A blog post shows how insurance companies can delay paying claims to help themselves

The Watchdog has long suspected that some insurance companies purposely delay paying policyholders whose homes are damaged in Texas storms. But how to prove it?

Thanks to a massive blunder by a South Texas law firm, I can show you how insurance company lawyers can use this legal strategy to frustrate a homeowner and lead the policyholder to surrender.

In mid May, the law firm of Colvin, Saenz, Rodriguez & Kennamer L.L.P., which has offices in Brownsville and Edinburg, publicly posted on its firm’s blog a story titled, “Is delaying an insurance claim an effective legal strategy?”

“Absolutely astounding,” was the reaction by J. Robert Hunter, Texas’ first solo insurance commissioner, when I showed him the post. “We knew many insurers operate this way, but I’ve never seen the strategy admitted like this.”

Here are excerpts of the post as it appeared for 46 days until its deletion this week.

Law firm post

In the post that appears to be aimed at insurance companies, the author writes, “Companies that delay claims may experience a number of benefits. First of all, delaying a claim puts pressure on policyholders. These individuals may be dealing with mounting bills for property damage, legal fees and medical expenses.

“Most people cannot afford to continue fighting insurance companies for a prolonged period of time. This means that most plaintiffs will be forced to settle for a favorable amount instead of continuing to negotiate with insurance companies for an extended period.

“In other words, delaying claims forces policyholders to accept lower settlement offers. Delaying claims can lower costs in other ways. For example, when an insurance company faces a deluge of property damage claims, they can delay some of them in order to avoid mass payouts all at once.

“This limits the financial stress on these organizations, and it allows them to invest funds from paid premiums in order to earn interest revenue and offset some of the costs. This is likely one of the main reasons for continuing delays related to the Texas freeze.”

The post concludes with a warning that “you need to be very careful about how you delay claims. … You could face a bad faith lawsuit.”

Before I share reactions to this post, I need to tell you that after The Watchdog contacted the firm, the post was removed.

Retraction

Law firm partner Trey Colvin sent me a retraction which stated the post “did not reflect our values, beliefs, or practices.”

“We believe strongly that all parties to insurance contracts need to comply with the terms of the contracts and report, evaluate and assess all claims in a professional and timely way. We not only expect that of our insurance clients, but it has been our experience that our clients have those same expectations of themselves.

“The post has been removed from the site. We deeply regret that content obtained from a third party was not carefully checked, and that the post may have been interpreted by anyone as suggesting anything to the contrary.”

Colvin told me a third-party vendor, MileMark Media, wrote the blog post. I reached out to that company, which handles social media for lawyers, but I didn’t hear back.

‘Quiet part out loud’

Houston lawyer James W. Willis, who alerted The Watchdog to the post, told me: “I see this behavior from insurance companies every day in my law practice, so it doesn’t shock me.”

He continued, “They said the quiet part out loud: that insurance companies cheat by taking advantage of the disparate bargaining power consumers have against a large company with unlimited resources. It’s evil and depraved, if not just unlawful.”

60 days

Texas Department of Insurance spokesperson Gardner Selby explained, “The department does not regulate lawyers and has no comment on the web page.”

State law says that when a claim’s paperwork is completed, an insurance company should, in general, pay a claim within 60 days. If violated, the law allows for a penalty of damages, interest and lawyer fees in addition to the claim itself.

‘Pocketing profits’

Texas Watch is a pro-consumer advocacy group. Executive Director Ware Wendell told me, “Insurance claims must be paid in full. Too many insurance companies engage in wrongful ‘delay, deny, defend’ schemes to force policy holders to give up, pocketing illicit profits.

“The vulture culture inside of insurance companies has to stop. Only strong laws will compel carriers to do the right thing.”

‘Cents on the dollar’

In human terms, lawyer Willis says that some Texans whose homes were hurt by the February 2021 Texas freezeout still have not had their homes repaired. He said more than half his clients are facing stalling tactics from insurance companies.

Sure, in the legal world, stalling is an accepted tactic. But this is not one company suing another in a business matter. This affects families who have not been able to return to their homes.

“They can’t take it anymore,” Willis says of these clients. “That’s what insurance companies are trying to do. That’s what that blog said. Put them in a position where they’re going to be forced to take cents on the dollar.”

What does a whistleblower who handled insurance claims for USAA admit under oath?

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