After representing insurance companies for several years, I left to start a policyholder practice in 1985. By the early 1990s, my personal sense was that policyholder protections in the law and in the contract were starting to diminish. The concurrent causation policy language established in the 1990s, the insurance company mantra about “having a right to be wrong,” the significant erosion of punitive damages to deter wrongful conduct, and the lack of meaningful consumer protection legislation allowing injured policyholders to seek extra-contractual redress all seemed to mark a long-term change and new trend in insurance law, shifting away from policyholder protections. Was it just me sensing this?
It turns out I was not imagining things. The erosion of consumer protections in insurance has been part of a much broader shift in American law. Courts that once took their role seriously as a check on unfair market practices have moved steadily toward formalism, enforcing the literal policy text even when insurers bury traps in the fine print. The result has been exactly what many policyholders feel in their bones when they call us. They are at a disadvantage from the moment they buy a policy, and the legal system increasingly refuses to level the field.
The academic world has now caught up with what many of us saw from the trenches decades ago. In 2015, Professor Max Helveston published a study, Judicial Deregulation of Consumer Markets, 1 showing that courts nationwide have embraced an anti-consumer jurisprudence, particularly in insurance. He documented how doctrines once developed to protect policyholders, like the reasonable expectations doctrine, have been narrowed, weakened, or abandoned altogether. Judges who once saw their role as preventing insurers from exploiting unequal bargaining power have retreated into a philosophy that treats even the most complex adhesion policies as if they were negotiated by equals. The result, he concluded, is judicial deregulation of consumer markets, leaving everyday people exposed to sophisticated commercial actors who know exactly how to tilt the playing field in their favor.
As someone who has spent forty years watching insurers deploy increasingly intricate exclusions, conditions, and technicalities, I can tell you this shift has been real, and policyholders feel its consequences every day. Anti-concurrent causation clauses are a perfect example. When these provisions began popping up in the 1990s, many judges initially expressed discomfort with their breadth. But over time, courts grew more comfortable enforcing them literally, even when doing so stripped away the very protection policyholders believed they were paying for. The same story played out with punitive damages. Just as large verdicts against bad-faith insurers were beginning to push the industry toward accountability, the United States Supreme Court stepped in with a line of decisions sharply limiting punitive awards. Those rulings removed one of the few meaningful deterrents against systemic claim denials and “delay, deny, defend” strategies, and insurers noticed.
Meanwhile, legislatures passed little that would empower consumers. Instead, policy language drafted to erase ambiguity made its way into everyday insurance contracts. On the claim-handling side, the industry adopted internal playbooks that rewarded low payouts and discouraged fair dealing. The relatively recent anti-public adjuster endorsements and new appraisal clauses are examples of new policy clauses entirely favoring insurers.
Regulators, often underfunded and politically constrained, struggled to keep pace. Worse, the revolving door between insurance regulators and insurance industry insiders has never been stronger or more transparent. I have noted this in The Revolving Door Connecting Insurance Regulators with the Supposedly Regulated Insurance Industry, and Is the Insurance Regulatory System Rigged from Within? Jay Feinman’s Warning on “Cultural Capture.”
So no, my early sense of erosion was not paranoia. It was the ground truth of what was happening inside insurance law and the courts. And this trend will continue unless regulators and lawmakers insist otherwise. The question is: How do we get them to do it?
The encouraging news is that awareness is spreading. Scholars, journalists, and judges are rediscovering the foundational principle that insurance exists to protect the public, not to create a revenue stream unchecked by accountability or fairness. That principle must be reclaimed if policyholders are to receive the benefit of the bargain they were sold.
Insurance is a promise. When that promise becomes clouded by legal doctrines that elevate form over fairness, the public loses faith not just in insurers but also in the legal system meant to hold wrongdoers accountable and to make honesty in the insurance marketplace a reality. It is time to restore balance and reaffirm what courts once recognized clearly: policyholders deserve the benefit of their reasonable expectations, and insurers must honor the spirit as well as the letter of the contract.
I will discuss more of this tomorrow with examples of how it is happening and what more can be done.
Thought For The Day
“The first duty of society is justice.”
—Alexander Hamilton
1 Max N. Halveston, Judicial Deregulation of Consumer Markets, 36 Cardoza L. Rev. 1739 (2015).