It's been some time since I last wrote about the inherent bias and occasional incompetence that Pennsylvania insurance companies sometimes display towards their own insureds and why people often need a lawyer even when they are dealing with their own insurance company. It's not that there haven't been plenty of examples, mind you. But the stories are typically complex and the policy language deep and dry. In short, I just haven't had anything fun to write about. Until recently, that is.
This is a story about a man who bought insurance from Erie Insurance and how Erie Insurance made him jump through hoop after hoop, and incur expensive attorney fees, just to get the benefits they'd promised in exchange for the premiums he'd faithfully paid. Like so many of these stories, the insurance company doesn't appear to have acted nefariously. Depressingly, it seems they were just sloppy and inclined to deny the claim for any reason, no matter how tenuous and, ultimately, false. Fortunately, it has a happy ending. Here's the story.
Our client owns a small landscaping supply business. He bought a used trailer, the bed of which lifts in order to discharge gravel and similar contents. On May 4, 2012, shortly after buying it, his employee was lifting the trailer bed when the load shifted. The weight and momentum of the shift caused the trailer to twist and fall over. It was damaged beyond repair. For a small business, the loss of the recently purchased trailer and the resulting business interruption was significant. But as bad as it was, our client thought, "Well, at least I've got insurance with a good company. They'll make it right and I'll buy a new trailer. It shouldn't take long." He couldn't have been more wrong.
Our client immediately notified Erie Insurance. He expected to see an adjustor who would, he thought, assess the damage and issue him a check. Instead, he got a letter. On May 12, 2012, Erie Insurance wrote him and said, "At the time of this loss, your policy did not carry collision coverage. Due to this fact, we are unable to settle the claim for the damage to your vehicle."
"What?" Our client thought. "Of course I have collision coverage. What could they be talking about?" The letter offered no explanation. He called his insurance company. It took some time but he eventually got someone to talk to him. The explanation, he said, was "gobbledy gook." It had something to do with the trailer VIN number and whether or not it was properly listed on his policy. To the extent he understood what he was told, it was wrong and he told them so. The Erie Insurance adjustor promised to take another look at his policy.
Eventually, Erie Insurance decided they'd been mistaken. Upon further reflection, they decided that our client did have coverage, after all. However, my client still didn't have a check.
An Erie adjustor inspected the trailer. The adjustor told our client something about how they might not pay him because the trailer had been "rusty." Our client didn't understand but the adjustor told him she'd take the information back to the office and he'd hear from them. He didn't.
On July 23, 2012, our client called the Pennsylvania insurance claim lawyers at Purchase & George. He told us the story, including the fact that Erie had denied that he had coverage and then changed course when he argued with them. But they never confirmed his coverage in writing, he said. He told us that they'd told him that even though he had coverage, he still might not get paid because his trailer had been "rusty." Again, though, he'd never received anything from ERIE in writing. He didn't understand why rust mattered and he wanted his claim paid. That's why he had insurance, after all. Could we help him get an answer? We could, we told him.
That same day, I wrote Erie Insurance. I told them that my client still didn't know whether Erie Insurance would pay for his ruined trailer. Would they provide me with a "written statement of Erie Insurance's position...?" I asked.
Eight days later Erie Insurance responded. In a one paragraph letter, they said "The 1998 trailer...was inspected and found that the trailer frame was rusted and previously welded in the same area where the rust was, which made the trailer unsafe at the time of purchase and also on the date of loss on May 4, 2012. Therefore, there is no coverage for this loss."
So, 2 ½ months after the accident, Erie Insurance had finally taken a position and it wasn't good for our client. There was no coverage, they said, because the trailer was rusty and had been welded. Try as I might, though, I could find nothing in the Erie Insurance policy that excluded coverage for rusty vehicles. Or welded vehicles. Frankly, I didn't expect to find anything. Can you imagine how ridiculous it would be if insurance companies could deny coverage merely because a vehicle had rust or had been repaired?
In fact, I thought I understood what the Pennsylvania insurance company meant, even though the letter didn't really say it. What the Erie Insurance adjustor had meant to convey was that Erie Insurance didn't believe there had been a load shift which caused the trailer to twist and fall. Instead, Erie Insurance believed the trailer had failed because it was in such bad shape that it just gave up the ghost. Insurance companies pay for accidents. They don't pay for old rotted out vehicles that just fail from being in bad condition.
Still, I wondered, how could they possibly have reached the conclusion that the accident was caused by rust and not a load shift? After all, the Pennsylvania insurance company hadn't sent an engineer or metallurgist to inspect the trailer. They'd just sent an adjustor and I had a pretty good idea this adjustor didn't know much about metallurgical failures or the physics of an accident. Moreover, all the witnesses to the accident confirmed that the load had shifted and that's what caused the accident.
