It was quite a week for the insurance industry. First, New York's Eliot Spitzer had to step down as governor in the wake of a prostitution scandal, and then high-profile trial lawyer Richard "Dickie" Scruggs pled guilty to bribing a judge--and in a Hurricane Katrina lawsuit, no less!!! With the shortage of high-profile nemeses, the loss of these two powerful crusaders against insurer wrongdoing is a huge blow to industry reformers.
(To read all about the plea entered by Mr. Scruggs, click here.)
It is important to note that in the Scruggs case, the bribery took place in a legal battle among attorneys over $26.5 million in contingency fees from a Hurricane Katrina-related settlement with State Farm, not to influence a coverage decision.
Mr. Scruggs simply got greedy, preferring to assure his firm's piece of an already fat pie by paying off the judge. Shame on him, and it will serve him right to not only lose his law license, but to go to prison. He of all people should respect the integrity of the judicial system.
As the TV cop Tony Baretta used to lecture those he busted, "don't do the crime if you can't do the time."
It's always shocking to see those who seemingly have unlimited power and resources--folks like Spitzer and Scruggs--so irresponsibly abuse their positions for personal gain. In Spitzer's case, the misconduct was more of a personal act (unless it's shown he used public or campaign funds for his illegal trysts), but even so, his misbehavior was outrageous because he himself had prosecuted others for committing similar crimes.
Mr. Scruggs has no such excuses. He was able to get State Farm to cough up $80 million in a Katrina settlement for his clients. For that service, he and his fellow attorneys charged a 33 percent contingency.
That might seem like a pretty stiff fee, but considering that the attorney takes all the financial risk if a suit is unsuccessful, and given the fact that average plaintiffs would not have access to top-notch legal talent without such jackpots at the end of the litigation rainbow, and granting that there is no limit to what a corporate defendant can spend to deflect a claim, what else can you do?
Still, whatever he earned from the judge's ruling should have been satisfactory. And even if Mr. Scruggs felt himself wronged, he had no business trying to corrupt the judge on the case to make sure he got what he believed to be his fair share.
Hopefully, the quick resolution of this matter--which I hope will end with jail time being handed out to Mr. Scruggs--will serve as a warning against other trial attorneys to play within bounds or suffer the consequences.
But for insurers, the party had barely ended over Mr. Spitzer's shocking demise before news of the Scruggs plea hit the NU daily newswire on Friday. But as I said when Spitzer announced his resignation, just because he was guilty of misdeeds, does not mean those he went after in the industry were victimized. It only shows he was no more honest than many of those he sued for wrongdoing.
Both sides need to clean up their acts big time.
What do you folks think?
Comments (6)
Not to put too fine a point on this, but Mr. Scruggs could have learned a few things from State Farm here.
You don't pay off the judge directly! You contribute substantially to his campaign fund. So substantially, in fact, that should the judge be asked to recuse himself, he will refuse (Avery v. SF).
That's the way it's done on the farm!
Google:
Illinois Supreme Court Justice Lloyd A. Karmeier
or download this PDF
http://tinyurl.com/2m6tpr
Posted by Insured Consumer | March 18, 2008 8:43 AM
Posted on March 18, 2008 08:43
Ironically, according to the American Institute for CPCU, March is "Ethics Awareness Month"!
http://www.aicpcu.org/ethicsawareness.htm?src=eu_mar08_eam
Posted by Gail | March 18, 2008 9:24 AM
Posted on March 18, 2008 09:24
Sam, surely you jest! Calling Dickie Scruggs a "powerful crusader against insurer wrongdoing" is like calling Jack the Ripper a "crusader against prostitution."
Dickie was well paid for his "crusade." Apparently TOO WELL paid since it appears he has a lot of money to throw around...
Posted by James P. Reilly | March 18, 2008 12:29 PM
Posted on March 18, 2008 12:29
Sam, I think your terminology re Spitzer and "Dickie" Scruggs is waaay too kind ("crusaders...").
These guys and others of that ilk were egomaniacal shakedown artists, perverting the justice system to their own economic and/or political ends.
I don't think our industry is any worse off with these so-called "reformers" out of the picture. The damage they did far outweighs any "reforms" to which they may have contributed.
Posted by Tom | March 19, 2008 10:52 AM
Posted on March 19, 2008 10:52
I read your comment, "the loss of these two powerful crusaders against insurer wrongdoing is a huge blow to industry reformers," as being written with tongue firmly placed in your cheek. If I read you wrong, then you should be ashamed.
These are not crusaders, but bullies who used the courts to bludgeon insurers into paying claims and fines they did not owe under the terms of their contract.
They were only interested in their own profit and would do anything--immoral or illegal--to get what they wanted.
Dickie even tried to bribe--he calls it "earwig"--a judge to screw co-counsel out of their rightful share of the the fees earned. For one of the richest of lawyers to invest $40,000 to $50,000 to earwig a judge to get a larger portion of a fee earned by making it too expensive for an insurer to fight [is outrageous].
I'm disgusted by both of them, and will not shed a single tear that they are gone and have no concern that Dickie will spend some hard time in jail.
It is bad enough to bring frivolous lawsuits, but to bribe a judge to get a larger share of the fee is proof that there is no honor in some of my brothers at the bar.
I don't litigate any more--as I get older it is not worth the effort--but I still practice law as carefully and honorably as I can. My clients pay claims they owe and refuse to pay those they do not owe.
SAM RESPONDS:
While I certainly do not defend Scrugg's criminal behavior and conceded Spitzer didn't exactly play "fair," the fact is that Spitzer exposed some pretty outrageous misdeeds on the industry's behalf--big-rigging, wrongful account steering, abuse of the legitimate contingency fee system, brazen cheating of clients--that otherwise might have continued for who knows how long.
Whatever the brokerages and insurers paid to be rid of the stigma and put it behind them was a bargain, in my view.
As for Scruggs, the Katrina suits exposed the industry's fondness for sticking to the letter of a contract that is often impossible for the average person to understand. Certainly, the anti-concurrent causation clause falls into this category. Plenty of evidence was also exposed showing that adjusters were pressured to label the claims flood-related so they could be dumped on Uncle Sam.
Shameless behavior, no? Again, it goes to my central point--that no matter what Spitzer or Scruggs did that was obviously wrong and illegal, it doesn't mean they victimized the innocent insurance industry, or that those who paid the price in the business did not have it coming.
BARRY HAS THE LAST WORD:
Sam, I recognize your point of view--I don't agree.
Both Scruggs and Spitzer used threats of litigation or filed suits to bludgeon insurers into paying claims. The few Katrina cases Scruggs took to trial were less than successful. Most of Spitzer's cases were tried in public and none went to trial.
Extortion, under the color of law, is still extortion.
So let's agree to disagree.
Posted by Barry Zalma | March 19, 2008 12:19 PM
Posted on March 19, 2008 12:19
I agree that Spitzer used threats of litigation to scare many of our company partners into making changes in contingency contracts that had nothing to do with the "Marshgate" shenanigans.
The reputable, honest agents and brokers got smeared in the process. Shame on Spitzer!
Posted by John | March 19, 2008 3:28 PM
Posted on March 19, 2008 15:28