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An article in yesterday’s Daily Report illustrates a problem well-known by most trial lawyers; the insurance industry would rather spend money fighting claims than paying them.

The Daily Report article follows a study published in the Columbia Business Law Review, conducted by Jeffrey O’Connell of the University of Virginia School of Law and Patricia Born of California State University-Northridge. That study analyzed settlements of personal injury and defective product cases against companies between 1988 and 2004 in Texas and Florida.

Based on their analysis, the researchers found that, by early settlement, the defendants could have saved an average of $114,000 per claim, or $670,000 for sever injuries, plus $32,000 from lower legal expenses, or about $211,000 in cases with more severe injuries.

That totals$146,000.00 at the low end and $881,000 at the high end; that’s a tremendous amount of money, money that could have gone to compensate injured people, but was instead spent on court costs and attorneys’ fees.

Like many lawyers, I’ve had that experience all too often; a reasonable settlement offer before trial is rejected by the defendant’s insurer, the case goes to trial and a jury finds the defendant liable for the plaintiff’s injuries.If it’s clear to 12 impartial jurors that the defendant was liable, surely the insurance company should have seen it before trial, before the money was spent, and settled the case.

Why would the insurer not settle? Why is the insurance industry’s policy so often “collect the premiums and deny the claims”? There are probably several reasons, but I’m sure that one is because it discourages all claims, even meritorious claims, and that saves the insurance companies lots of money.

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