An Insurance Case That Flooded the Net

It isn't often that automobile insurance becomes the subject of nationwide outrage. So when it does happen, it's worth a peek inside all our policies to figure out how they actually work and what the insurance companies are up to behind the scenes.

This week, a man named Matt Fisher took to his Tumblr site to call out Progressive, which insured his sister, Katie, two years ago when she died in a car accident. The company recently sent its lawyer to court -- not to assist her estate but to argue that the driver of the other car, who had a suspended license and little insurance, was the innocent party.

Or, as Mr. Fisher put it, ''My Sister Paid Progressive Insurance to Defend Her Killer in Court.''

The outrage on social media came swiftly, and it was brutal. Progressive's initial public comments parsing the definition of ''defendant'' only opened up the company to further vitriol.

After several requests, I finally got Progressive to come to the phone and explain in detail, out loud and on the record, why it chose to fight Ms. Fisher's family in court.

In the end, the saga of Ms. Fisher and her family isn't just about whether Progressive made a needless mess of its reputation this week. And it's not simply about whether everyone should drop their Progressive policies in protest either, as scores of people have threatened to do. We also need to take a close look at our own coverage and determine whether we have a fundamental misunderstanding of how our various auto insurance policies actually work.

Before @fishermatt became a social media phenomenon, he was a devastated older brother. His sister was just 24 when she died in Baltimore with two degrees from Johns Hopkins University to her name and nothing but promise in front of her.

The insurance machinery began its work relatively quickly. Ms. Fisher had $100,000 in liability coverage per person in this accident, and three people (and the lawyers negotiating for them) wanted a piece of it: a passenger in her car, the driver of the car that hit her and a passenger in that car.

Progressive sized up its legal risks. Three individuals thought Ms. Fisher had run a red light -- the police officer who filed the accident report (but who did not witness it), Ms. Fisher's passenger and the driver of the other vehicle. On the other hand, one eyewitness said that it was the other driver who ran the light.

At that point, Progressive chose to pay the liability claims. ''If we determine that we shouldn't pay any third parties, our insured can get sued and be responsible for any amount over the limit,'' said Marcia Marsteller, the business leader in Progressive's legal department for claims. ''If we make the wrong call and don't pay them and perhaps we should have, there is an issue for her estate.''

Here's where things get tricky. Liability insurance pays money to injured people even if the policyholder is at fault. But the dispute in court that so infuriated Ms. Fisher's brother, Matt, also affected a different policy she had -- underinsured motorist coverage -- that operates under different rules.

That coverage is something you buy if you're worried about somebody hurting you who doesn't have much insurance. The driver who hit Ms. Fisher had only $25,000 in liability coverage, and her parents tried to coordinate claims from his company and their daughter's to collect the $100,000 total that her underinsured motorist insurance covered.

The challenge with the coverage, however, is that it pays you money only if the other driver is at fault. Many states, recognizing the subtleties in assigning blame, will pay out partial claims based on the share of responsibility. But Maryland is among a small number of states where insurance policyholders may get nothing under the terms of their underinsured motorist policies if they're even 1 percent at fault.

''You're buying insurance that steps into the shoes of the guy who injured you,'' said Tom Baker, a professor at the University of Pennsylvania Law School. ''It's kind of a nasty business, because they have to act like they're the bad guy that hurt you.''

Indeed, that is exactly what ended up happening with the Fishers. Even as Progressive was paying money to the injured people under the terms of Ms. Fisher's liability policy, her family was making a claim on her underinsured motorist policy that she wasn't responsible at all.

''She was a very cautious kind of person,'' said her mother, Joan Fisher. ''She wasn't a risk taker in any phase of her life. She was almost a nerd. I have never believed that she ran the red light.''

The other driver's insurance company appeared to be siding with the Fishers when it offered them the full $25,000 that his own liability policy covered. But Progressive, having already assessed the evidence and come to a different conclusion when it paid claims on Ms. Fisher's liability policy, decided not to pay the full claim on the underinsured motorist coverage.

While the company did engage in settlement negotiations with the Fishers, the two sides could not come to an agreement. ''I think they're still hoping that we are what they originally thought we were: stupid people that they could bully,'' Joan Fisher said. ''I think they thought that we would just turn our tails down behind us and walk away.''

Instead, the Fishers chose to sue the driver of the other vehicle to determine who was truly at fault in the accident. Armed with a favorable judgment, they could then force Progressive to pay their daughter's underinsured motorist claim in full.

Progressive didn't want that to happen, so it filed a motion to intervene in the case and sent its lawyer to court alongside the other driver's lawyer to make the case that Ms. Fisher was at fault (giving rise to her brother's accusation that the company defended her killer). The jury sided with the Fishers and determined that she bore no fault at all.

The Fishers' lawyer, Allen Cohen, said he felt that Progressive's conduct raised questions about whether the state insurance commissioner would find that the company had acted in bad faith. After all, he explained, two of the witnesses who lined up against Ms. Fisher were not independent, since one had made a liability claim against her insurance policy and another (the other driver) had potential criminal exposure.

''I have no issue in general with insurance companies defending themselves,'' he said. ''But in this specific case, I have an issue with how they examined the evidence to come to the decision to abandon their insured.''

Progressive sure seems to have done absolutely everything wrong here. It paid out three liability claims, doubled down in court on its interpretation of the evidence that was behind those payouts, lost in court, was roundly mocked online, will pay the underinsured motorist claim to the Fishers after all and is now also paying them a separate settlement to avoid a hearing before the state insurance commissioner.

But Ms. Marsteller of Progressive said that the company was acting in Ms. Fisher's best interest from the start. ''You make a decision and you might get a lawsuit either way,'' she said. ''Our goal is to make the best decision overall for the insured, and I think we did that here.''

A short personal coda here. I went back and checked my own insurance policy and realized that while I have $1 million of liability coverage, I had the minimum amount of uninsured motorist coverage. My guess is that at the time I made that decision, I figured that my separate health, life and disability coverage would cover me in the event of an accident involving somebody driving around with no insurance.

That seems foolish in retrospect, given all the things that I might have to pay for out of pocket if I were hurt badly. Plus, it cost less than $6 a month to take the underinsured coverage up to $1 million.

The low price seems to indicate that the odds of making a claim are slim. But the Fishers' experience suggests that having decent coverage is a good idea, and they are now considering increasing their own coverage.

Before their daughter died, they had taken out a home equity loan to pay off some of her student loans. The proceeds from the uninsured motorist claim will allow them to retire the debt. But her mother said that the lawsuit was never about the money for them. ''This is the last that the world will ever hear of my daughter,'' she said. ''And I didn't want those last words about her to be that she was a reckless driver.''Alas, having insurance doesn't guarantee that your insurer won't cross the ring at some point and fight alongside the other person who was involved in your accident. And if companies make enough of the sort of miscalculations that Progressive did here, the costs may well be passed on to all of us in the form of higher premiums.

PHOTOS: Joan and Steven Fisher, left, at their Connecticut home. They went to court to prove that their daughter Kaitlynn, known as Katie, was not responsible for the auto accident that took her life. Above, Katie in 2008. (PHOTOGRAPHS BY DOUGLAS HEALEY FOR THE NEW YORK TIMES; MATT FISHER) (B5)

August 18, 2012, Saturday    Late Edition - Final
Section: B    Page: 1    Column: 0    Desk: Business/Financial Desk    Length: 1520 words