Subsection 5.6.   Rampant Insurance Claim Lawsuits

 

Among American litigations, damages claims account for a large proportion, and most of the claims are ultimately directed at insurance companies. The reason for this litigiousness is only because people know insurance companies can afford the compensations. 

 

There are several kinds of insurance claims. Let’s use a simple car collision as an example. Two vehicles collided and there was a loss. The victim’s first compensation request is for the immediate damage caused by the accident which is legally known as “special damages”. This kind of compensation involves car repair fees and the victim’s medical expenses. 

 

The second kind of compensation is for “general damages”. This includes the victim being injured and not being able to go to work resulting in a loss of salary and income. “General damages” usually also covers the compensation for the victim’s inconvenience and pain which is also known as “pain and suffering”. This kind of pain is all-inclusive. However, it depends on the case, whether the jury accept the evidence put forth by the victim, and whether they think the victim’s demands are reasonable. For example, if an ordinary person gets injured and cannot run and exercise, the compensation amount would be completely different from a track and field athlete getting injured and not being able to run. Because this kind of compensation has no fixed standard, during a lawsuit, the most aggressive fights are over the “general damages”. A lawyer’s skill and ability are also revealed during this time. 

 

Years ago, I represented a lady who got injured in a car accident. The most severe injury she received from the accident was her nasal nerve getting severely damaged which caused her to lose her ability to smell forever. Of course her injuries could be compensated, but to receive the amount she wanted from the other side would take some work. First I began by referencing compensation amounts given for other cases involving the loss of smell or hearing,  and adjusted it for my client according to her situation. This became the basis for negotiation. After talks with the other side, if the two sides accomplish an agreement, the lady will definitely receive the compensation. During negotiations, lawyers will try to fight for the highest compensation possible from the other party which is not easy. But to persuade their own party to accept a reasonable compensation amount is also critical work that has to be done. If the negotiation does not succeed, then they must go to court and convince the jury.

 

The third kind of compensation is court costs. Typically the side that loses the lawsuit pays the opposing party’s court costs.

 

The fourth kind of compensation is  that the losing party pays for the winning side’s lawyer fees. This kind of compensation is not conventional and is not utilized in every case. You would also need to demand  and justify it in advance in the complaint, or it would have to be mutually agreed upon. In common car accidents where someone is injured, there are no lawyer fees so this kind of compensation is not applicable. 

 

The fifth type of compensation is for “punitive damages”. This form of compensation also does not necessarily appear in every case. Generally speaking, only cases that involve deceiving others or maliciously wounding people will involve punitive damages. 

 

Let’s go back to the car crash accident example. Because this was an accident, victims can claim special damages, general damages and court costs. But they will not be compensated for lawyer costs or punitive damages. 

 

Something worth noting is how we often read about compensations with astronomical amounts of money involved in newspapers. Most of these compensated amounts are for punitive damages. For example, a woman in San Francisco, who was a secretary, sued her former employer for sexually harassing her. She was awarded 3.5 million dollars. The plaintiff’s actual loss was only $50,000. Over three million dollars was what the employer needed to pay for punitive damages. These compensation figures are actually exaggerated. Let’s use California’s Lottery to explain. If a person wins a million dollars in prize money, it is actually paid to them in twenty increments with no interest. People familiar with economics calculated the result and the one million dollars split into twenty years with interest-free payment is actually only worth two hundred thousand dollars. Law compensations are also the same, especially when it is established through mutual agreement. So, one million dollars of compensation is actually only worth two hundred thousand dollars in cash. However, lawyers responsible for claims often exaggerate their record and emphasize their highest number. This causes ordinary people to misunderstand and make unrealistic deals when fighting lawsuits which use up a lot of unnecessary time and effort. 

 

The United States' numerous lawsuits feed many lawyers. In recent decades, the insurance system has actually been an important factor in the growth of the law profession. The relationship between lawyers and the insurance system can be deduced in the following very dramatic news reporting about law. 

 

A secret Southern California law group were exposed for their collaboration efforts to deceive insurance companies. The government ended up prosecuting this group of lawyers. This group had dozens of lawyers who all specialized in personal injury cases which mainly included traffic accident and car crash injury cases. Some of the lawyers specifically represented injured victims who wanted a compensation. Others specialized in defending insurance companies in court. The lawyers in the group had no dealings on the surface and often were acting in the interest of their own clients in public court. They debated until they were flushed with anger and would not yield at all Only after they were exposed did people finally know they were collaborating in cheating insurance companies of their money and making the United State’s largest insurance company a victim. From 1985 to 1988, it is estimated that this group collectively defrauded insurance companies of about 50 million to 200 million dollars. You could imagine these people  do so well they have "stuffed brain and fat intestines". 

 

These lawyers had many deception techniques. There are two major approaches. First, the attorney representing the plaintiff coordinated with some unscrupulous doctors to provide counterfeit pharmaceutical evidence by exaggerating the degree of injury and the medical treatments needed. This was all to increase the compensation figure. Second, the plaintiff’s lawyer would collaborate with the lawyer representing the insurance company by taking a simple case and delaying it so it would not be resolved promptly. The goal was to create numerous time wasting opportunities for legal fees by recruiting unnecessary witnesses to give statements or refusing to accept appeals. This was so the lawyer representing the insurance company could continue to charge the company for their services. Another example is: to “bribe” the plaintiff to cooperate, during the course of the lawyer’s litigation, the lawyer was responsible for the plaintiff’s cost of living. When the negotiation finally settled, the insurance company’s lawyer would continue to argue on the surface, but was actually increasing the compensation amount which was a loss to the insurance company. When the money had been obtained, the lawyers and doctors in the group split the winnings and got what they wanted. After the evidence had been gathered in 1989,  the United States Department of Justice prosecuted eighteen people in the group with criminal charges. There were no shortage of celebrities within the fourteen named lawyers. The head of the group was a lawyer who practiced in Los Angeles and fled after the incident and disappeared. The remaining seventeen people pleaded guilty and nine of them  would face trial. 

