Imagine the following as a business plan model for an insurer.
To wit: Require an applicant applying for disability coverage to sign a policy and remit payments, and yet defer from actually issuing the insurance contract until the policyholder makes a claim. And then (here is where the spotlight shines starkly in today’s post) alter the original terms of the contract via new language that includes disclaimers and riders yielding coverage denial.
That strategy spells a “we always win and you always lose” approach in uppercase.
And it virtually guarantees blowback as well from aggrieved claimants who acted in good faith in executing insurance contracts while justifiably relying upon an insurer to do the same.
The details of such a charge are outlined repeatedly in multiple lawsuits filed by prominent American athletes against Lloyd’s of London. One recent complaint alleges the insurer’s “deliberate pattern and practice” of selling specialized disability insurance policies to athletes that it never intends to pay out on. In fact, a number of professional and high-profile college athletes state that Lloyd’s weighed in with amended policy terms after they were injured and filed claims.
The type of policy involved in the athletes’ claims is a so-called “loss of value” product that hedges injury bets. In the event that an athlete suffers a material injury that reduces future earnings, such a policy is slated to compensate for the loss.
In the above-noted complaint, the plaintiff – a professional football player – states that Lloyd’s conduct constituted “oppression, fraud, and/or malice.” The suit seeks up to $5 million in actual damages, as well as punitive damages that directly address the insurer’s bad faith.