Liberty Bonus Program Cost More Than Anticipated
By Robert Warne - January 26, 2004 Adjuster bonuses based on reducing payouts from year to year put Liberty Mutual in a $12 million punitive pinch last week.
Alice Torres, a cook at a nursing home in Rapid City, SD, had her $8,000 workers' compensation claim for carpal tunnel syndrome denied in 1999.
The denial was based on a lack of proof that her hand problems were caused by her work, alleged inconsistencies in her story and the possibility that her hand problems were a pre-existing condition from an injury she received at home a year earlier.
Then in 2001 she filed suit in U.S. District Court in Rapid City accusing the company of bad-faith dealing, barratry, abuse of process, and interference with business and contract relations.
Her case focused on a Travelers bonus structure called the “Claim Professional Incentive Program,” according to the Associated Press.
Reportedly adjusters were eligible for year-end bonuses up to 20 percent of their pay if they reduced overall payouts from one year to the next.
Her attorney, Michael Abourezk, argued that, "An insurance adjuster is supposed to be like a judge, fair and impartial. ... If you bribe a judge, you get thrown in jail. But they bribe these claims adjusters with bounties that are tied directly to their performance in paying claims," the AP reported.
Although the jury at the end of the four day trial awarded Torres $60,000 in compensatory damages and $12 million in punitive damages, the award must still be reviewed by a federal judge and Liberty has far from exhausted its legal options.
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