Righteous Denials

I have what could be described as an accumulation problem, and it involves newspapers and magazines. It is mostly self-inflicted, since I haven’t yet convinced myself to transition to digital subscriptions, but it is chronic as new paper items arrive every day and I refuse to recycle those that remain unread. Instead, I create "read later" piles and then intermittently try to deal with those piles, as I did last week when I sat down on my screen porch, surrounded by stacks of newspapers and magazines, intending to read and recycle until current.

Unfortunately, reading world news in large doses can be disheartening, and when your mind wanders off in search of more uplifting thoughts while you are reading, you end up not remembering what you just read. This has everything to do with how your working memory operates, and how your two competing modes of attention (focused and wandering) interact. See Hit the Reset Button in Your Brain by Daniel J. Levitin for an enlightening description of how it all works.

So while I wasn’t concerned when my mind began to wander, I was surprised when this quote from Nobel Prize winning poet, dramatist and literary critic T.S. Eliot popped into my head:

“Most of the evil in this world is done by people with good intentions.”

I have been unable to discover the original context of his statement, but if I take it at face value and consider it from today’s perspective I have difficulty accepting the premise that most evil is accidental and unintended. Fellow Nobel Prize winner Albert Camus’ observation in The Plague somehow seems closer to the mark:

“The evil that is in the world always comes of ignorance, and good intentions may do as much harm as malevolence, if they lack understanding.”

The concept that actions taken with good intentions, but fueled by ignorance or lack of understanding, can be as harmful as actions taken with bad intentions isn’t really surprising. We’ve all worked with both types of people: the well-intentioned but uninformed folks who, through their lack of understanding and/or incompetence, cause all kinds of trouble and damage, and the malevolent ones who intentionally do harm. But the Camus quote reminded me of something else, something I hadn’t thought about for many years, something that used to be a problem in claims handling in the early 1990s. We called it the righteous denial.

Righteous denials occurred when an insurer refused to honor a first party property claim simply because, in the opinion of the claims handler, something wasn’t quite right with it. The decision to deny, usually made at the local claims office level, was often not evidence-based; sometimes the denial would be issued before the investigation had even been completed. The written comments in the file supporting the denial were usually colorfully raw and emphatic, flavored with instinct or emotion. You know, comments like “This claim stinks” or “This guy is a crook” or “I know he set this fire, no matter what the Fire Marshal says.” It goes without saying that these were called “righteous” denials because the claim handlers earnestly, perhaps even sanctimoniously, imagined themselves occupying the moral high ground. They were driven and determined to resist any claim that seemed inflated or fraudulent, against all odds and at all costs.

Don't get me wrong--these were not evil people intent on doing harm. But their doggedness to do what they saw as the “right thing”--even if the evidence didn’t entirely support doing it—arguably interfered with the performance of the duties of good faith and fair dealing that insurance companies owed to the people they insured. The litigation that followed exposed insurers to negative publicity, contractual damages in excess of policy limits, and to direct actions for extra-contractual damages, including punitive damages in some cases.

It may be hard to believe now, but back then most claims handlers didn’t understand what “bad faith” claim handling was, and they never imagined that their righteous denials could contribute to such unfortunate outcomes. Their good intentions, pursued intractably with ignorance and a lack of understanding, were characterized in litigation as egregious, outrageous, unscrupulous, arbitrary, capricious, reckless and/or unreasonable behaviors designed to avoid claim payment while placing the insurer’s interests ahead of the insureds’. And their claim file comments were used against them as evidence to support that characterization.

Those were stimulating and challenging times. As I recall, it required quite a bit of time and effort to change the underlying operating mindset and banish the righteous denial, in part because some claims handlers had a hard time “unlearning” something they believed in so strongly. Of course adults often have trouble learning and integrating things that conflict with something they believe they already know. Jane Bozarth described it this way in her article Nuts and Bolts: Unlearning:

Old habits are hard to break, and revising old thinking patterns, even when one recognizes the need for change, is challenging. And when we’re under pressure the old learning may reemerge, as it has a longer history inside our responses.

I need to get back to my reading, but for more about first party bad faith and the history of bad faith in general, check out the ABA’s Recovery of Extra-Contractual (“Consequential”) Damages in First-Party Bad Faith Cases and Thomas F. Segalla’s Bad Faith as a Continuum: From Claim to Trial.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on Property Casualty insurance claims and operations. He can be reached at dean.harring@theclm.org or through LinkedIn or Twitter.