Moral Hazard? Slabbed wipes our a$$ with Moral Hazard Part 2 Contract Sanctity: Millions for Executive Bonuses, Screw the policyholders

In America, when you owe people money, you pay them.

Ed Liddy, CEO of AIG

It was the greatest company in history. In the insurance industry, there wasn’t anything like it.

Maurice ‘Hank” Greenberg taking credit for all the good at AIG and none of the bad.

Today we’ll continue analyzing the concept of Moral Hazard in the context of rule of law as differences in how contracts are honored are compared and contrasted. The result, as illustrated by Hurricane Katrina’s aftermath is that some contracts are more “sanctified” than others. Those who have been screwed by big insurance, especially AIG, knew immediately Ed Liddy wasn’t talking about their contracts when he was trying to fleece taxpayers  into paying those executive bonuses using that bogus rule of law argument.

Claims handing at AIG has enjoyed the reputation of being the most hard nosed, despicable sum bitches in the industry and Mr Greenberg deserves that credit too. People across the country have been shafted from small auto claims to large Katrina related homeowner claims so I was not surprised to see AIG once again in the news for shafting government contractors badly hurt in Iraq. We’ll start with a story from last August in the Charleston Gazette on Stan White’s troubles collecting from AIG unit American General Life Insurance Company:

The parents of an Iraq war veteran who died in his sleep in February while recovering from post-traumatic stress disorder have sued his insurance company after it refused to pay his life insurance.

In a lawsuit filed in Kanawha Circuit Court in July, Stan and Shirley White of Cross Lanes maintain that Houston-based American General Life Insurance Co. wrongly denied them the proceeds from their youngest son’s life insurance policy.

Andrew White joined the Marine Corps Reserve in July 2003, and served as a combat engineer, disarming “improvised explosive devices” and patrolling areas near Iraq’s border with Syria.

Shortly after he returned home in September 2005, his older brother, Bob, who was serving in the Army in Afghanistan, was killed when a rocket-propelled grenade hit the Humvee in which he was riding.

In the wake of his brother’s death, Andrew White took out a $50,000 policy with AIG, the lawsuit states.

“To preclude placing a financial burden on his family, who had already suffered through one tragedy, Andrew purchased a life insurance policy from AIG. Andrew chose to list his parents as sole beneficiaries, as he was unmarried, and did not have children,” the lawsuit states.

After filling out an application, he was examined by a health professional of AIG’s choosing on Oct. 31, 2006, the lawsuit maintains.

AIG issued his policy the following month.

Because he was a smoker, White agreed to pay a higher premium, according to the lawsuit. For 14 1/2 months, he made his monthly payments.

In August 2007, White was diagnosed with post-traumatic stress disorder, and began treatment at the Veterans Affairs clinic in Kanawha City.

Although he was taking prescription medicines at the time of his death, a toxicology screen performed as a part of an autopsy indicated normal levels of his medication, the lawsuit maintains. The autopsy found no disease, organ damage or health problems, the lawsuit states.

The state Medical Examiner’s Office determined that White’s death was accidental, according to the lawsuit.

However, when his parents submitted his death certificate to AIG, the insurer denied their claim.

“[AIG] said that had they known that Andrew White had a car accident when he was 16 years old, they never would have written the policy to begin with,” said Charleston attorney Jack Tinney, who represents the White family. “That’s ludicrous.

“They have gone back and searched for any reason whatsoever to deny the claim, rather than look for a valid reason,” Tinney said.

Carrie Goodwin Fenwick, who represents AIG, could not be reached Friday.

It’s gets better though courtesy of Brian Ross at ABC news in a segment that ran last Friday on their news show 20/20:

Insurance giant AIG, the same company that rewarded its executives with millions in bonuses and spent hundreds of thousands of dollars on a spa retreat at an exclusive California resort and private jets, has been nickel and diming employees of private contractors injured in Iraq, with a pattern of denying and delaying their claims, a joint investigation between 20/20, the Los Angeles Times and the non-profit group ProPublica has found.

In a joint investigation with 20/20, ProPublica and the Los Angeles Times analyzed some 30,000 claims filed by people working for American defense contractors overseas, covered by AIG under a federally-mandated program. Almost half – 43 percent – of the most serious cases were challenged by AIG, the analysis found, particularly those where claims were made for treatment of post traumatic stress disorder.

