I am returning to an old chestnut on my blog, a section which went dormant to some degree over the years, namely the section on interviews. They take a little time to do well, and podcasts (with their reliance on guests) seemed to have swallowed the field, so I stopped focusing on them. However, both my blog’s analytics and discussions with readers have made clear to me that there is still an appetite for them, and when I stumbled across an excellent first victim – I mean guest – for the reinvigorated interviews section of this blog, I decided to leap back into the fray. I will try to sustain this new effort on this front, so if any of you have candidates who you would like to volunteer for the back and forth Q&A that results in these interview posts, by all means, reach out and offer them up, willingly or not, as volunteers (cue the old schtick, done by everyone from the Three Stooges to Bill Murray, where everyone else steps back in line, leaving one poor sucker as an unwitting “volunteer”).
I have known our next guest, Joe Lorenzo, for many years, probably decades actually, going back to when he was a client. Joe recently retired after over nineteen years at AIG, where he oversaw bad faith litigation against the company. Joe handled cases all over the country, which allowed him to bring a unique and interesting perspective to the mostly Massachusetts based bad faith and coverage cases that I have long litigated. Joe had and has a unique perspective in many ways with regard to bad faith and Chapter 93A litigation in Massachusetts, having been an industry side lawyer during the entirety of the development of what I consider to be the modern era of bad faith law in Massachusetts, which has become highly driven in the past decade or two by the overlap between ever increasing jury verdicts in tort litigation (in other words, the rise of the so-called nuclear verdict) and the right to recover three times a jury verdict by proving bad faith by an insurer.
I have been trying those cases since the 90s, and tried, as a defense lawyer, the first attempt to multiply a large “runaway jury” verdict based on an insurer’s alleged bad faith in appealing the verdict rather than just paying it (I won). In the years following that trial, those types of cases started going south in many ways for the insurance industry, which from my perspective responded by getting much better, more sophisticated and more proactive in handling that risk. Joe had a front row seat on those developments during those years.
My discussion with Joe follows.
Q: Joe, can you tell us about your experience and background, particularly with bad faith litigation, in a way similar to how a lawyer would seek to qualify you as an expert at trial?
A: I have held positions in both the claims and legal departments for major insurers. My early career experience took place in the claims departments of Aetna, Travelers, AIG Technical Services, and Empire Insurance Group where I held positions as claim representative, supervisor, manager, complex claim director, Liability Manager and Vice President. This hands-on experience provided me with invaluable insight into how claims are investigated, evaluated, reserved, and negotiated. During my time in claims I attended law school and obtained a degree and was admitted in New York.
For the last 19 years I worked in the legal department of AIG as Vice President, Supervising Attorney, and Associate General Counsel where I developed extensive bad faith expertise managing and directing extra–contractual litigation and providing advice to the claim department.
Q: What do you think you bring to bad faith litigation as an expert that distinguishes you – your unique value proposition, so to speak?
A: While I was overseeing bad faith litigation, I would often encounter experts who generally fell into two categories: 1. Attorneys who represented defendants or plaintiffs in personal injury actions and 2. Former claim personnel who handled and/or managed claims.
Relative to the attorneys, although they were generally very knowledgeable and typically had tried many personal injury cases, it was often true that they had never handled, supervised, or managed a claim in their careers. While working with and preparing reports for adjusters and in some instances, claim management provides them with some insight into the world of claims, it’s a far cry from having handled claims. These “claim adjacent” experts would frequently face motions to exclude and there was always at least some concern that an individual judge, on an individual case, would strike them pursuant to a challenge.
I would typically favor choosing experts from category 2 who could not be impeached for failing to work in the field where they are alleged to be an expert.
My value proposition is that I not only have extensive claim experience but have also worked in a position where I had to evaluate the conduct of claim handlers to determine if claims were handled reasonably and whether bad faith occurred.
I think an argument can be made that much like a jury in a bad faith case, I have in essence been sitting in judgment of how claims were handled. I can only hope that a jury hearing about this experience might give my opinion more consideration than the typical expert who merely handled claims.
