17-Apr-2009 (Fri) Wherein I tell an old story that probably I shouldn't.

So here's a funny story. And by "funny" I mean, "so funny that I sometimes have a hard time getting out of bed."

This is an old story, and has nothing to do with our current battles with the government. Or with any other absurd lawsuits we might or might not currently be dealing with. I didn't tell this story back when it happened because there were lawyers involved, and they always advise you to never say anything to anyone. But it's long over now, so now it can be told. I guess.


Several years ago, there was some kind of scuffle and one of our customers who was dancing on the stage fell off and hurt her ankle. She sued us. I'm not sure what exactly her reasoning was, but she did, because this is America, and you can sue anybody for anything. She claimed she had spent $4,000 on medical bills (chiropractors!) and asked for $500,000 in pain and suffering.

We learned in the discovery phase that this woman had also been in three automobile accidents in the previous two years, for which she had been going to chiropractors already. How about that.

We submitted this claim to our insurance company, like you do, and their lawyers handled it. They ended up settling the case by paying her around $11,000. And here's where it gets fun:

Our deductible was $10,000. So the lawyer, who was working for the insurance company, did right by the insurance company. It only cost them $1,000! But he didn't try to negotiate anything lower, because that would have been a waste of his time, since he wasn't working for us, and that was the part we would have to pay. Oh, but it gets better.

It turns out that the fine print on our insurance said, in longwinded, 4-point, incomprehensible legalese, that the rates we had been paying for years were merely "estimates". So after our claim, the insurance company "audited" us, and retroactively raised our rates for the last four years by $20,000 per year. So the fact that we filed a claim at all caused the insurance company to demand an additional $80,000 from us.

At that point, we hired our own lawyer who negotiated that $80,000 down to $40,000, paid out over a year instead of being due immediately. Plus several thousand more for the new lawyer, obviously.

In summary... Customer with a fake injury sues us for half a million dollars. Ends up getting $11k, of which her lawyer probably takes half. We're out almost $60k. Insurance company turns a $40k profit.

What's the lesson here, kids?

I think it's, "people are scum" and/or "never start a business."


I would be remiss were I not to take this opportunity to mention our legal defense fund.

35 Responses:

  1. i_e_d says:

    Horrid.. :/

  2. radparker says:

    Out of curiosity, does that settlement include a clause prohibiting her from returning to the DNA Lounge?

  3. stiobhan says:

    Insurance companies are scum.
    Self-serving lawyers are scum.
    Scammers are scum.

  4. util says:

    Which insurance company was it?

  5. flipzagging says:

    You know, I sometimes have to deal with safety issues around fire art, and I've wondered if somebody might try to cause some accident and sue us.

    But your story convinces me that will never happen. They want a fake injury that they can claim requires the attention of fake doctors. Nobody wants third degree burns, no matter how much the insurance claim might be.

    So I'm suggesting your club needs more flamethrowers.

    • fo0bar says:

      Yeah, safe bet. Pyrotechnics have never been a legal liability for a night club. Or a promoter. Or a radio station. Or a city.

  6. mooflyfoof says:

    What. The. Shit. That's... I don't even know. I'm speechless.

    Oh hey Jamie I sprained my ankle at the DNA 3 years ago because I was drunk and wearing heels and fell down the stairs (true story). Can I have $11,000?

  7. perligata says:

    Man, you could've paid me $300 to break her ankle on purpose.

  8. funjon says:

    I fucking hate this kind of entitlement-bitchism.

    I think the last time I went to a bar, I tripped on a stool and twisted my ankle. I didn't sue them, I didn't sue the guy who was sitting on the stool, I said "Ow, fuck", limped to my table, and bought a shot.

    I keep trying to decide who's the biggest scum - lawyers, insurance wankers, or realtors. I hope they're all first against the wall when the revolution comes.

  9. bifrosty2k says:

    I wish you could have a EULA that absolved you of all liability by entering the club. Seriously, this kind of shit shouldn't be allowed in this country.

    • pdkl95 says:

      Apparently the contract-lawyers for dating in Cherry 2000 were highly prophetic.

      Back on topic, I've said for years that insurance companies fail a conservation-of-energy like test, and nobody seems to believe me. If they were in the business of actually paying you money, they wouldn't stay in business. Therefor, seeing as the insurance company (provably) believes that the net flow of money will be in their favor, why should anybody ever do business with them?

      • bifrosty2k says:

        The insurance company stuff is a protection racket.
        Because I have biz insurance, I can go after Fortune 50 companies, which makes me more money. If I didn't have it, I wouldn't get in the door.
        So far, things are in my favor :)

      • seeing as the insurance company (provably) believes that the net flow of money will be in their favor, why should anybody ever do business with them?

        Because predictable cash flow is better than unpredictable cash flow. Next question?

        • scjody says:

          What part of a demand for "an additional $80000" is "predictable cash flow"?

          • Poster I was responding to was talking about insurance companies in general.

          • cattycritic says:

            Individual claims are treated as "random," but the overall behavior of various populations is fairly predictable.

            I have a friend who does actuarial work which winds up in adjusters' hands who talks about this kind of stuff all the time.

      • fnivramd says:

        Firstly, this rant is so old that it's in the Devil's Dictionary (under Insurance, I think, don't have my copy here).

        Secondly, the answer is unlimited liability. The chain of insurance companies and underwriters protects you from enormous liabilities, far beyond those the company or its investors/ owners could afford.

  10. takeapeek says:

    what fucking scumbags...that fucking bitch probably gets in accidents all of the time to find fucked up ways to make a profit off of it.

  11. wyndebreaker says:

    That story pissed me off so much I just donated some money.

    My stepmother is a judge in SF and she used to see frivolous shit like that all the time in Civil Court. Thankfully, she is in Superior Court where she deals with murders instead of ambulance chasers.

  12. Are you still with that insurance company?

  13. cattycritic says:

    It's not like drunk people twisting their ankle in a bar should be a big fucking surprise to anyone, especially insurers, so I just don't believe there is any honesty whatsoever in the rate adjustment. This "oh hay, we didn't charge you enough for the last N years, here's your bill" shit has got to go.

  14. nathanrsfba says:

    What's the lesson here, kids?

    I think it's, "people are scum" and/or "never start a business."

    Or maybe it's "start an insurance business..."

  15. babasyzygy says:

    Try running a health care business. This kind of shit is a daily fact of life. The attorneys who file these kind of suits know very well what the insurance companies will settle for under what circumstances, and turn that knowledge into a high volume business.

    What we ended up doing back when I ran an assisted living facility in Florida, was get the technically legally-required amount of insurance with a rider say that they didn't actually cover anything (and even that cost us $10k/month), and then split the business up so that it was judgment-proof. IE, the operating corporation didn't hold any assets (only substantial debt), and paid rent to the corporation that owned all the assets.

    This wouldn't have stopped a truly determined plaintiff who had really been wronged, but it succeeded in chasing away many nuisance suits.

  16. Raise your deductable, litigate everything you think without merrit to the end.

    Next time you get a claim, point out this behavior to them.

    I know Bell motorcycle helmets and Cyprus Semiconductor (shareholder lawsuits) did this.

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