The Hartford Financial Services Group has agreed to pay $72.5 million to more than 21,000 consumers -- mostly personal injury victims -- nationwide who have alleged that the insurer engaged in fraud in settling their insurance claims. According to an Associated Press news report, a federal judge approved the agreement in Connecticut to resolve the class action lawsuit.

Alleged Fraud

The class action plaintiffs alleged that the insurance company engaged in bad faith practices in negotiating and settling the claims against its liability insurance companies. They alleged that the Hartford companies would offer settlement to the injured people by giving them a "structured settlement" of future payments to be funded by an annuity contract purchased with a premium of a stated "settlement" amount.

The claimant would decide to accept the settlement not on the basis of the promised future payments but because of the stated present-value of the settlement amount. It is alleged that Hartford did not disclose that the premium for the annuity contract which would be issued to pay the offered future payments was actually up to 15 percent less than the stated present value of the settlement. In this way, the Hartford companies were saving that 15 percent. The future payments to the claimants would have been larger had the full present value of the settlement amount been used as the premium for the annuity contract.

Holding Wrongdoers Accountable

The Hartford has denied any wrongdoing saying that claimants have received the amounts they were due. Officials said they agreed to the settlement to avoid the cost of continued litigation. The 21,000 people who were part of this class-action lawsuit were people who were injured in car accidents, on-the-job injuries and other accident victims. They will receive an average of $3,300 as part of the settlement, and will (of course) continue to receive their annuity payments.

I'm pleased to see that this insurance company has been held accountable for its unethical business practices, to say the least. What was at issue in this case were the structured settlements in which payments are made to injured victims over a period of time. These payments are usually funded with annuities. What the lawsuit says The Hartford did was develop a plan in which its liability insurance companies bought these annuities from its life insurance subsidiary, which then paid a kickback to the other Hartford property and casualty companies. The insurer basically kept about 15 percent of the value of the premium for the annuities to cover profits, taxes and costs.

Importance of Class Action Lawsuits

Our Newport Beach personal injury law firm represents victims in personal injury cases and we recommend a structured settlement to our clients as opposed to a lump sum payment. If The Hartford did what consumers allege they did, it is nothing short of fraud and racketeering. To rip off injured victims who count on these payments to make ends meet and maintain their quality of life, is simply horrendous, to say the least.

This is yet another case that proves the importance of class-action lawsuits. This is pretty much the only legal remedy available to consumers, who do not have the resources, to go after large corporations that engage in unethical practices, and hold them accountable.

Have you been a victim of insurance bad faith? Have you had a bad experience with your insurance company? We would like to hear from you.

None of the parties mentioned in this article are represented by us at the time this article was posted. The source of our information is cited in the article. If you were involved in this incident and have questions as to your rights and options, call a reputable law firm for a consultation. Do not act solely upon the information provided herein. The BISNAR | CHASE personal injury law firm will provide free, confidential consultation to "not at fault" persons and their family members if you mention your source was the “Personal Injury Law Journal." They can be reached at 866-456-5235 during California business hours.