My legal insurance company denied a large claim. Now what?
November 30, 2009 10:24 AM Subscribe
I have "legal insurance" coverage through my employer - it works just like medical insurance but covers personal legal matters instead. I have been working with a lawyer on a probate with the understanding that the insurance company will cover the costs, but my claim was denied. Do I have any recourse with either insurance company or the lawyer I have been working with?
(To be totally clear, the above insurance plan is for personal legal matters. It has nothing to do with my line of work or employer.)
To expand on the story a bit: since my mother has passed away I am involved in a probate - a fairly simple one by all accounts (she did not leave a will, but there are no creditors, the list of survivors is clear, and we are all agreed on how her assets are to be divided). My family asked me to be the point person for representing the entire estate. When it came time to look for a lawyer to do the legal filing, I picked one out of the directory provided by the insurance company, and went to have a meeting with them. During that meeting, it was stated unambiguously that probate matters would be covered by my insurance. In fact, they gave me a quote in writing which split the parts that insurance would cover vs. costs that I am responsible for (basically the lawyer billable hours are covered, and I am responsible for court filing fees and such). They told me that they contacted the insurance company to verify that this is the case.
Fast forward a few months, the case is rolling along without any issues, and suddently I get a bill to the tune of $2K. It turns out that the insurance company does not cover this case. Verbatim from the email:
When I emailed to confirm your coverage, in June of 2009, they indicated that they do cover probates and that you were covered; however, it is now being made clear to me that they only cover probates for the insurance holder and his or her immediate family (spouse and dependant children).
So what they are telling me that I am out of luck because they did not do enough due diligence, and now I have to pay all costs accumulated. The probate is still ongoing, though at this point it's getting close to done.
I understand that it seems like an honest mistake was made here, and that legal work has been done on my behalf, and the person who did it deserves to be paid. On the other hand, I feel taken advantage of, as I - believing that all costs were covered - did not do any price shopping, and may have taken a different path (working with a paralegal to do all form filing myself) had I known in advance that this was going to be the case. Present legal bill will not exactly send me to bancruptcy, but it is certainly a big unhappy dent in my savings. What I am primarily curious about is whether I have any legal standing for working with my law firm to reduce their fee gives the circumstances. All thoughts are appreciated. Thanks!
(To be totally clear, the above insurance plan is for personal legal matters. It has nothing to do with my line of work or employer.)
To expand on the story a bit: since my mother has passed away I am involved in a probate - a fairly simple one by all accounts (she did not leave a will, but there are no creditors, the list of survivors is clear, and we are all agreed on how her assets are to be divided). My family asked me to be the point person for representing the entire estate. When it came time to look for a lawyer to do the legal filing, I picked one out of the directory provided by the insurance company, and went to have a meeting with them. During that meeting, it was stated unambiguously that probate matters would be covered by my insurance. In fact, they gave me a quote in writing which split the parts that insurance would cover vs. costs that I am responsible for (basically the lawyer billable hours are covered, and I am responsible for court filing fees and such). They told me that they contacted the insurance company to verify that this is the case.
Fast forward a few months, the case is rolling along without any issues, and suddently I get a bill to the tune of $2K. It turns out that the insurance company does not cover this case. Verbatim from the email:
When I emailed
So what they are telling me that I am out of luck because they did not do enough due diligence, and now I have to pay all costs accumulated. The probate is still ongoing, though at this point it's getting close to done.
I understand that it seems like an honest mistake was made here, and that legal work has been done on my behalf, and the person who did it deserves to be paid. On the other hand, I feel taken advantage of, as I - believing that all costs were covered - did not do any price shopping, and may have taken a different path (working with a paralegal to do all form filing myself) had I known in advance that this was going to be the case. Present legal bill will not exactly send me to bancruptcy, but it is certainly a big unhappy dent in my savings. What I am primarily curious about is whether I have any legal standing for working with my law firm to reduce their fee gives the circumstances. All thoughts are appreciated. Thanks!
This sounds like a mistake on the lawyer's part. I don't know what you're possible recourse is here, but I'd make it clear to the lawyer that it's their screwup.
posted by rhizome at 10:42 AM on November 30, 2009
posted by rhizome at 10:42 AM on November 30, 2009
Not only did the lawyer make the mistake, but it's exactly the kind of mistake that lawyers are supposed to be good at avoiding. I don't know what your legal standing would be here, but it's very embarrassing at least for the law firm.
posted by amtho at 10:47 AM on November 30, 2009
posted by amtho at 10:47 AM on November 30, 2009
I'm not an attorney, but it seems to me that you have at least a couple of options (aside from the obvious one of paying up).
First, you could work with the estate lawyer on the fees; if he or she needs the work or is sympathetic you may have some leverage there. Anything more depends on the fee arrangement with the attorney, which should be in writing. I would be surprised if the contract actually let you off the hook for the fees, but it's possible. You would want to hire another lawyer to review the contract and probably also to negotiate or sue on your behalf; trying to stick the first attorney with $2k worth of unpaid work is unlikely to go smoothly.
