By Erik Holm
Progressive Corp. (PGR) was trying to save $75,000. Instead, it
unleashed a flurry of social-media rage against the company.
Now, the question is whether Progressive's experience will
prompt changes throughout the auto-insurance industry as more
consumers use the Internet to tell their side of the story when
they feel they've been slighted by their insurers.
The car insurer found itself in the middle of an online
firestorm last week after a blogger named Matt Fisher took to his
Tumblr page to complain about the way Progressive treated his
family as they sought to collect on his deceased sister's insurance
policy.
Mr. Fisher's story went viral, and four days later, Progressive
agreed to settle with the family for an undisclosed sum. Whatever
the settlement amount, the total cost of the incident will be much
higher, with a tally that will include those people who made good
on their Twitter threats to switch their insurance away from
Progressive, as well as those who won't consider Progressive for
their insurance in the future.
The uproar is a cautionary tale for insurance companies. Even
Mr. Fisher said in an interview Tuesday he was surprised by the
furor his blog post created, but the incident shows that in the era
of Twitter, Tumblr and Facebook, any customer who doesn't like how
his claim is being handled could potentially become the next
policyholder to go viral.
Even when a company's actions are legal and done with the
blessing of regulators, it can suffer reputational and financial
harm when exposed to harsh cyber-invective.
"In the court of public opinion, no one cares that it's legal or
if the regulator approved it," said Robert Hunter, the director of
insurance at the Consumer Federation of America. "If it can't pass
the smell test, that's enough to spark something."
Industry observers and public-relations experts say
claims-handlers and lawyers working for insurers typically operate
strictly by the book, which is usually a valuable attribute for
their employers. But they point out that someone in the chain of
command needs to keep in mind how their actions will be perceived
by the public, even when they are acting within the rules.
"This could be a wake-up call for insurers," said Linda
Kornfeld, a partner at Jenner & Block in Los Angeles who
represents companies that have disputes with their insurers. "If
your job is to look at claims and do what is in the best financial
interest of your company, you may lose sight of the bigger picture
of what the negative repercussions could be."
Last week's firestorm began when Mr. Fisher wrote on his blog
about his family's experience when they sued a driver involved in a
car crash that killed his sister, Kate Fisher. Mr. Fisher said his
family had filed the lawsuit to prove the other driver's negligence
and collect on his sister's Progressive "uninsured/underinsured"
coverage, a supplemental type of insurance that pays out if another
driver is responsible for the accident.
When the case got to court, Mr. Fisher wrote that he was angry
that a Progressive attorney sat alongside the defendant and argued
that his sister was responsible for the crash.
"If you are insured by Progressive and they owe you money, they
will defend your killer in court in order to not pay you your
policy," Mr. Fisher wrote.
Two weeks ago, a Maryland jury found in favor of the Fishers,
determining the other driver was responsible for the crash.
The company said in a statement Thursday it participated in the
trial because there were "credible conflicting eyewitness accounts
as to who was at fault" in the car crash. Court filings show the
investigating police officer had concluded, based on those
accounts, it was Ms. Fisher who ran a red light, not the other
driver.
In fact, Progressive's stance that Ms. Fisher may have been at
fault in the accident was consistent through its handling of the
claim, even when it was costing the company money. The Fishers'
attorney, Allen Cohen, said Progressive paid out more than $100,000
in liability claims under her main insurance policy to three people
involved in the accident, including the driver whom the family
later sued.
Had it determined Ms. Fisher wasn't at fault and that stance
held up in court, it could have paid just the $75,000 claim the
Fisher family earned by winning their lawsuit.
In the end, it paid under both parts of Ms. Fisher's insurance
coverage and then settled other outstanding issues with the Fisher
family for an additional amount.
"We never looked at it as a math problem," said Tricia Griffith,
Progressive's chief claims officer, in an interview Monday. "We
handle every claim consistently, and we do a very thorough
liability investigation in order to make the best decision
possible."
Still, Mr. Fisher's primary complaint wasn't how Progressive
apportioned blame but that the company came to court to try to
convince a jury that its own policyholder, his sister, bore the
blame for the crash that killed her. On that point, he differs from
lawyers and insurance-industry experts who say Progressive was
entitled to argue its case in court.
"I didn't have a legal opinion to give. What I was offended by
was the audacity," Mr. Fisher said. "I'm surprised people don't
crow about that every time it happens. I wrote what I did to shame
Progressive a little bit."
Still, some lawyers who tracked coverage of the Progressive case
said they doubted insurers would drastically change their behavior
in response to the incident.
"If insurers overpaid on claims or paid claims that were not
owed simply because of the risk of one of them, every now and then,
being wrongly blown out of proportion on account of a viral blog
post, they would soon be unable to pay any claims," said Randy
Maniloff, a partner at White and Williams in Philadelphia who
frequently represents insurers in coverage disputes. "And then
you'd really see a lot of negative blog posts."
--Leslie Scism contributed to this article.
Write to Erik Holm at erik.holm@dowjones.com
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