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>it's just a cost/benefit analysis on the insurer's behalf.  Do they want 
>to spend $50K to get to a judgement of innocence, with some small chance 
>of a very large judgement, or just pay $40K up front?  If you are running 
>an insurance carrier as a business, the decision may not be hard.
The flaw in this logic is fairly typical of people who only worry from 
quarter to quarter. When you have a policy of paying off phony claims, 
even at a discount, you end up facing a lot more phony claims. My auto 
insurer started fighting such things with some success. The company 
fought a couple of fraudulent claims placed against us (one for damage in 
a fender bender that never occurred, and a claim for $100,000 in fake 
chiropractic services after a fender bender). This company even has their 
own captive law firm to save on legal fees. Someone finally recognized 
that the last thing plaintiff counsel wants is a trial unless the case is 
completely air-tight, which they never are. Plaintiff counsel can't 
afford to bet the farm on a doubtful verdict. If he loses he gets nothing 
from the client and he's also got out-of-pocket expenses that he can't 
recover.

One company I did work for was structured so that trial costs and claims 
didn't come out of the same budget. Claims were refused by the claims 
office to keep them off their budget. When legal action ensued it was 
counted against the settlement budget, and often cost more than a than a 
claim payout. But at least claims looked good.

Christopher Wright P.E.    |"They couldn't hit an elephant at
chrisw(--nospam--at)skypoint.com        | this distance"   (last words of Gen.
___________________________| John Sedgwick, Spotsylvania 1864)
http://www.skypoint.com/~chrisw



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