If it's fraud, take 'em to court

Dave Brown

 

Brown's Beat, The Ottawa Citizen, April 7, 2000, Final Edition, p.F1 / FRONT

 

If the insurance industry wants to lower complaints and raise its image, it may consider kickstarting legal actions instead of sticking out its collective chin and saying: Go ahead. Try to land a blow.

 

Two separate but similar complaints are on this desk. Both involve widows refused a settlement on mortgage insurance when their husbands died. Both were paying monthly premiums and believe if the insurers accepted the money, they are obliged to honour the agreement.

 

Both women are learning a little-known fact of mortgage insurance. It indulges in underwriting after the fact. Mortgage insurance, actually a life insurance policy, is sold at the bank with minimal background checks. If there's a death, the insurance company will take a closer look at the paperwork. Insurance companies don't give away money if loopholes can be found, and they have working for them people with black belts in loopholes.

 

Widow One believes her claim is legitimate because it was disclosed in 1998 that her husband had had triple bypass surgery. She says the bank mortgage manager that sold the mortgage insurance said the surgery was far enough back, seven years, that it no longer mattered.

 

When the husband died a few months ago of heart failure, correspondence with the insurance company showed phrases including ``failure to disclose,'' and ``pre-existing condition.''

 

Those same phrases show up in correspondence with Widow Two, who also bought a life policy through a bank the same year. Her husband recently died of lung cancer. Lawyers for both insurance companies have used careful language that can easily be interpreted. Go ahead. Sue us. They have offered to return money paid through premiums.

 

It looks like bullying. The women are severely financially outweighed. They appear to be frail women in rocking chairs sitting in one corner, while Mike Tyson, threatening to bite as well as punch, grins from the other.

 

A better lawyer's letter might be: We seem to have a disagreement that needs settling by a court. We believe you knew of a pre-existing condition and failed to disclose. That could be attempted fraud. To save you money and to warn others away from similar actions, we will, if you agree, initiate an action against you for attempted fraud.

 

If the insurance company fails to get a conviction, it pays out. If it succeeds, the claimant is in a world of trouble. Either way, the insurance industry comes out of it looking more user friendly.

 

The best way to be assured you have a mortgage covered is to deal through your own broker who will sell you a life policy that will include underwriting before the fact. Unless you're 25 and an athlete, you won't be able to get coverage by simply answering questions on a form. You will also probably have to submit to a medical exam.

 

Policy Bump

 

Another insurance glitch to watch for involves car policies. If you can get it cheaper, you may be getting less. Claude Blain of Stittsville has just been through it.

 

Because he was a senior he was offered a lower rate. He bought. More likely it was his perfect driving record that got the attention of a group insurer. He switched home and car coverage to save money.

 

In February his perfect driving record came to an end, although there was no crash. He was backing out of parking spot at a Bells Corners mall. Another man directly behind him was backing out at the same time. The cars bumped. There was no discernable damage. Mr. Blain is a regular reader of this column and warned the other driver, also a senior, not to let his insurer know they had bumped.

 

The other driver was obviously not a reader of this column with its frequent insurance warnings. He suspected a trick, and reported to his broker. Both drivers were deemed 50-percent at-fault in a collision. Mr. Blain lost his six-star rating and saw his car insurance jump $200. Worse, he was put on notice that one more at-fault bump would put him into facility rates. His insurance would jump by thousands.

 

He went shopping. He found another group insurer that would take his whole package, house and car, for $12 less per year, but he would still have that ``at-fault collision'' hanging over his head. He kept shopping, and found an independent broker who found complete coverage at an increased cost of $90. The no-cost bump wouldn't count. ``It was worth it for my peace of mind.''

 

Car insurance is like any other product. The cheapest is seldom the best

 

Dave Brown is the Citizen's senior editor. His e-mail address is dbrown@thecitizen.southam.ca.

 

Read previous Dave Brown columns at www.ottawacitizen.com

Copyright Ottawa Citizen 2000 All Rights Reserved.

 

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