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The law on unintended consequences and insurance

Insurance contracts can be simple or extremely complex, depending on the risks the insurer takes. Regardless of insurance, it is neither more nor less than a contract whose terms are agreed by the parties to the agreement.

Over the last few centuries, almost all words and phrases used in insurance contracts have been interpreted and applied by a court or other. Ambiguity in contract language was known. But the average person saw the insurance contract as incomprehensible and impossible to understand.

Courts, struggling to understand the insurance policy added to the interests of the legislators and, as stated in the Insurance Company of North America against the Electronic Purification Company 67 Cal. 2d 679, 689, 63 Cal. Rptr. 382, 433 (1


The insurance company provided insured coverage in relatively simple language that easily understood by the common man in the market, but attempted to remove some of the same coverage in paragraphs and languages ​​that even a lawyer, if he Being from Philadelphia or Bungy, it would be hard to understand. [Hays v. Pacific Indemnity Group,8 Cal. App. 3d. 158, 80 Cal. Rptr. 815 (1970).]

To protect the public to protect the public for lawyers such as the one cited above, insurance regulators and lawmakers decided to require insurers to write their policies in "easy-to-read" languages. Because they were obliged to do so by law, the insurance companies changed the words in their contracts in languages ​​that people with a fourth education could understand. Exact language interpreted by hundreds of years of court order was made and replaced with inaccurate and easy-to-read language. [For examples of the “easy to read” or “plain English statutes” go to Appendix 1.]

The "easy-to-read statutes" made to help the public understand insurance and avoid litigation, became victims of law with unintended consequences. Instead of protecting the consumer, the unfair language resulted in thousands of trials determined to impose penalties on insurers to try to establish ambiguous "easy-to-read" languages.

The trials cost insurers and their insurance millions of dollars to get courts that interpret the language and reformulate their "easy-to-read" policies to comply with court decisions. For more than 50 years, the inadvertent consequence of a law designed to avoid litigation has been the exact opposite.

Attempts by investigators and courts to control insurers and protect consumers were made with the best intentions. Judges and regulators found it necessary to protect the innocent against what they perceived as the rich and powerful insurer. Unfortunately, the simple English statutes had the opposite effect.

Of course, the fact that easy-to-read policies lead to more problems than they cure, has had no effect on regulators and legislators, laws and regulations have not changed. [19659010] Bad Faith Causes Bad Behavior

In the 1950s, the Supreme Court of California created a new injury to US jurisprudence: The Torture of Evil Faith

An injured party is a bourgeois error from which a person can receive damages from another for several injuries. The torture of evil faith was created because an insurer failed to treat an insured fairly, and the court considered that the traditional contract damages were insufficient to properly replace the insured. The court allowed the insured to receive, in addition to the contractual damage which the insured was entitled to under the contract, the insurer treated the insured fairly, damages for emotional distress and punishment in order to punish the insurer for his illegal actions. [19659002] Insured, attorneys, regulators, and US-wide lawyers estimated the Supreme Court of California to provide a fair remedy for abused insureds. Most states adopted the victim created by the Supreme Court of California. Some assumed statutes that allowed litigation on evil crimes. Many did so, as in California, through legal fiat.

After the damages had been created, if an insurer and the insured did not agree on the application of the policy to the actual situation, the damage was no longer limited to contract damage as in other commercial relationships. If the court found that the insurer was wrong, it may be necessary to pay the amount of the contract and the damage for emotional distress, pain, suffering, penalties, attorneys' fees and any other damage that the insured and the court might imagine to discourage other insurance companies from treating their insured badly.

The courts and lawmakers assumed difficult torture hopes that the damages would have a healthy effect on the insurance industry and force insurance companies to treat their insured fairly. But even after claims of $ 40 incorrectly denied resulted in $ 5 million in judgments, the intended purpose of erroneous cases and statutes was skewed. Juries, unaware of the cause and operation of insurance, decided that insurers who did not pay claims were bad and that they signed contracts so that they never had to pay claims. The judges were convinced that it would be appropriate to punish the insurance companies seriously, even if the insurer's conduct was correct and correct under the terms of the contract as no insurance can cover all possible events.

The massive judgments were published and many insurance companies decided to fight their insured in court was too expensive no matter how accurate their position was on the contract. They thought it was cheaper to pay than to fight just like business owners threatened by the mafia, decided it was better to pay protection to mob instead of fighting.

Most of the massive judgments were reversed or reduced upon appeal. The bad actors raised their prizes and lost small businesses. Other insurers, who were met by the massive judges, allowed fear to control the cause and paid claims that were inappropriate or fraudulent.

The extra cost was transferred to all insurance consumers. Insurers who acted wrongly were penalized less than bad insurers who were threatened with criminal injuries. Indeed, the insurance companies who treated their insured poorly received benefits because they continued their erroneous actions and were only obliged to pay the few insureds who sued. Those policyholders who did not match the misguided profit margins.

Beloved insurers, afraid of being painted with bad faith brush, paid fraud and claims they did not owe. As a result, the insurers who paid claims that they did not owe found, they needed to raise the premiums to cover the additional cost. The increased contribution paid by the insured to cover the extra cost was a clear example of the effect of the law on accidental consequences. The insurers and their insured who paid instead of fighting fears of judgments of criminal injuries, lost business and profits, as they could not assure themselves of the cost of paying the policyholders and lawyers claiming the damage of bad faith

. unintended consequences hit the insurance industry and the insurance to buy the public. Instead of discouraging erroneous action, the law of unintended consequences in penalizing the honest and right insurance companies, honored the insurance companies who acted in bad faith with profit and allowed many fraud to succeed.


