How To Prevent Another Matt Fisher / Progressive Insurance Debacle: Eliminate Contributory Negligence And Enact Real Bad Faith Laws

Comedian Matt Fisher’s post about Progressive Insurance defending the man who negligently killed his sister in a car accident has gone viral, with commentary from a wide variety of sources (e.g., The Blaze and Consumerist), a response from Progressive Insurance, and an update from Matt Fisher.

To recap, Fisher’s sister had car insurance with Progressive, including “underinsured / uninsured motorist insurance,” most commonly referred to as UIM, which is supposed to provide additional insurance coverage for policyholders when they are injured by someone who does not have adequate insurance to cover the full extent of damages. In the car accident, it appears – according to Matt Fisher – that the other driver ran a red light while Fisher’s sister had a green, and she died and resulting accident. There was apparently only one witness to the accident, who testified that Fisher’s sister had the right-of-way.

The other driver was insured by Nationwide. Unsurprisingly, his insurance wasn’t enough to cover the full value of the wrongful death and survival claims (that’s not surprising, given the low policy limit requirements of state law, and the fact that the vast majority of car insurance policies have limited below a hundred thousand dollars) and Nationwide quickly offered the full policy limits to Fisher’s family. The Fishers then filed a UIM claim with Progressive, which it denied.

Let’s step back for a moment. Liability insurance, including UIM coverage, is not the same thing aslife insurance or homeowner’s insurance, both of which are supposed to pay whenever there was any loss, regardless of who was at fault. (Life and homeowner’s policies, of course, have limited exceptions for suicide or for intentional damage to the house by the policyholder.) Rather, car liability insurance is only supposed to pay out to a third party when the insurance policyholder is at fault, and in turn the underinsured/uninsured policy is only supposed to pay to the policyholder when a third-party was at fault and had inadequate insurance.

Thus, in the most general sense of how insurance operates, it’s not inherently wrong for Progressive or any other insurer to raise doubts about whether or not liability coverage like UIM should pay out in a particular circumstance. As strange as it sounds, that can sometimes involve the insurance company taking the tortfeasor’s side in court. We have to allow some degree of this defense of claims to avoid people from abusing the system and being paid unjustifiable claims, which would increase the cost of insurance to everyone.

What makes the Fisher situation outrageous, in my opinion, is how the evidence of liability was so clear. Even though an insurance company facing the claim from the policyholder is in some ways an adversary (because the policyholder is asking them for money), they’re not supposed to act like they are. “Like a good neighbor?” “In good hands?” Do those phrases ring a bell? They’re not supposed to be just marketing nonsense, they’re legal requirements: an insurance company has a duty of good faith to its policyholders in evaluating claims. Insurance companies are supposed to promptly pay out every legitimate claim, even if the insurer could, in theory, manufacture some reason to delay and deny the claim for a little while and continue making money off of their policy reserves (by investing it).

But the devil is in the details. Maryland law has two provisions that essentially destroy the duty of good faith insurance companies are supposed to have to policyholders in UIM situations.

First, Maryland is one of the very few “contributory negligence” states in which, if a plaintiff is at all at fault, even just 1%, then they’re kicked out of court with nothing from anyone. Thus, under Maryland’s harsh and unfair contributory negligence laws, if Progressive had been able to show that the accident was 99% of the the fault of the other driver but 1% the fault of Fisher’s sister, then they would not have had to pay a dime in UIM coverage to her family. That contributory negligence law, as compared to the far more fair comparative fault law in most other states (which makes each party responsible for the percentage of the damage they caused, e.g. someone 40% responsible has to pay 40% of the damages), encourages insurance companies to deny every car accident claim, because every car accident has a theoretical issue of contributory negligence in terms of driver reaction, proper seat-belt usage, proper car maintenance, tire inflation, et ceterea.

Second,although insurance companies in Maryland technically have the duty of good faith their policyholders, there is virtually nothing policyholders can do if the insurance company breaches that duty. Maryland does not have a useful “bad faith” insurance law that allows policyholders to sue and be awarded damages beyond the policy amount itself. Instead, as long as an insurance company can show that the issue of liability was “fairly debatable,” then the insurance company has carried out its duties to treat the policyholder with good faith. Do you think it’s “good faith” to deny someone what they’re due if it’s “fairly debatable?” I don’t. But that’s Maryland law; indeed, many Republicans and “tort reformers” think that goes too far in favor of consumers.

So what does all this mean? That Fisher’s sister paid a bunch of money to Progressive Insurance just so, after her death, the family would have to hire a contingent fee lawyer and then go through years of difficult litigation because, just maybe, a jury would find that she was 1% responsible for the accident, even though it seems there was virtually no evidence that she was.

Even worse, even though jury just held that Fisher’s sister was not at all responsible for the accident, Progressive has vowed to fight the case. Their press release claims otherwise, but read it carefully: they didn’t say they’re going to pay out the policy now, they said they “now can continue to work with the Fisher family to reach a resolution.” What does that mean? It doesn’t mean “we’ll now pay the whole policy, plus interest, plus attorney’s fees.” It means nothing. It just means that they still consider the issue to be “fairly debatable” and so are going to try and keep running Fisher’s family through the ringer until they give up and have to settle. That’s how insurance companies look at their own customers: with a closed fist.

It doesn’t have to be this way. With a vote and the stroke of a pen, Maryland’s legislature and governor could change this by eliminating contributory negligence and by enacting a real bad faith law that imposes real duties on insurance companies in Maryland. If you live in Maryland, call up your state representatives and tell them that you want the state to move to comparative fault that and you want a real insurance bad faith law on the books.