You Should Know: Beware the Insurance Company Three D’s

When you buy insurance, you’re buying security. In exchange for your hard-earned dollars, you trust the insurance company to be there when disaster strikes, to shoulder a potentially devastating financial burden. But too many insurance companies care more about profits than policyholders. They employ shady tactics to keep from paying legitimate claims, a practice we call The Three D’s.

If you’ve ever had to file an insurance claim, you know the frustration that seems baked right into the maze of endless forms and confusing small print. Companies that once lived up to their promise to “be on your side” when disaster strikes dramatically shifted business practices in the 1990s to meet Wall Street demands for short-term profits. The result is chronicled in the book Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It by distinguished Rutgers law professor Jay Feinman. Not surprisingly, insurance companies are recording astronomical profits. Here’s how it works:

Trick #1: Deny, Deny, Deny Claims

Insurance companies will outright deny that an accident occurred or that the policyholder was seriously injured. Some companies even offer gifts and bonuses to employees who deny claims and keep payments to a minimum. Arbitrary rules will crop up, often referencing provisions that do not exist or that contradict a previous statement. The hope is that denial after denial will defeat and deflate claimants, making them feel they have no choice but to throw in the towel.

Trick #2: Delay Paying as Long as Possible...
Even Until Death

Endless forms, arbitrary rules and a sea of fine print discourage claims.

You’ve jumped through all the hoops and the insurance company has agreed to pay the claim, so you can rest easy, right? Think again. Delaying payment is another common tactic to boost profits. Insurance companies have been known to send out incorrect forms and then blame claimants for the error, or set very short time limits on when a claim can be made after an accident, injury or illness. In cases involving elderly or gravely ill claimants, some insurance companies have even delayed payments in hopes that the customer dies before they have to pay.

Trick #3: Defend in Court

Following a denied claim or a delayed payment, insurance companies know they can further delay writing a check by defending their questionable tactics in court. Billions of dollars in profits and thousands of high-priced lawyers on the payroll means they are always ready for a trial. Insurance companies know that many of their customers may be afraid or unwilling to hire a lawyer, and they use that fear to convince claimants that a court battle would only end in an insurance company victory.

Getting Paid What You Deserve

Forcing a claimant to sue for benefits owed is one way insurance companies fail their customers.

What can a David do against these insurance company Goliaths? Here are some tips on what to do before, during and after making a claim to an insurance company:

• Pick a reputable company: It pays to do a little homework before you sign on the dotted line. Start with this list of best/worst insurers ranked on claim denials and bad-faith practices.
• Read your policy carefully: You should know exactly what is covered and what you need for an appeal in case your claim is denied.
• Double- and triple- check forms: An incorrectly filled-out form can be used by an insurance company to deny or delay claims. Past forms can even be used as a way to retroactively deny coverage. Be thorough and honest on every piece of paper you fill out.
• Do not cash the check right away: Insurance companies will send checks with very low offers, or pay premium refunds if they rescind your coverage. Cashing these checks can be legally interpreted as accepting their offers.
• Get everything in writing: If you need to fight your insurance company, you must be able to produce every bill, form and piece of correspondence.
• Reach out for help: An experienced plaintiff’s lawyer can guide you through your claims process and provide the firepower necessary to challenge the insurance company in court if necessary.

This article appeared in our July 2017 "You Should Know" e-newsletter.

Join us in congratulating Malvern King!

(l-r) Christy Malott (former President of the 14th Judicial Bar Association), Guy W. Crabtree (current President) and Malvern F. King, Jr.
photo courtesy of Bob Friedman, Publisher, NC Triangle Attorney at Law Magazine

Malvern F. King, Jr. was honored for 50 years as an attorney at the recent annual meeting of the 14th Judicial District Bar and Durham County Bar Association.  

Malvern King concentrates in the areas of corporate law, commercial transactions and estate planning and administration. Many of his clients have developed close business relationships with Mal, working with him over the years as their businesses prospered and their legal needs evolved. With his broad understanding of commercial law, he’s known as one of the preeminent business attorneys in Durham and surrounding counties. In 2007, he was inducted into the North Carolina Bar Association General Practice Hall of Fame, one of the highest honors in the profession.

Mal received his undergraduate and law degrees from the University of North Carolina at Chapel Hill. After graduation from law school, he served on active duty with the U.S. Naval Security Group and retired as a Captain in the U.S. Naval Reserve Judge Advocate Generals Corp. Mal was a founding partner at Pulley, Watson, King & Lischer, P.A. for over 30 years before joining Crabtree, Carpenter & Connolly, PLLC when the firm began in 2015.