“It’s difficult for me to think it’s anything but a concentrated effort just to ignore these guys,” said Houston attorney Toby Cole, who represents many of the injured contractors. He said he’s never seen one insurance company treat so many people so badly.

“The pattern is to deny, to delay and to fight,” Cole said of AIG, which has been kept in business only because of $182 billion in taxpayer bailout money.

Insurance companies know people hard hit by a covered peril are in a weak position and discriminating slabbers will tell you AIG is a particularily nasty bitch when it comes to applying the ol boot to the throat as the story continues:

“They just threw me out on the street basically,” said Preston Wheeler, who was driving a truck for the KBR contracting firm when he convoy was attacked by insurgents, of AIG. He watched as fellow drivers were murdered and took bullets in his chest and arm.

Wheeler, who still has nightmares and flashbacks, said AIG didn’t believe him and tried to cut off his medical and disability benefits. After he retained an attorney and went to court, AIG agreed to reinstate his benefits, months after not giving him anything.

One of the bullets from the attack is still lodged in Wheeler’s underarm, but he says AIG won’t even respond to his request for a cat scan to see if he should have it removed. “It’s a foreign object,” Wheeler told ABC News. “It doesn’t belong in there, so it needs to come out.”

At a hearing last May, congressional investigators said AIG’s insurance business covering private contractors has been “extremely profitable” for the company.

AIG won’t disclose how much it’s making by handling what is essentially workmen’s compensation for contractors. The company says it has a 45-year history of handling such claims and provides “quality service” to its claimants and clients.

Next up is the related story of John Woodson, who is now a blind amputee because of his service in Iraq:

An Oklahoma man who lost an eye and a leg in Iraq says the giant insurance company AIG refused to provide him a new plastic leg and fought to keep from paying for a wheelchair or glasses for the eye in which he has 30 percent vision.

“They bought the cheapest thing that they could get away with,” said 51-year old John Woodson, a truck driver for the KBR contracting firm who lost his leg when his truck hit a roadside bomb in Iraq.

“Everything’s been a struggle, a constant fight,” said Woodson, injured in Oct. 2004. “It’s been hell since.”

Still in constant pain, Woodson says he was infuriated to see AIG executives receive huge bonuses, travel on private jets and be pampered at a California spa.

“They’re getting their bonuses but they fight you, they’ll constantly fight in order to try to get you to give up,” said Woodson, of Poteau, Oklahoma.

Woodson is one of a number of injured contractors whose alleged difficulties with AIG were examined in the joint investigation.

Predicatbly AIG throws out a line of bullshit defending their bad behavior as the story continues:

AIG said it could not discuss any specific case, but that it strives to provide “quality” care.

“We think we’re helping the military with our insurance program,” said AIG executive John Russo.

In Woodson’s case, when his fuel truck hit the hidden bomb outside Baghdad, he was blown through the roof of his cab and thrown about a hundred feet away, also damaging his back and breaking his pelvis.

Woodson says he was told by an AIG representative in the hospital that he would be fully covered by AIG, but that when he returned home, he quickly discovered AIG was prepared to challenge almost all of his medical needs.

“I’ve had to argue for everything, you constantly stay on the phone, writing letters, e-mailing, trying to get things to happen,” Woodson said.

To cushion the impact on his injured back and pelvis, Woodsen asked AIG for a new plastic leg with a spring in the foot.

“It was just so painful just to walk,” Woodson said.

He says AIG refused to buy him a new leg, which he says would have cost about $8,000.

AIG also refused, he said, to provide him a water-proof leg so he could remain standing and take a shower.

U.S. military amputees are normally provided three different legs, to cover a full range of walking, showering and exercising.

In the end, Woodson says he thinks it was pressure from his lawyer and Sen. Tom Coburn (R-OK) that forced AIG to finally provide an improved leg, with replacement parts, but not a new one as his doctor had ordered.

Woodson’s lawyer, Toby Cole, says he sees a pattern of AIG “delaying and denying” claims from contractors injured in Iraq and Afghanistan.

“It’s difficult for me to think it’s anything but a concentrated effort just to ignore these guys,” said Cole.

Hank Greenberg didn’t ignore everyone though, just ask Jackie Clegg Dodd.

sop