 

This case involving lawyers collectively involved with deceiving an insurance company allows us to see the relationship between lawyers and insurance companies in the United States. Are the loopholes that show up a natural occurrence or artificially created by men? This question is worth pondering for Americans. The economic relationship between insurance companies, lawyers, and doctors is close and ambiguous. Compared to the rest of the world, this situation may be unique to the United States. 

 

I must continue to emphasize that the types of lawyers in the Untied States are very complex and most do not rely on insurance companies to earn money. For example, there are lawyers involved with divorce, bankruptcy, business, and immigration who do not have a close relationship with insurance companies. Another matter that must be clarified is with the example mentioned above about the lawyers that scammed insurance companies that it is merely an individual case and is used  here to let readers understand all different kinds of problems. There is no intent to show that all personal injury  lawyers have problems.

 

        Section 6. Appeals are More Difficult than Going to Heaven

 

When many people litigate they say with a lot of bluster, “If I lose this lawsuit, not matter how much it costs, I am going to appeal to the end!” Their lawyers hear their client’s impulsive words and  generally will not take them  seriously. However, they will warn their clients by saying some very pleasant but realistic words, “It’s better to use all your energy to fight the current lawsuit. Appeals are uncertain so let’s not think about that now”. 

 

It is because television news always report about the Supreme Court or the Court of Appeals decisions to reverse or modify lower court rulings, people inevitably begin to think appeals are a very common thing. However, appeals actually only account for a small portion of cases. When applying for an appeal, unless the case has a new point of law or has sufficient evidence to prove that the previous judge made an error, the Court of Appeals will not accept it. For example in California, there are  in the Court of Appeal and State Supreme Court at least several thousand pages of published opinions, but most people do not know that they are only a small portion of the numerous appeals that were accepted. The absolute majority of appeal applications submitted only received a post card from the Court of Appeal with a sentence: your appeal has been denied”.  There is no explanation given as to why their appeal has been rejected.  This kind of simple reply is known inside the  court as a “post card denial”.

 

When an appeal receives the court’s consideration, the party that petitioned for the appeal can submit a real appeal petition and other case-related files. The legal procedure for appeals has a lot of technical problems so we shall not go into detail about them. In conclusion, if an appeal even gets considered by the Court of Appeals, it is already a considerable feat. If you want an appeal to get to the Supreme Court, it is compounding the difficulties.  It will take around four to five years.  And for an appeal to go from the lowest court to the Supreme Court is extremely rare. There are about four thousand cases a year that are able to reach the United States Supreme Court, but only less than 5% of them will actually be considered. 

 

Therefore the many litigants who boast in moments of anger that they will pursue their appeal to the very end do not actually understand the entire situation. Realistically, even if the Court of Appeal accepts the case, regardless of whether it is successful in the end, it is rare for litigants to be able to afford the legal fees, energy, and time spent. We will borrow Li Bai’s Shu Dao Nan poem to describe the situation, “Appeals are more difficult than going up to the blue sky!”.

 

              Conclusion: See you in court!

 

The United State’s flood of lawsuits, expensive fees, and time consuming wastes have  come to hinder its social and economic development. Although I am a lawyer, I still experience bitterness and pain. Lawsuits have led to many businesses failures and families breaking up. 

 

If we blame the rampant lawsuits entirely on the excessive number of lawyers and the attractiveness of damages judgments, it is not entirely fair. In the United States, law and daily life are close. Even an ordinary person knows his rights and has the habit of taking legal action to solve problems. So if Americans have their own lawyer, it is not a big deal. Even when ordinary people encounter disputes of unsolvable problems, their go-to response is, “See you in court!”.  When they say that sentence, they probably have no idea what the lose-lose experience feel like when they actually go to court. 

 

In May of 1993, I toured China’s Three Gorges at the Yangtze River. I boarded the famous shore excursion tour. We visited the famous City of the White Emperor, In the City was a temple honoring Baron Wu (Zhu Geliang). While we relished the scenery of this historic rampart and fond memory of the famous heroes from the past, we discovered by chance a very interesting stone tablet monument, on it was inscribed the following declaration:

 

"Look, the consequence of loving litigation and doing evil and lechery against filial piety.  Do not initiate litigation out of anger. Do not become a robber out of hunger and suffering cold.  Promiscuity is the first among all evils. Filial piety is the leading virtue. Winning a lawsuit but losing money.  Litigation ends with disasters, leaving harm to future generations...".

 

Judging from the choice of words, the monument was probably made in modern times. The inscription advised people to avoid litigation, committing crime, and adultery.  Among these “bad deeds”, initiating litigation is actually the first one listed. The  person offering the monument must have had a litigation story that filled him with extreme bitterness.  Lawsuits in China and the United States are different, but the words on the inscription: “While you win the lawsuit, you lose money; the ending will be shocking and hurt future generations” are  still valid in all corners of the world.