the Northern Miner, April 24th, once again demonstrates the deceptive practices of insurance companies who collect premiums on the basis of false advertising and then fail to honor their obligations to the patient. When will our politicians take note and rectify these serious problems?

Luciano Branco’s long and soul-destroying battle with insurance firms AIG and Zurich has finally reached some satisfaction in the courts, with a Saskatoon judge awarding the injured Portuguese-Canadian welder $450,000 in aggravated damages and $4.5 million in punitive damages. It’s the largest award of its kind ever given by a Canadian court against insurance companies.
Branco, now 62, immigrated at age 24 to Canada, where he learned to weld and worked out West and up North. In 1994 he moved back to Portugal, and by 1997 was working at Cameco-subsidiary Cameco Gold’s (now Centerra Gold) huge Kumtor open-pit gold mine in Kyrgyzstan.
During a 12-hour shift on Dec. 25, 1999, he dropped a steel plate on his foot. He finished his shift, packed his foot in ice, and returned to Portugal at the end of his 28-day rotation to recuperate. Towards the end of his next rotation, he stepped on a piece of steel and reinjured his foot, and then sought medical treatment in Portugal, missing his next rotation.
He only reported his injury to the Kumtor operating company on his next rotation in June 2000, when he did not work at the camp. Kumtor continued to pay his base salary of $51,920 to the end of his contract in March 2001 (in fact, overpaying him $12,000 by mistake).
Anxious to get back to work, Branco had surgery on his foot in January 2001, but it was unsuccessful. Despite physiotherapy and rehabilitation treatments, Branco’s Portuguese doctor determined that he was permanently disabled and in chronic pain, a prognosis repeated many times in the following years by specialists in Canada.
American Home Assurance Co. (AIG) was advised of Branco’s work-related injury in mid-2000, which triggered the Saskatchewan Workers’ Compensation Board-equivalent claim handled under the AIG policy. His long-term disability benefits were covered by Zurich Insurance.
To make a long story short, AIG and Zurich refused to pay out the benefits owed to Branco, hoping the outrageously long delays, transcontinental complexities and non-stop legal bills would grind him down and force him to accept a much lower settlement.
In the recent judgment, Justice Murray Acton found that AIG and Zurich had acted in a “cruel and malicious” manner towards Branco for more than a decade, offering him “ridiculously low” settlements, including AIG initially offering him a cash settlement of just US$22,500. AIG didn’t make some of its payments owed to Branco until the day of the trial.
Zurich, for its part, internally approved Branco’s long-term disability payment in 2002, but never informed Branco, who didn’t receive his first funds from Zurich until 2009 and had turned down Zurich’s settlement offer of $62,900, minus $9,000 in legal costs in April 2003. “This court cannot imagine a more protracted and reprehensible behaviour than that of Zurich in blatantly refusing to pay what had been owed in monthly payments for almost eight years,” Acton writes in his decision. “The actions of AIG and Zurich establish a pattern of abuse of an individual suffering from financial and emotional vulnerability.” (The judge said that the mining company had treated Branco fairly, and only the insurance companies were liable for damages.)
The judge noted that prior to his injury, Branco was a “proud, athletic and hard-working individual” who was “warm, friendly and sensitive” and an “excellent employee” at Kumtor. After the injury and the withholding of benefits, however, he had become a “demoralized man full of sadness and loss of pleasure,” and an individual “full of anxiety and depression.”
The insurance companies, Acton writes, “virtually destroyed Branco’s life over the last 13 years,” causing his marriage to break down and financial burdens to be placed on his daughter and other family members, and his legal representation. The judge writes that the insurance companies tried to use Branco’s diminished life to “gain leverage” over him and force him to accept a low settlement.
“That Branco was able to continue to withstand this pressure for so many years from two different fronts is truly remarkable and almost superhuman, even though his resistance may have resulted in irreparable mental distress, which may last for the remainder of his lifetime,” Acton writes. “The question remains: how many individuals have been unable to withstand the financial and psychological pressure of these tactics?”
The insurance companies are expected to appeal the decision.