You Should Know: Watchful Parents Can Prevent Playground Injuries

School’s out for summer, and kids are bursting to get outside and hit area playgrounds. No surprise then that June is a particularly dangerous month for playground injuries. Before you let those kiddos loose, learn how adults are the key to playground safety with tips on equipment, clothing and safe behavior.

Adult Supervision Is the Number One Way to Prevent Playground Injuries

Seventy-five percent of playground injuries take place on public playgrounds.

According to the Centers for Disease Control (CDC), at least 200,000 children age 14 or younger are treated in emergency rooms each year for playground-related injuries. More than 10 percent of these are traumatic brain injuries (TBIs), and the rate of TBIs is rising.

Because public playgrounds are numerous and easily accessible, most kids spend their time on these rather than private playgrounds. Thus, the largest percentage of playground injuries take place on public facilities. Monkey bars and climbing equipment are responsible for the highest number of injuries.

But despite the risks, we know kids love playgrounds and benefit from the exercise and social interaction. The good news: Adults can play a key role in keeping kids safe on their favorite playgrounds with these tips and resources:

Keep Your Kids Safe With These Tips

• Areas underneath the equipment, known as fall surfaces, should be made of soft material such as wood chips, mulch, sand or rubber.
• Inspect equipment for any piece (especially metal) that may be hot from the sun.
• Watch for hazards or protrusions like bolts, hooks, stumps or rocks that could trip or cut children.
• Look for neglected maintenance, such as rusty or broken equipment.
• Make sure kids wear safe clothing. No loose scarves or hoodies with drawstrings, as these can become a strangulation hazard if entangled with equipment. Shoes should be comfortable for play and protect feet, like sneakers. Tie long hair back as well.
• Make sure there are strong and sturdy guardrails to prevent falls.
• Your children should be using age-appropriate equipment. Read all playground signs for warnings and instructions.
• Most importantly, the best way to prevent injuries is parental supervision. Talk to your kids about appropriate playground behavior before you visit the playground and watch them while you’re there.

More Resources for Safe Playgrounds

To ensure your local playground is safe, the National Recreations and Parks Association has a network of Certified Playground Safety Inspectors (CPSI). The CPSI certification program provides comprehensive and up-to-date training on playground safety issues, including hazard identification, equipment specifications, surfacing requirements and risk management methods. To find your local CPSI, click here.

A thorough playground safety checklist and ranking tool, created by the National Program for Playground Safety, can be found here. If you see safety hazards or poorly maintained equipment, reach out to the owner as soon as possible. In most cases, this will be a school or park district. 

Keeping our kids safe while out on the playground is an issue we can all get behind, and one that benefits the community as a whole. So let’s all get out there and have some fun!

This article appeared in our June 2017 "You Should Know" e-newsletter.

Choosing the Best Legal Structure for Your Business - Part 2

Whether in New York, New York or Durham, North Carolina, choosing the legal structure of a business is one of the most critical decisions every entrepreneur faces at the outset of a new venture. The effects of this choice reach well beyond whether you might face personal liability, will impact how much you pay in taxes, the level of paperwork and formality required, and even the ability to raise funding.

To help ensure that Durham entrepreneurs will make the right choice for their businesses, this article will cover some basic considerations with regard to some of the most popular organizational structures, including the Sole Proprietorship, Partnership, Corporation, and the Limited Liability Company.

See Part 1 of this post for information on Sole Proprietorship and Partnership

Corporation

A third, more sophisticated type of entity is the Corporation. Corporations are legal entities distinct from their owners and organizers, and can be taxed and held legally liable for their actions just like an individual. The greatest advantage of the corporate structure is avoidance of personal liability for the owners- it is extremely difficult to “pierce the corporate veil” and hold an owner liable for the debts and actions of the entity. 

The primary disadvantages, on the other hand, are the extensive cost and record keeping requirements of starting and operating a corporation. Unlike sole proprietorships and partnerships, corporations are required to pay taxes independent of those paid by corporate shareholders. This results in what is known as “double taxation,” because both the corporation and the shareholders must pay taxes on any earnings which are distributed. An S corporation structure—also known as a Subchapter S corporation—may be utilized to avoid this issue in lieu of a regular C corporation. In an S corporation, earnings and losses may be passed through to the tax returns of shareholders as in a partnership or sole proprietorship.

