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Under traditional principles of insurance law, insurers are supposed to give as much consideration to the interests of their policyholders as they do to their profits. However, the paradigm of many disability insurers today is, "shareholder first". Profits take priority over protection of the disabled policy holder because of executive compensation incentives. At Allstate for example, senior management executives are required to own Allstate stock worth four times their annual salary. This plan flies in the face of the fiduciary nature of the insurance contract which prohibits insurers from "linking the interests of management with those of shareholders" since the shareholders' only interest is increasing profits - even at the direct expense of policyholders. As articulated in one of the nation's landmark insurance cases, insurers must take the public's interest seriously, where necessary placing it before their interest in maximizing gains and limiting disbursements. As a supplier of a public service rather than a manufactured product, the obligations of insurers go beyond meeting reasonable expectations of coverage. The obligations of good faith and fair dealing encompass qualities of decency and humanity inherent in the responsibilities of a fiduciary. Insurers hold themselves out as fiduciaries, and with the public's trust must go private responsibility consonant with that trust. Financial filings of one large insurer show that its income increased by an obscene 3,335 percent as a result of dramatically reducing claim payments while keeping premiums at the same or higher levels, known as the "Zero-Sum Economic Game." Some disability carriers intend to win the claims economic game in two phases that deliberately exploit the economic pressures placed on a policyholder suffering from financial loss. The first phase involves arbitrarily lowering claims evaluations. The adjusters then make nonnegotiable, take-it-or-leave-it settlement offers based on these artificially low settlement evaluations. It is estimated that, when confronted with the threat of a substantial delay in getting any benefits at all, 90 percent of policyholders will succumb within six months to the economic pressures caused by their loss and give up without a fight, accepting the low offers. The second phase involves a plan to deliberately abuse the civil justice system as a weapon of attrition against the estimated 10 percent of policyholders who would refuse to accept reduced disability benefits. These policyholders would be driven into the "kill box" of the zero-sum economic game-the American civil justice system. Disability insurance firms understand that aggressive litigation yields positive results. Thus, a key part of the strategy is to actively incite significantly higher levels of litigation. The goal: to delay or diminish payment of full value for legitimate claims. The strategy is aimed to make litigating claims against the insurer so time-consuming and expensive that any victory by the policyholder would be purely Pyrrhic. Disability insurers hope that most policyholders and their attorneys would refuse to endure the expense and delay of litigation if they knew that the company had made an institutional decision to try every disputed claim to verdict - no matter the amount in controversy and regardless of the cost to the disability carrier of doing so. The result-the insurance company shareholders win and policyholders lose. 
Alan C. Olson practices disability law from his offices in New Berlin, Wisconsin, and throughout the United States. AOlson@GetMyLTDbenefits.com
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