Another option is to hire a lawyer to negotiate with / sue the insurance company. Find an attorney that is willing to review the case for free before moving forward. Most attorneys offer a free consultation, so you should be able to find out if you've got a solid case or would just be throwing good money after bad.
And yeah, usually you pay the probate costs out of the estate. The pain should be spread between you and the other heirs, not lumped onto you alone.
posted by jedicus at 10:50 AM on November 30, 2009
First, you could work with the estate lawyer on the fees; if he or she needs the work or is sympathetic you may have some leverage there. Anything more depends on the fee arrangement with the attorney, which should be in writing. I would be surprised if the contract actually let you off the hook for the fees, but it's possible. You would want to hire another lawyer to review the contract and probably also to negotiate or sue on your behalf; trying to stick the first attorney with $2k worth of unpaid work is unlikely to go smoothly.
Another option is to hire a lawyer to negotiate with / sue the insurance company. Find an attorney that is willing to review the case for free before moving forward. Most attorneys offer a free consultation, so you should be able to find out if you've got a solid case or would just be throwing good money after bad.
And yeah, usually you pay the probate costs out of the estate. The pain should be spread between you and the other heirs, not lumped onto you alone.
posted by jedicus at 10:50 AM on November 30, 2009
Usually errors in filing etc that cost you more are payable by the professional who screwed up. If your letter actually says that they confirmed with the insurance company, then you're probably able to win. I'd ask another lawyer for a free consultation, then see what your options are. From these details, you should be able to get the fees reduced, if not waived entirely.
As many people have noted, you personally are not responsible for paying the fees, they come out of the estate before it is divided up.
posted by jeather at 11:10 AM on November 30, 2009
As many people have noted, you personally are not responsible for paying the fees, they come out of the estate before it is divided up.
posted by jeather at 11:10 AM on November 30, 2009
i'm kind of surprised that the lawyer made that kind of mistake. i think the insurance was intended to cover your probate, not your mother's. as your mother's probate includes people who aren't covered under your insurance, using the insurance to cover their costs would be unfairly taking advantage of the benefit.
you might be able to get a percentage of charges approved if submitted just as your portion of the expense.
posted by lester's sock puppet at 11:15 AM on November 30, 2009
you might be able to get a percentage of charges approved if submitted just as your portion of the expense.
posted by lester's sock puppet at 11:15 AM on November 30, 2009
Response by poster: Thanks for all the answers! A couple of clarifications below:
1. The "estate" consists of basically no money and one mostly paid-off house. So sure there is money in there, but it's unrealized money until the house is sold.
2. There are just two heirs - myself and my sister. My sister is not in a position to pay for much of anything at this point, so I am (voluntarily) putting myself on the hook for all probate expense.
3. I really, really don't want to deal with starting a lawsuit against a law company, because I suspect that they have a lot more resources and patience to deal with this than I do. The amount of money involved here is just not enough to justify what seems like a dicy proposition, regardless of how in the right I might be. Still, if we were talking about a larger amount - say, $20k - I would definitely be consulting with another lawyer. But at $2k, I would be happy settling with the company at half the fee and moving on. I just want to figure out what leverage I have to negotiate, without actually initiating a lawsuit.
posted by blindcarboncopy at 11:21 AM on November 30, 2009
1. The "estate" consists of basically no money and one mostly paid-off house. So sure there is money in there, but it's unrealized money until the house is sold.
2. There are just two heirs - myself and my sister. My sister is not in a position to pay for much of anything at this point, so I am (voluntarily) putting myself on the hook for all probate expense.
3. I really, really don't want to deal with starting a lawsuit against a law company, because I suspect that they have a lot more resources and patience to deal with this than I do. The amount of money involved here is just not enough to justify what seems like a dicy proposition, regardless of how in the right I might be. Still, if we were talking about a larger amount - say, $20k - I would definitely be consulting with another lawyer. But at $2k, I would be happy settling with the company at half the fee and moving on. I just want to figure out what leverage I have to negotiate, without actually initiating a lawsuit.
posted by blindcarboncopy at 11:21 AM on November 30, 2009
The bill will be paid out of the estate. You don't need to pay this personally.
I'd recommend that you have your attorney forward you the email he received. It turns out that if insurance companies aren't careful, they can bind coverage without meaning to. If they previously said that you'd be covered and then changed their mind, you might be able to take them to small claims court.
I don't think you have any recourse against the attorney, as it's your responsibility to know what your coverage is. Pay the bill out of the estate and then hash it out with your insurer.
posted by valkyryn at 11:24 AM on November 30, 2009
I'd recommend that you have your attorney forward you the email he received. It turns out that if insurance companies aren't careful, they can bind coverage without meaning to. If they previously said that you'd be covered and then changed their mind, you might be able to take them to small claims court.
I don't think you have any recourse against the attorney, as it's your responsibility to know what your coverage is. Pay the bill out of the estate and then hash it out with your insurer.
posted by valkyryn at 11:24 AM on November 30, 2009
Just saw your additional info. This law firm presumably does a lot of probate, if they're in the yellow pages. They know how estates are wound down and don't necessarily need their money right now.
Don't assume this expense. It's the estate's, not yours. The law firm can afford to wait until the probate process is finished before they get paid.