According to the CDC, between 2000 and 2017, the number of overdose deaths in the opioid in the United States has disappeared over 700,000 people from an overdose of drugs. On average, 130 Americans die every day from an opioid overdose.

From 1999-2017, nearly 400,000 people died of an overdose involving opioids, including prescription and illegal opioids.

This increase in the death of opioid overdose can be described in three distinct waves.

  1. The first wave began with increased prescription of opioids in the 1990s, with overdose deaths with prescription opioids (natural and semi-synthetic opioids and methadone) which increased since at least 1999.
  2. The second wave began in 2010, with rapid increases in deaths associated with heroin overdose.
  3. The third wave began in 2013, with significant increases in overdose deaths with synthetic opioids – particularly those involving illegally produced fentanyl (IMF). The IMF market continues to change, and the IMF can be found in combination with heroin, counterfeit pills and cocaine.

The road to the current epidemic began to be asphalted with good intentions in the late 1990s when, shortly after the approval of the FDA, the American pain society's controlled release of oxycodone introduced the term "pain as the fifth vital sign."

In 1999, the Veterans Ministry included the statement, as well as other organizations. The Common Commission Standards for Pain Relief 2001 stated that "pain is assessed in all patients" (all released in 2009) and contained a referring reference to pain as the fifth vital sign.

In 2012, CMS added to its ED performance core actions in timely pain management for long bone fractures, emphasis on parenteral medications. The government was saving people from pain, which required prescriptions for opioids that resulted in several addictions.

In 2010, the problems arose by emphasizing effective pain management revealed and measures being introduced to limit the prescription and availability of pharmaceutical opioids. The restrictions sent many patients to ED who sought painkillers. Others sought replacements on the street and finally ended up in ED as overdoses from very powerful synthetics. Many EPs began to limit opioid prescriptions to 3 days for acute painful conditions, but not all patients could receive follow-up missions with PCP within this time period.

In April 2016, the Joint Commission issued a statement that it was not responsible for "pain as the fifth vital sign" or to suggest that pain should be treated with opioids.

In June 2016, the AMA urged the release of "pain as the fifth vital sign" and in 2014, CMS modified its core action emphasis on parenteral medication in early treatment of long leg fractures. But the damage has been done, which means that many people need help in managing their pain and others who suffer from the consequences of opioid dependence.

As a result, the public health programs started paying for opioids without any real controls or restrictions on doctors who prescribed them and patients became dependent on them.

In the hope of reducing opioid use, abuse and overdoses, politicians have focused on developing and promoting manipulation-resistant or addictive deterrent formulations (ADFs) that render diverted opioids unusable if individuals attempt to use them for non-medical (ie recreational) purposes.

Although the benefits of the ADF appear to be non-existent, these formulations have resulted in real damage. The ADF has encouraged users to switch to more dangerous opioids, including illegal heroin. In at least one instance, the reformulation of prescription opioid led to an outbreak of human immunodeficiency virus (HIV).

At the same time, ADF unnecessarily increases drug prices, which means unnecessary costs for health insurance buyers, taxpayers, and especially patients suffering from chronic pain. Like the federal government's promotion of addictive deterrent alcohol a century ago, these efforts produce unintended consequences, for example, making legal pain relief impossible for many patients and possibly increasing morbidity and mortality.

In the 1990s, for example, some states have required consumers to buy cover for an experimental, expensive and highly toxic breast cancer treatment called high-dose chemotherapy with autologous bone marrow transplantation. The treatment involves harvesting the patient's bone marrow, administering substantially lethal doses of chemotherapy, and then re-fusing the patient's bone marrow to restarting his immune system. The treatment did not appear to be more effective than standard chemotherapy, which means that it is exposed to breast cancer patients to a greater extent without any clinical benefit. Under pressure from patient support groups, states, including Massachusetts and Minnesota, still required insurers to cover the procedure.

The evidence shows that ADF opioids are an inefficient and detrimental approach to reducing opioid doses. The government at all levels should stop marketing them. Congress should stop or limit drug manufacturers' ability to impose higher costs on pain patients by using ADF files for the evergreen patients for their opioids. The FDA should end its policy of encouraging ADF opioids, especially its goal of eliminating non-ADF opioids. Ideally, the agency should adopt a skepticism position.

That should at least be neutral on the issue. Legislators should abandon efforts to require consumers to purchase coverage for more cost-effective ADF opioids and, instead, allow insurers to direct medical users of these products to cheaper, non-ADF generic formulations.

The recipe for opioids has become a temptation for doctors as

This post was adapted from my newest book, he T he law of accidental consequences and torture of bad faith. 19659002] The concept of unintended consequences is one of the building blocks of the economy. Adam Smith's "invisible hand," the most well-known metaphor of social science, is an example of a positive unintentional consequence.

However, the law of unintended consequences often sheds light on the perverted unforeseen effects of legislation and regulation. In 1692, the English philosopher John Locke, a pioneer of modern economists, called for a defeat of a parliamentary bill aimed at lowering the maximum rate from 6 percent to 4 percent. Insurance is controlled by the courts, through appeal decisions, and by state authorities, by statute and regulation. Compliance with appeal decisions, statutes and regulations – different in different states – is extremely difficult and expensive.

Unfortunately, the insurance business is subject to the law of accidental consequences as if it were on steroids. [19659002] Available as a paperback

Available as a Kindle book

© 2019 – Barry Zalma

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