Q: Why become a testifying or consulting expert in bad faith cases?
A: I still enjoy talking about claims and case strategy. In many ways it’s nothing new, just an extension of what I have been doing for the last 19+ years. After having worked for corporations most of my life, the freedom of working as much or a little as I want is extremely attractive.
Being able to decide which cases to get involved in and which cases to pass on is also refreshing.
Q: Can you give us a sense of how many jurisdictions you have handled bad faith matters in over the course of your career?
A: I have been involved in bad faith matters/issues in every jurisdiction in the United States except Alaska. I have also been involved with cases which were filed in Canada, London, and Hong Kong.
Q: Are any particularly difficult for insurers as opposed to others?
A: Although there have been some recent attempts to improve life for insurers, Missouri is still very problematic. Attempting to deny coverage, or even reserve rights is fraught with complications that generally don’t exist elsewhere. Doing either might well result in an insured entering into a consent judgment for an amount of damages many many times the actual value of the case in dispute.
As if the explicitly authorized consent judgments are not bad enough, their evil twin, the
“Laydown trial” is also bad news for insurers. When I first heard the phrase many years ago it seemed like an oxymoron. Isn’t a trial a place where issues are vigorously contested in the closest thing to a gladiator fight that exists in civilized society? If you are squeamish about the sight of blood, don’t worry, because no fatal blows are ever landed in a Laydown trial. In fact, the lawyer representing the insured frequently forgets to contest the plaintiff’s claims, cross-examine liability and damages witnesses, or introduce evidence. Like the consent judgment, this process ends with the insured being liable for an amount that can be millions of dollars in excess of the true value of the case and leave insurers with a factual record that impairs their ability to prevail on their coverage position.
It’s an extremely dangerous place where things can go catastrophically wrong in a hurry.
Q: What about for plaintiffs or insureds?
A: During my tenure with the bad faith group, we had relatively few filings in Connecticut, New York, and Alabama. You can always rely on policyholder counsel to sue you in the jurisdictions where the law is most favorable to their clients. Where they don’t sue you is almost as telling.
Hartford Connecticut was known as the insurance capital of the U.S. for many years and historically the concept that an insurer had to act with an “evil motive” was frequently referenced in bad faith decisions. While adjuster’s conduct is often alleged to be sloppy, lazy, or neglectful in bad faith litigation, evilness is a tougher sell. Although the tide seems to be shifting in the last several years, it’s not a bad place to be a defendant.
New York has a solid body of bad faith and punitive damages law that gives an insurer a fair shot in litigation. Almost as important as the body of law, is the willingness of the judiciary, (particularly the appellate courts), to undertake rigor in their application of the law to carrier conduct. New York jurists and appellate courts have generally been adept at undertaking that examination. The willingness to undertake the rigor can make all the difference in determining whether the conduct rises to the level required to find liability or impose punitive damages.
Lastly, Alabama has perhaps the most interesting extra-contractual cause of action I have come across in my career. This state recognizes the tort of “Outrage” relative to some types of claims.
Generally, to prevail, a plaintiff must be the victim of extreme and outrageous conduct. To support such a finding, it must be established that a defendant’s action was “…heinous and beyond the standards of civilized decency or utterly intolerable in a civilized society …” I remain hopeful that most of us can work our entire careers without running into a claim handling decision that could be described this way.
Q: How do you prefer to work as an expert? In other words, I have had experts who want to exhaustively review every piece of paper in a case, others who prefer to focus on the claim file believing that an insurer should be judged on the information it actually had when it made its decisions, and still others who want to focus on the testimony at trial, among other approaches. Obviously, the approach is controlled to some extent by the jurisdiction and the scope of the required report or disclosure. Do you have a preference in this regard and if so, why?
A: I generally fall into the more information – the better camp. While I agree the claim file is usually the most significant piece of evidence in a bad faith case, I don’t think there is any harm in seeing the entire picture and having a solid understanding about what other parties were claiming, writing, or doing outside of what was recorded in the claim file.