I told my client what I thought. I told him I'd like to retain an expert like an engineer or metallurgist to evaluate the trailer. But my client didn't have the money for that. The whole trailer cost less than $20,000. He couldn't afford to spend thousands on an expert witness (he was already spending that on his lawyer!). Instead, we had a mechanic on his payroll perform an investigation and analysis. The mechanic was certain. This trailer didn't fail because of rust. It failed because a shifting load had put too much torque on the frame. We decided to press on with the information we had.
On August 8, 2012, I wrote Erie Insurance. I told them that we were going to file a lawsuit to force them to pay for their insured's claim. I told them it appeared "Erie Insurance has conducted a biased and peremptory investigation and reached an unsupportable conclusion, leading it to breach its contract." I asked them to reconsider and conduct additional investigation. I asked them to let me know that they wished to perform additional investigation within twenty days and told them if I didn't hear from them my client might scrap the trailer, forever destroying the evidence.
Erie Insurance never responded to my August 8, 2012 letter. Erie Insurance didn't ask to take another look at the trailer. Erie Insurance didn't agree to reconsider. So, my client authorized the filing of a lawsuit in the Court of Common Pleas of Erie County.
Suddenly, Erie Insurance got interested. A new adjustor was assigned to the file and called me to offer my client a settlement. The amount of the offer was a fraction of what the trailer was worth. The new adjustor suggested they were only offering that much because my client had retained a lawyer and Erie Insurance didn't want to pay their own lawyer to fight the lawsuit. The new adjustor said Erie Insurance wasn't going to pay the full value of our client's claim and they would defend the lawsuit if he wouldn't take their offer.
I told my client about the offer from Erie Insurance for a fraction of his claim. I told him about the risks and costs of litigation. I asked him what he wanted to do. His answer was simple. "Reject it," he said. "Let's move forward with the lawsuit."
Pretty soon, a lawyer out of Pittsburgh was assigned by Erie Insurance to defend them. On January 16, 2013, the Pittsburgh lawyer wrote me. "...(W)e would like to schedule an inspection of [the trailer] immediately...[and] speak to the person who was operating the trailer at the time of the accident..."
I didn't blame them. That's exactly the sort of basic investigation they should have done when their insured made the claim. But they hadn't done it then. Instead, they'd just denied the claim because the trailer was rusty and had been repaired. Inspecting the trailer again and talking to the operator was exactly the sort of thing they should have done when I wrote them and asked them to reconsider. But they hadn't done it then, either. Instead, they'd try to float a low-ball offer to their insured to get him to settle on the cheap. Instead, they put their insured in a position where he would have to spend thousands on litigation to try to recover thousands in insurance benefits.
I called my client. Even though he'd planned to scrap the trailer within twenty days of my August letter and even though it was months past the deadline we'd given Erie Insurance, he still had the trailer. "Could Erie Insurance inspect the trailer?" I asked.
"Sure," he said. "Just tell them they have to hurry."
It took some time to arrange the inspection. There were issues coordinating schedules; questions about the nature of the inspection (would there be any destructive testing?); and assurances that we would receive photos and results of the inspection. The delay wasn't all the insurance company's fault (a death in my client's family and other matters pushed the insurance company's inspection to the back burner) but the inspection didn't occur until April 2, 2013.
A few weeks after the inspection, I got a phone call. The insurance company's Pittsburgh lawyer suggested that she had a busy caseload and would like to move the case off her desk. She made an offer of settlement that was very nearly the full amount we'd demanded. "That's good," I thought, "But what about the report?" So, I asked. "Would Erie produce a copy of their expert's report?"
The inspector's report was brief. In sum, the inspector found that the trailer, though rusty, was in generally good repair. The evidence was consistent with a shifting load causing an accident. There was no evidence that pre-existing rust or cracks had weakened the frame and caused the failure. So, my client had been right the whole time. All it took to resolve the problem was an inspection by someone who was both knowledgeable and unbiased.
So, we went back to Erie Insurance. It seemed to me that Erie owed my client more than just the value of the trailer. After all, Erie had made its insured wait more than a year; incur legal fees; and endure litigation and all because it had done a completely inadequate job in investigating and evaluating the accident. Shouldn't Erie also pay for my client's attorney fees? Wasn't Erie liable under Pennsylvania's bad faith insurance law? In the end, Erie agreed to pay its insured over and above the value of the trailer in exchange for a release of all claims, including a claim for insurance bad faith.
So, the end of the story is a happy one, at least as far as insurance claims go. Our client got paid and, better yet, he received enough to pay his attorney fees, a remedy which is rare enough. But he didn't get the full benefit of his policy. He didn't get compensated for being treated unfairly; for being told (falsely) that there was no coverage; for being told (falsely) that he had no claim because of rust and prior repairs; for being delayed in the receipt of the funds for his trailer; or for being forced to invest the time and energy in retaining a lawyer and filing a lawsuit to get the benefits he was promised.
On balance, our client did better than do many others in their dealings with insurance companies. And he has a clear answer to the question asked at the start of this article. Do you really need a lawyer in your dealings with Erie Insurance? What do you think?
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