Thursday, February 26, 2009

McDonald's case demonstrates tension between insurers and insureds

An article on highlights the tension that can arise between insurers and insureds, especially in high-profile claims.

According to the original article (which begins about halfway down), a McDonald's employee was shot and seriously injured when he intervened after a male customer hit a female customer in the Arkansas restaurant. The worker's compensation carrier denied his claim on the grounds that he was not acting within the scope of his employment when he was injured. (Okay, I'm no expert on Arkansas worker's compensation law, but I just don't see how a restaurant employee breaking up a fight in the restaurant is outside the scope of employment.)

It is obvious to me from reading the article that the decision to contest the claim was made by the insurer, not by McDonalds. However, even the author of the article did not make that distinction, blaming McDonalds and accusing it of just acting ugly.

In the article update the franchise owner plays nice, stating that if the worker's compensation board agrees with the insurer, he will personally pay the medical bills. At the same time, he is no doubt telling his insurance agent to find a new worker's comp carrier.

Let's say that the insurer's denial of the claim has a sound legal basis under Arkansas law. Then the insurer has a responsibility to its stockholders to deny the claim. But in doing so, it has created a predictable swirl of horrible publicity for the restaurant, which its owner has now scrambled to undo.

And if there is no sound legal basis for denying the claim? Then the insurer is using the claim to send a message that it plays hardball and pays no claims easily, in order to discourage others from filing claims. Not only the claimant but the insured suffers--and that's why we have bad faith laws.

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