Consumer fraud litigation includes individual cases as well as class actions that have been filed throughout the country. These cases involve wrongful conduct of insurance and finance companies including fraud and bad faith.
Types of Fraud
With scandals involving Enron, WorldCom, Global Crossing, Merrill Lynch and other corporate giants, there has been an outcry for corporate accountability. Many law firms are investigating and assisting investors nationwide to recover losses caused by the alleged inappropriate acts and actions of brokerage houses. Many investors are complaining that they have lost money because of the failure of companies and brokerage houses to disclose material adverse information and artificially inflating the companies reported results on its financial statements and other forms of accounting irregularities.
Financial fraud involves lending institutions which typically target the most vulnerable people in society. These lenders are commonly referred to as “predatory lenders” and target minorities, the economically disadvantaged and the uneducated in an effort to realize huge profits. These lenders charge the borrowers higher rates of interest, require credit insurance products, require exorbitant up-front fees and include prepayment penalties. Most predatory lenders require the customer to purchase unnecessary credit insurance products. Additionally, these insurance products are grossly overpriced and essentially worthless to the consumer.
These companies engage in a practice known as “flipping” which involves a borrower constantly being flipped from one loan to another. This practice is extremely profitable to the lender, but devastating to the borrower’s ability to ever pay off the loan.
Another “predatory” practice known as “packing” involves unnecessary property, life and/or disability insurance being placed on the loan for no other reason, except the increased profit.
Another practice of the financial industry is known as “equity stripping” which involves a scheme to get the equity in your home pledged to a high risk separate loan, resulting in consumers losing their homes.
Insurance Bad Faith
Bad faith claims arise when a company with whom you have a contract fails to act within the terms of that contract. In the case of your insurance company, this may happen if it fails to promptly or properly defend or pay a claim. An insurance company has a duty to deal fairly with its customers, giving more consideration to its insured customers than to its own interest. Whenever your insurance company fails to honor its obligations in its contract with you, you may have a claim for bad faith. An insurance company is required to investigate all claims and find out information about anything that might support their insured’s claim.
Insurance contracts are written to reflect current case law. Known terms which seem self-evident to the insured may actually have special interpretations to the insurance company and not to the insured. All insurance contracts are interpreted in a court to carry out the reasonable expectations of the insured party. The contract will be studied to obtain its meaning, and such meaning must be clear and unmistakable. Generally, any terms which are not clear will be interpreted to benefit the insured. You do not have to prove that the company intended to cause harm, only that they failed to honor their agreement and had no cause not to pay the claim.
Other Insurance Fraud Cases
The term “insurance fraud” often brings to mind the insurance claimant who manufactures or fakes an injury in order to bilk an insurance company. However, in the context of “mass” and “class” legal actions, it is the insurance company that is accused of committing the fraud and bilking the insured, not the other way around.
One area that has been ripe for mass legal action is what is known as the “vanishing premium” case. These cases involve customers being falsely told that if they make their premium payments for a certain amount of time (for example, 10 years) they never have to make any other premium payments and the policies will pay for themselves at that point, or that premiums on universal life policies are “fixed”, when in fact the premiums will require increases in order to maintain the policy in later years.
May major companies have been involved in legal wranglings over these types of allegations.
Race-based Premium Discrimination
Another area ripe for mass legal action involves the sale of race-based insurance premiums. During the 1930’s through the 1970’s, several insurance companies engaged in the shameful practice of charging “race-based insurance premiums” on so-called “burial policies” and/or “industrial life policies”. This reprehensible practice involved a national scheme to unlawfully charge African Americans higher insurance premiums based solely on the color of their skin.