My daughter has been taking acrobatics at a private school that specializes in that sort of thing. One class was on the front handspring, which she had never done before. When she tried to do it, she landed wrong and broke her left leg. The doctors’ and hospital’s bills were covered by our family health insurance, except for the policy’s deductible and coinsurance. Last week, when my daughter returned to class, the manager of the school spontaneously said he thought the accident had resulted from negligence by the instructor, and he asked me to submit all the bills and a statement of other costs, including my daughter’s lost pay from her part-time job. I did, and the school’s liability insurance company has offered to reimburse us for everything, provided we agree to forgo any further claim. May I accept that offer and keep both the partial payment of the bills from our own insurance and the full reimbursement from theirs?
Another case. Five years ago my husband had to stop suddenly at a pedestrian crossing and was hit in the rear by a truck. His injuries put him in the hospital for a week. Afterwards, he still had to go for therapy for his neck. The trucking company’s insurer offered to cover everything, plus twenty thousand dollars, if my husband agreed to forgo any further claim, and he did. Within another month the therapy was completed; he felt fine and has had no problems since. Obviously, they paid him the twenty thousand thinking he might have further problems. Since he didn’t, he wonders whether he ought to refund some or all of it.
This question calls for application of the norms regarding lying and candor. To make a just claim on insurance, one must truthfully supply all required information. Assuming this couple did that, they may try to negotiate a larger settlement than has been offered by the school’s liability insurance carrier and keep the settlement paid by the trucking company’s insurer. In the first case, the settlement should be, and in the second it was, not only for the damage clearly done to the injured parties but for the residual risk of later ill effects. If medical expenses for the daughter’s injury were paid by the health insurance on the basis of a statement by the questioner that turns out to have been false, she should correct the mistake. If not, she should find out whether the family’s health insurance excludes payments for injuries covered by other insurance; if it seems to exclude them, she should inform her health insurance carrier of the settlement by the school’s insurer as soon as it is paid.
In asking these questions, you and your husband manifest sensitive and sound consciences. Moral questions about insurance claims are hardly likely to arise unless a significant amount is at stake. Hence, questions in this field regularly concern grave matter. Nevertheless, some people who are honest in dealings with individuals and most organizations have no qualms about defrauding an insurance company, reasoning that it is wealthy and will suffer little harm. Like other business expenses, however, the costs of fraudulent claims are distributed by insurance companies among policyholders, so that cheating on a claim eventually burdens other people.341
The first requirement in making an insurance claim is to be completely honest. It is dishonest not only to lie but to withhold relevant information requested on a claim form or by a claims adjuster—for example, to omit some fact that might disqualify the claim. If one has been honest, however, one almost always may accept any payments or settlements offered, since insurers take great care in interpreting their own policies, evaluating any claims arising under them, and protecting their own interests. In responding to the questions raised by the two cases you describe, I shall assume you were completely honest.
The settlement offered by the school’s liability insurance company in the first case is not merely to pay the medical and hospital costs already reimbursed by your health insurance. Rather, the insurer is using those bills and other costs, including your daughter’s lost income, as a basis for settling a potential claim based on negligence. That claim might eventually be for a far greater amount, if your daughter later has serious problems that could be traced back to the injury. If you accept the payment offered, you will be forgoing the right to additional payment in such an eventuality. For that reason, I believe you would be justified in trying to negotiate a larger payment. You certainly will not do the company an injustice in accepting the settlement.
At the same time, your health insurance perhaps also covers the medical and hospital bills for your daughter’s broken leg. If so, you need not refund the payment made by that insurance company. I say “perhaps also covers,” because many health insurance contracts exclude coverage for injuries due to accidents when the costs are otherwise covered, as they may be in this case. If your health insurance policy includes that provision, you probably stated in making your claim that the injury was not otherwise covered. Though such a statement would have been truthful at the time you made it, you now know it may have been mistaken, and, if you made it, you may have a duty to correct it.
But what if you made no such statement? If you tell your health insurer about the settlement offer, they might ask you to refund their payment even if you are entitled to keep the money. Still, you should at least try to examine the policy to find out whether it requires repayment. If your health insurance is provided by your employer, perhaps you do not have a copy of the policy itself. In that case, unless the policy is available to an employee who asks to see it, the insurer has chosen in its own interests to limit the information available to you, so I think you may decide what to do on the basis of your study of whatever materials the insurer and your employer do provide.
In the second case, again assuming your husband was completely honest, he did nothing wrong in accepting the settlement offered by the trucking company’s insurer. The insurer thereby forestalled the risk of having to pay out far more if your husband’s injuries led to ongoing, serious medical problems, while he accepted the corresponding risk of receiving far too little. Provided such a settlement is made freely by two parties competent to judge their own interests, there is no reason to doubt its fairness. In this case, the insurance company’s agent almost certainly was better able than your husband to estimate appropriate compensation for the risk he assumed. So if your husband took the first offer instead of bargaining for the maximum the company was prepared to pay for a settlement, he probably settled too easily and got less than he should have. Moreover, even after five years, he still lives with the risk he accepted, since he cannot be certain he will never have any problems resulting from that injury.
341. Michael Clarke, “The Control of Insurance Fraud: A Comparative View,” British Journal of Criminology, 30 (1990): 1–7, describes the rationalization of insurance fraud and explains why insurers may prefer to pass on the cost of fraud rather than to resist it vigorously.