Insurance Companies and Covid
One of the most significant impacts of the pandemic shutdown in Maryland was the closing of the court system. Cases previously scheduled for trial went unresolved and allowed insurance companies to hold onto their money for longer than would otherwise have been the case. Moreover, even when the court system re-opened, the backlog was significant and cases that should have been finalized a while ago are getting trial dates into 2023!
We are frequently telling our personal injury clients all the time that the primary leverage we have over the insurance companies is the threat of going to trial because that’s their main risk. And that remains true even today. But Covid temporarily nullified that threat and now, even with the courts open, that threat is reduced by the length of time it is taking cases to go to trial.
As a result, insurance companies have been more than happy to “play the long game” and try to strongarm plaintiffs into taking lowball settlement offers because they know most plaintiffs don’t want to wait a year or more for their case to go to trial. Or even worse – not make any settlement offers at all and just wait out the trial date on the theory that even if they lose, the money they will have to pay out will be offset by the interest they earned on that money.
Part of the explanation for this is rooted in how insurance companies operate and conduct business. Historically, insurance companies make money by (1) taking the premiums they receive from their customers and (2) investing that money to generate even more revenue from the interest returned on those investments.
However, while this has and always will be a lucrative business model, insurance companies are also required to set reserves on all active cases. A reserve is basically the insurance company’s estimate of what they will need to pay out on a given claim and because it is a liability, they have to ensure that they have sufficient funds to pay those reserves. And that means a certain portion of the insurance company’s money, reserved for payment of claims, is generally not able to be invested.
But the business model additionally accounts for the fact that these reserve amounts can be revised during the life of a case and that has been an area where the insurance companies have arguably taken full advantage of the Covid pandemic.
Here at Dubo Law, while sympathetic to the frustration of our clients at these tactics, we try to dissuade them from giving in because we know that ultimately, they will benefit from having their day in Court. While most follow our advice in the knowledge that our courtroom success and expertise is on their side, some do not. And that’s okay too. At the end of the day, as I am ALWAYS telling my clients, their cases belong to them, not me. In almost twenty years of practicing law, I have never made a settlement decision for a client. I provide information and advice based on my experience as a Maryland personal injury attorney. And if I feel strongly enough, I will occasionally make recommendations. But I do not make decisions – those are always left up to the client.
And for those that choose to march forward, while we cannot force the insurance companies to pay a fair settlement prior to trial, they know that once we walk into that courtroom, they have a lawyer who will zealously fight to ensure that, while they had to wait longer than necessary for justice, the wait was ultimately worth it.