Don't sue the law firm either. They performed legal services, and they have a right to get paid. If a mistake was made, it was the insurance company's. Get those records and see if you can go after them. If you can show documentation which indicates that there would be coverage, this is a small enough issue that threatening to raise a stink will likely get you what you want. It'd cost them more than $2k to defend against your small claims suit, which would cost you about $100.
posted by valkyryn at 11:28 AM on November 30, 2009
Don't assume this expense. It's the estate's, not yours. The law firm can afford to wait until the probate process is finished before they get paid.
Don't sue the law firm either. They performed legal services, and they have a right to get paid. If a mistake was made, it was the insurance company's. Get those records and see if you can go after them. If you can show documentation which indicates that there would be coverage, this is a small enough issue that threatening to raise a stink will likely get you what you want. It'd cost them more than $2k to defend against your small claims suit, which would cost you about $100.
posted by valkyryn at 11:28 AM on November 30, 2009
I don't think you have any recourse against the attorney, as it's your responsibility to know what your coverage is.
That's hard to know. Consider the case of a fee arrangement that says "Attorney's fees are solely the responsibility of the insurer. The client will pay only court costs and filing fees." That would be a pretty poorly drafted fee arrangement, but it would be strictly construed against the drafter and probably end in the client's favor. So one can imagine cases where the asker might have a case against the attorney. We can't say either way, of course, since we don't know the details.
There are other possibilities. For example: this attorney came from the insurer's directory. Had he or she encountered this situation before? If so, why didn't he or she inform the client. Did he or she not read the insurance policy (for example, to know if there was a cap on attorney's fees)? If not, why not? If so, why didn't he or she realize that the policy would not cover the client?
posted by jedicus at 11:36 AM on November 30, 2009
That's hard to know. Consider the case of a fee arrangement that says "Attorney's fees are solely the responsibility of the insurer. The client will pay only court costs and filing fees." That would be a pretty poorly drafted fee arrangement, but it would be strictly construed against the drafter and probably end in the client's favor. So one can imagine cases where the asker might have a case against the attorney. We can't say either way, of course, since we don't know the details.
There are other possibilities. For example: this attorney came from the insurer's directory. Had he or she encountered this situation before? If so, why didn't he or she inform the client. Did he or she not read the insurance policy (for example, to know if there was a cap on attorney's fees)? If not, why not? If so, why didn't he or she realize that the policy would not cover the client?
posted by jedicus at 11:36 AM on November 30, 2009
I'd be interested to know exactly what the attorney asked the insurer. Did the attorney just ask "Does the policy cover probate expenses?" or "Will the policy cover the probate expenses for the policyholder's mother's estate?"
My guess is that the attorney was sloppy and, at the very least, should be embarrassed enough to give you a very generous amount of time to pay for their services. I might also be a little concerned about the quality of their probate work and tempted to report the mess to the board of professional responsibility.
posted by Carbolic at 11:43 AM on November 30, 2009
My guess is that the attorney was sloppy and, at the very least, should be embarrassed enough to give you a very generous amount of time to pay for their services. I might also be a little concerned about the quality of their probate work and tempted to report the mess to the board of professional responsibility.
posted by Carbolic at 11:43 AM on November 30, 2009
Everyone's advice to not worry about the probate bill because it'll come out of the estate may be correct, but not particularly helpful here: as one of only two beneficiaries of the estate, blindcarboncopy stands to lose over $1,000 if the bill is "paid for by the estate" (the other half being paid for out of his or her sister's share, of course). It's not like the lack of insurance coverage doesn't have a financial impact on him or her, accordingly. This is aside from the previously stated issue that the estate's only real asset is a house that's not yet sold.
I would suggest trying your best to negotiate with the insurance company directly. If it has only been your estate lawyer so far who has spoken with them, there is probably very little pressure on the insurer since the lawyer has no stake in the matter. If you contact them directly you're more likely to be able to work something out.
You should also speak with your lawyer about negotiating the bill. $2,000 or more for a simple probate sounds reasonable, but if they know that you are facing this expense unexpectedly and through no fault of your own, they should be willing to discuss a reduction. Aside from disbursements, the fees charged on any given file are usually very, very flexible, and it may be well worth their while to help you out if it saves them embarassment and even the whiff of a possibility of a negligence suit.
posted by Pomo at 6:26 PM on November 30, 2009
I would suggest trying your best to negotiate with the insurance company directly. If it has only been your estate lawyer so far who has spoken with them, there is probably very little pressure on the insurer since the lawyer has no stake in the matter. If you contact them directly you're more likely to be able to work something out.
You should also speak with your lawyer about negotiating the bill. $2,000 or more for a simple probate sounds reasonable, but if they know that you are facing this expense unexpectedly and through no fault of your own, they should be willing to discuss a reduction. Aside from disbursements, the fees charged on any given file are usually very, very flexible, and it may be well worth their while to help you out if it saves them embarassment and even the whiff of a possibility of a negligence suit.
posted by Pomo at 6:26 PM on November 30, 2009
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posted by dfriedman at 10:36 AM on November 30, 2009