Effective enforcement by state regulators for individual policyholders runs from spotty to nonexistent. Insurers also maintain that if the insurance coverage litigation enhances the claims against the policyholder and the insurer loses the insurance coverage case, it may have to make greater indemnity payments. Finally, insurers claim that they may get hit with a bad faith or punitive damage verdict. For at least some insurers, an occasional bad faith judgment may simply be a cost of doing business. In fact, insurance companies do not even regularly purchase errors and omissions insurance coverage to protect against the occasional bad faith verdict, believing instead that this risk is manageable.
Policyholders expect to be taken care of.
When their protector becomes their betrayer and persecutor, policyholders are appalled. Insurance companies add insult to injury by contending that the financial pain they are inflicting on a policyholder is either for the policyholder's own good or for the greater good of all policyholders. For example, a group of nationwide insurers told a Wisconsin appellate court in Fortier vs. Insurance smoothes the rough edges of a humane industrial democracy by providing a source of compensation for the injured and ameliorating catastrophes. Insurance through loss control services and financial incentives decreases the incidence of accidents and other undesirable happenings.