Monday, October 31, 2011

How Bottom Feeders Work and Why We Always Get Jack

Everyone is making a big deal over the allegations of Sexual Harrassment against Herman Cain. The key to understanding this is to know how our litigation system works. Those who own businesses are charged by attorneys by the hour for their defense. Those who go up against businesses are either solicited or welcomed when they call an attorney who know they can make a buck off the case either way.

I know a guy and, although not a party to the suit, was assisting him with the defense of such suit. His company had Errors and Ommission insurance. A consumer went to an attorney to file bankruptcy to get out of an obligation. The attorney questioned her about my friend's company's approach. She, in broken English, claimed to the attorney that she was told if she didn't pay the debt that people would be breaking down her door and that a sheriff would come to her house. In rural counties, sheriffs are also police officers.

The attorney immediately phrased his questioning in such a way that she, again in broken English, answered that she had felt as if she was threatened. There is no voice recording of the conversation. Neither the defendant nor the defendant's attorney could name the agent they were alleging the violation against. It was strictly made up. At best, it was poorly documented and if it really did happen, slipped past a supervisor and six other people who may have been able to hear that conversation. In fact, the representative who was assigned to the account was not there on the date the complaint alleges, and there are no notes on the account that an incoming call was ever fielded on that date as well.

The defendant's attorney figured getting $500.00 to file a bankruptcy wasn't enough. He found a way to make an additional $3,000 on the case. That's not bad for for filing a claim on behalf of a false witness. In America's tort and legal system, being a dirt bag makes you money, but doing the right thing costs you too much, so you don't even bother.

The outcome: the company could have fought the case and won at the cost of about $100,000. Instead, it paid about $2,500, settled the debt and had its E&O insurance company pay the attorney who defended the company and recommended all of this strategy another $2,500. This sounds like a good deal, right?

About a week after the case was settled, the E&O insurance company dropped the company. Had the company exercised its right to defend itself and racked up over $100,000 in legal expenses, the E&O insurance company would have had to pay that. But because it would have cost the business another $2500 out of pocket to meet the deductible, they went with the original recommendation. Crony #1 sued on behalf of the lying bearer of false witness and crony #2 (the defendant's attorney) convinced the company to keep the costs down.

The moral of the story is that the attorney for the plaintiff made $3000. The attorney for the defendant made $2500. The E&O insurance company made off with three years of premium to the tune of about $7,500. The victim had their debt settled in the amount of about $2,500. The company that did nothing wrong, had their insurance dropped, and got a major blemish on Google (the case was dismissed and the settlement agreement stated that there was no wrong doing but its still on Google!). Now the company has to try to market itself with a Google blemish and will now be shopping around for another E&O carrier who will clearly raise their rates big time.

Who made out on this deal? Bottom feeding attorneys and a lying plaintiff. Who got screwed? The company that was trying to do the right thing. The next time, they should make the insurance company pay for every dime they can. Drag the case out. Bring the legal fees into the hundreds of thousands. I bet you only then will the insurance company feel good about pursuing a counter suit against the original bottom feeder. But they recommend against it so they don't have to take the risk. And they drop you any way.

Our system is severely dysfunctional. America as we know it is gone. Don't expect it to come back anytime soon.

Now you know why Herman Cain settled his case. Now you know why it came back to haunt him.

Why would anyone want to run for president or run a business in this day and age? Business decisions require the proper assessment of risk versus reward. There is no reward to attempting to be successful in business. Nor is there any reward in running for president. Everything today is all risk and no reward, unless you're a crony who gets paid no matter what the outcome is - even if both the defendant and the plaintiff get jack out of the deal.

The political parties and the permanent political class in Washington are the players in this game. We the people, regardless of party, are the ones who get jack. How's Jane Roe doing these days, anyone know?

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