I have seen policyholder attorneys attack experts who “only” reviewed the claim file as biased. The charge being that they only consider the insurers’ narrative of the claim as documented in a file that they control. While there are answers to that charge, I think an insurer may in some instances be better served by an opinion that allows an expert to testify that the insurers conduct was reasonable under the totality of the circumstances presented.
Q: This question is a professional interest of mine, in particular. Over the course of decades, I have found that most insurance experts, and particularly experts on bad faith or other aspects of claims handling, tend to fall into one of two categories. They either were in the insurance industry for a handful of years and then hung out a shingle as an expert and consultant, and have focused on that role for most of their professional careers, or else they spent a 20 or 30 year career in the industry handling significant risks, before becoming an expert witness. I know that I find the former easier to cross at trial and that I probably have a bias towards presenting the latter type as my expert in a case. Any thoughts on this dichotomy? And which category would you put yourself in?
A: I agree with you. In general, my idea of an expert is someone who has a mastery of the subject matter acquired throughout a career of “doing” rather than talking about doing. My preference was to steer clear of people who are experts for a living if at all possible. I particularly don’t like when a witness’s resume reflects more years working as an expert than years in the industry. In bad faith litigation, policyholder lawyers are skilled at making even mundane activities look improper or suspicious. Whoever your witness is, his/her ability to explain why things were done or not done in the handling of the claim is sometimes the best indicator of a witness’ potential success or failure with a jury.
Q: How has the bad faith landscape changed in the last 19+ years and how have those changes impacted claim handling?
A: When I started in the bad faith group, an extra-contractual claim against a carrier was not a very common occurrence. Sure, there were cases based upon coverage denials where the parties were reading the same policy and coming to different conclusions. Those lawsuits usually did contain bad faith counts. However, it seemed that those counts were not frequently the focus of the litigation. There were less than a handful of firms across the country who held themselves out as “Bad Faith” lawyers. More often than not, the coverage or personal injury lawyer in the underlying case stayed on and muddled through the handling of the extra-contractual claim. Today, there are many firms specializing in bad faith. Additionally, the average plaintiff personal injury lawyer is more familiar with bad faith law (or at least able to cite those cases where carriers were found to be in bad faith.)
In today’s environment there is no hesitancy to sue a carrier alleging bad faith or even worse conduct. In addition, it can no longer be assumed that parties asserting these claims merely want to be made whole for their alleged losses. Policyholder firms have become more adept and aggressive in the pursuit of punitive claims. Carriers who don’t take those claims seriously, do so at their own risk.
In addition to increased and more aggressive litigation, another change that I have observed is the attempted injection of the concept of potential bad faith into the claim handling process. In some jurisdictions, I have seen adjusters bombarded with correspondence accusing them of bad faith conduct. The frequency and ferocity of some of these attempts are another obvious change that has occurred. To be clear, I am not referring to “time limit demand” letters which are letters that typically claim that failure to pay a demanded sum, by what is often an arbitrary date, “opens” the insured’s liability limit and subjects the carrier to extra-contractual damages. The proliferation of demand letters is a separate change of significance.
To be clear, not every firm that sends letters asserting bad faith is seeking to monetize the situation to increase the settlement amount in the negligence case. Not every policy limit demand that is sent is a pro forma one. Any such correspondence should be reviewed carefully and responded to thoroughly and promptly. I raise these instances as issues that an adjuster must address if they are handling claims in certain jurisdictions in 2025.
Years ago, an adjuster could focus almost exclusively on evaluating liability, damages and determining whether a personal injury case could be settled or not. Importantly, you could be relatively sure that the attorney on the other end of the phone was interested in doing the same thing. Today, the adjuster’s focus and knowledge must be much broader than a solid understanding of negligence principles. He/she must be able to recognize when potentially problematic situations are developing, in real time, and know how to respond to them.