The dangers insurance companies hide; insurers don't have to tell you when they know you're about to be killed.

• Author: Mintz, Morton

THE DANGERS INSURANCE COMPANIES HIDE

Imagine a manufacturer who discovers that one of his products has a defect that is causing grave injuries to unsuspecting consumers. If he promptly warns them, halts production, and recalls the product, he will be obeying a moral obligation deeply rooted in our religious and ethical heritage. The obligation is expressed this way in Leviticus 19:16 "Neither shalt thou stand idly by the blood of thy neighbor."

Now imagine a house bordering an alley. From a second-floor window, X sees Y lay a nearly invisible wire across the alley and then run away. Moments later, X sees Z--an unsuspecting stranger to whom he has no special tie--walking toward the wire. X's moral obligation to warn Z is also his duty under the laws of a dozen foreign countries. In the U.S. since 1973, 27 states and the District of Columbia have enacted some version of the so-called "Good Samaritan" statute.

In a final scenario, our manufacturer neither warns of the defect nor recalls the product. Figuratively, he lays a nearly invisible trip wire and flees. Watching him do it from the window, and then sitting in silence as consumers are ambushed, is the manufacturer's product-liability insurer. He is above it all. He sounds no warning. Unlike X, however, he claims that his conduct is morally right--even though, unlike X, he is not a "stranger" to Z since the insurer profits from the consumer, and even though, unlike X, he in essence enabled Y to lay the trip wire by underwriting the effort. His conduct, he points out, is required by the courts. They have ruled that an insurer has no affirmative duty to warn the public or to facilitate a recall of a product it insures. "Indeed, under the laws of, I think, ever state," Craig A. Berrington, general counsel of the American Insurance Association, told me, "The insurer has an absolute obligation to provide a defense for that policyholder against claims that arise, and the insurer can be sued when policyholders believe that insurers are not vigorous enough in providing that defense."

Lie-ability insurance

"My primary concern," Berrington said, is that no standard be established under which "insurers essentially become police officers or reporting officials--an arm of the government ... or that insurers do the work of government and be blamed when government fails in its responsibility to make judgments as to what products ought not to be on the market.... A legal duty to disclose with regard to a product that the insurance company has covered would be contrary to the insurer's statutory and contractual obligations today and place the insurer in a terrible bind."

Berrington has a point about the role of government, but through him the insurance industry makes an argument for preserving the confidentiality of a commercial relationship no matter the cost in human life. It's an argument that government, which has no higher mission than public safety, must not compel insurers to divulge information that would protect us from massive, continuing disease, injury, and death. It's an argument that would surely astound most Americans were they aware of it; but thorugh a quiet accretion of court rulings, and without congressional debate, this privileged position asserted by product-liability insurers has evolved into national policy. It's an argument that in essence is an excuse for the insurance industry to stand by the blood of its neighbors.

Meanwhile, the neighbors in the marketplace and the workplace have been shedding lots of blood. Consider the dreadful catastrophes caused by only two products: the Dalkon Shield, the defective intrauterine contraceptive device (IUD), and asbestos, the deadly material.

New Year's Eve irresolution

The Dalkon Shield was sold in the United States from January 1971 to June 1974, when the manufacturer, pressed by a worried Food and Drug Administration (FDA), ended domestic sales (but continued foreign sales until at least April 1975). During those three and one-half years, physicians implanted an estimated 2.2 million of the devices in the United States and 800,000 in some 100 other countries. For at least a decade after the sales halt, acording to recently available court documents, the liability insurer joined the manufacturer in suppressing knowledge of the IUD's hazardous defects. The foreseeable and preventable result was that tens if not hundreds of thousands of women suffered life-threatening pelvic infections, which commonly impaired or destroyed their ability to bear children. In addition, hundreds of children were born with injuries inflicted by the Dalkon Shield while it was their companion in the womb, causing blindness, cerebral palsy, and mental retardation. Eighteen deaths have been reported, but the toll is certainly much higher, if only becuase in Third World countries no one was counting.

The insurer was Aetna Casualty & Surety Company. ACS is wholly owned by Aetna Life & Casualty Company, one of the world's largest providers of insurance and financial services. In its corporate publications, Aetna acclaims itself a "good corporate citizen." Notably, it was an ACS senior claims adjuster who, on New Year's Eve of 1981, writing in the margin of a complaint filed by a Dalkon Shield victim, raised the rarely asked question: "What is duty of an insurer to the public when it has knowledge of serious product defects which are likely to cause injury?" [Italics added.] That William D. McGehee had asked the question did not become known for more than six years; whatever his answer, it isn't on the record. So I asked Aetna for an answer, and a spokesman assured me I'd get one. Several days later, Aetna backed out, giving an interesting reason: the information I was seeking concerned the industry as a whole, and therefore I should talk to Berrington, the insurance association counsel.

About 21 million U.S. workers have been exposed to asbestos, and several hundred thousand of them are expected to die of asbestos-induced cancer over the next quarter-century. In Outrageous Misconduct, Paul Brodeaur wrote: "By 1981, many of the nation's insurers had known for decades that asbestos workers were dying early, but had kept silent while their underwriters wrote policies for workmen's compensation and comprehensive general liability as fast as they could put pen to paper." Providing to a fare-thee-well that they had known the truth from their own "actuarial tables, ratings schedules, physicians' reports, workmen's compensation claims, underwriting guidelines, and safety-and-engineering manuals," Brodeur wrote: "If at some point along the way, Aetna, Travelers, Commercial Union, Liberty Mutual, INA, Hartford, Home, Lloyd's, or any of the other major insurers of the asbestos industry had gone public with their inside knowledge, they might well have been able to saves tens of thousands of lives and untold suffering and pain."

Why did insurers conceal their knowledge and continue to provide coverage? Disclosure, Brodeur explained, would "have encouraged claims and damage suits, and run counter to basic insurance-company practice, which is to write as much coverage as possible, and as cheaply as possible, in order to reap a rich harvest of premiums that, when invested, will return enough money to pay for future claims and make a profit for the company." As Ralph Nader put it in a 1987 article in the Suffolk Law Review, insurance companies "have become predominantly cash flow financial institutions.... More and more attention is being paid to increasing investment income through premium volume."

Such a casino philosophy too often has led to industry indifference to loss prevention and advocacy for health and safety, which, as some insurers often brag, are historical objectives of insurance. Thus Aetna's top officers piously stated in their 1989 annual report that "the best way to keep premiums down is to work with clients to prevent or minimize losses." Yet, while the...