For those who perform personal services that requires a license from a North Carolina licensing board, the Professional Corporation is another option. In general, PC’s must be operated for a “single purpose,” meaning that all members must practice in the same professional field. Another restriction of PC’s is that only those licensed to perform professional services of the kind the business offers may own stock in the business. Like any other corporation, PC’s offer shareholders insulation from liability and owners may elect “S Corp.” status in order to gain the benefits of pass-through taxation. 

Limited Liability Company

Since its introduction in 1993, the Limited Liability Company, or LLC, has become the most common form of business structure in Durham, North Carolina. The LLC affords many of the advantages of the corporation and partnership business structures. Similar to a partnership, for instance, earnings and losses may be passed through to owners without taxation of the business itself. And similar to the corporation, the owners of an LLC are shielded from personal liability for the business’ debts and obligations.

In addition to the standard LLC, there is another option—the PLLC— for businesses which are deemed “learned professions” such as doctors, lawyers, accountants and engineers. The primary difference between PLLCs and LLCs is that the PLLC does not shield individual members from malpractice claims against them. PLLC members are still, however, protected from the liabilities and obligations of the business, and may not be held liable for another member’s malpractice. This liability structure is often chosen by professionals as it is more conducive to a stable business where malpractice suits may pose a risk to the company as a whole.

One downside of LLCs in comparison to corporations, however, is that it does not have shares or stock certificates. As a result, it may be difficult to raise public funding and owners will have to decide whether each investor will be a simple member of the LLC, or a member-manager with authority to act on behalf of the entity.

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While the considerations above are a great place for the entrepreneurs of Durham, North Carolina to start when deciding what type of business to form, the decision is ultimately much more nuanced. In order to ensure the best choice of form for your business, it is advisable to speak to an attorney as to your specific needs and goals. Indeed, while most entrepreneurs will tell you to seek legal advice when drafting Articles of Incorporation or Organization for your new Corporation or LLC, it’s just as important to get the first step right.

Michael E. Kohagen is an attorney with Crabtree, Carpenter & Connolly, PLLC, in Durham, NC.

Choosing the Best Legal Structure for Your Business - Part 1

Whether in New York, New York or Durham, North Carolina, choosing the legal structure of a business is one of the most critical decisions every entrepreneur faces at the outset of a new venture. The effects of this choice reach well beyond whether you might face personal liability, will impact how much you pay in taxes, the level of paperwork and formality required, and even the ability to raise funding.

To help ensure that Durham entrepreneurs will make the right choice for their businesses, this article will cover some basic considerations with regard to some of the most popular organizational structures, including the Sole Proprietorship, Partnership, Corporation, and the Limited Liability Company.

Sole Proprietorship

The most basic and most common business structure is a Sole Proprietorship. A sole proprietorship has no legally separate existence from the owner of the business. As a result, the owner may be held personally liable for all financial obligations of the business. Moreover, income and losses are taxed on the owner’s personal income tax return. Perhaps the greatest advantage of a sole proprietorship, however, is that there are extremely few formal requirements for starting and maintaining such a business, and owners therefore have greater control and flexibility in managing its operations. 

Partnership

Another basic form of business structure is the Partnership. Much like the sole proprietorship, a partnership is a very basic legal entity, and is most commonly defined as one in which two or more people agree to share in the management, or profits and losses, of a business. The primary disadvantage of a partnership is that each partner may be held personally liable for all financial obligations of the business. The primary advantages are again similar to those of the sole proprietorship: profits and losses pass through the company to the individual income tax returns of the partners, and starting and maintaining the business entails few formal requirements.

Partnerships come in two varieties: the general partnership, and the limited partnership. In the former, each partner manages the business and assumes liability for the debts and obligations of the company. A limited partnership, however, is made up of a limited partner or partners in addition to a general partner or partners. Limited partners serve as passive investors and have no control over the company, with the advantage that they may not be subject to the same personal liabilities as a general partner. 

 

In Part 2 of this post, we will look at Corporations and Limited Liability Companies.

Michael E. Kohagen is an attorney with Crabtree, Carpenter & Connolly, PLLC, in Durham, NC.

The Dangers of Texting & Driving - Facts & Statistics

"I think we can all agree: new technology offers many benefits - computers have allowed lightning fast data processing, the internet created a global world, and mobile phones provide us with convenience and a valuable safety tool.

Unfortunately, the law of unintended consequences almost always rears its ugly head when it comes to technological advances. In terms of cell phones, one of the most dangerous consequences has proved to be a rise in distracted driving." - Misha Safranski, MoneySavingPro

Click here to learn more about the dangers of texting and driving at MoneySavingPro.