Sunday, March 12, 2006

In the bigger scheme of things, Duane Divich is a relatively unimportant artifact of the United Services Automobile Association: so let's cut to the chase. Why does Robert J. Koenig have a problem with Duane Divich? Read on.

In 1992, Koenig's family was faced with a very problematic claim-for-damage lodged by a woman who worked at a rural-Vermont day-care facility: she believed that Mrs. Koenig had backed into her car. The purported incident took place on private property: in the day-care parking lot, in the dark, on a cold winter evening.

The principal fly-in-the-ointment of this woman's claim was that she was in the position of being alone, for extended periods, with the Koenig's youngest child - who was less than two years old at the time.

The second problem with the day-care lady's claim was that there was absolutely no sign of actual damage to her otherwise 5-year old salt-damaged, already dented, and rebuilt Subaru: Mrs. Koenig was driving an absolutely brand new Toyota Landcruiser: and there was not a scratch on the Landcruiser.

The third major problem was that this woman had presented over the preceeding months in a manner which gave the impression that she was not mentally balanced: this conclusion about her mental stability was confirmed by the fact that she separated from the day-care center several days or weeks later. And it was the Koenig's understanding, based on the day-care administrator's and other staff statements in the matter, that the women's apparent mental inquietudes were associated with her being asked to resign.

An addition feature of this woman's claim that Mrs. Koenig had "backed into" and "damaged" her 5-year old salt-damaged and rebuilt Subaru was that she had an extremely aggressive husband who prosecuted the claim by telephone: what the Koenigs did not know at the time was that this woman's husband also had a well-settled reputation with local insurance adjusters for vexatious insurance claims.

Now, let's stop here for a second. Nowhere in this story is the author suggesting either that the lady with the ostensibly damaged Subaru was insane, that her husband was an insurance cheat, or that the Koenig's Landcruiser did not in fact back into and crease/dent the Subaru. In fact, it is entirely possible that the Landcruiser "did it", and sustained no damage to itself.

The day-care woman's husband presented an estimate from St. Johnsbury Vermont's most expensive and reputable autobody shop: for $475. This estimate provided for the replacement and painting of a fender - with all new parts.

Because there was a larger issue at stake than just the claimed damage, Mr. Koenig declined to pay the claim for damage. And Mr. Koenig faxed USAA and instructed USAA to disregard and to not pay a damage claim from the day-car lady or her husband: and Koenig explicitly indemnified USAA. USAA acknowledged Koenig's request.

Here is what followed: the day-care lady and her husband obtained USAA's name as the Koenig's insurer from the Vermont Department of Motor Vehicles: and they filed a claim with USAA without telling Koenig.

Enter USAA and Duane Divich: here is what Duane Divich and USAA did.
  1. Without advising the Koenig's, Duane Divich sent an adjuster to look at the day-care lady's car.
  2. And this is important: Duane Divich did not send the adjuster to inspect the corollary damage to the Koenig's car. The reason why this is important is that it would have been absolutely impossible for Duane Divich's adjuster to have acquired an understanding of what may have actually happened without personally inspecting the Koenig's car.
  3. The adjuster gave the day-care lady and her husband a check for $510 to cover damage to their car - $35 more than their estimate from St. Johnsbury Vermont's most expensive autobody repair shop

Now - why the stink? USAA was totally within its rights to settle the claim; right? Mr. Koenig believes that USAA also had information on the day-care lady and her husband that indicated they were vexatious insurance-claim makers - and best settled with promptly. USAA may have had no obligation to disclose to the Koenig's any industry-specific knowledge they had about the day-care lady and her husband.

So what did USAA do wrong?

Duane Divich settled the day-care lady's claim for $35 more than she and her husband had demanded.

And by over-paying the claim, Duane Divich set up a situation which then permitted USAA to charge the Koenig's back for the claim - spread out of their next three years premium bills.

(The law of small numbers, in such cases, can yield extraordinary benefits to the insurance company which can somehow force border-line claims, $500 in this case, to slightly over the hurdle which makes it possible to charge back the claim settlement to the policyholder. But that is an entirely separate issue - except of course to the extent that Duane Divich may have wanted to cover it up.)

When Mr. Koenig brought this matter of the $35 over-payment to Duane Divich, Mr. Divich was faced with a clear choice: Mr. Divich had a moral dilemma and a practical business dilemma. And Divich did the wrong thing: he argued the toss.

Mr. Koenig believes that adjusters at USAA are probably subtly rewarded for pushing borderline claims to slightly over the hurdle which makes it possible to charge back the claim settlement to the policyholder.

Mr. Koenig would love to see a statisitical analysis of USAA's claims history to see how settlements are grouped arount the break-point where charge-back becomes possible.

But that was not Koenig's request to Duane Divich: Koenig asked Duane Divich to roll-back the notional settlement to the $475 demanded by the day-care lady: and to either "eat" the $35 over-payment or to charge the $35 back to the adjuster.

Duane Divich's response was criminal. Divich, in at least two long windy letters, ended up by accusing Mrs. Koenig of being less than truthful about the circumstances of the purported damage to the day-care lady's car.

By making that accusation, Duane Divich extorted the Koenig's silence as to their belief that USAA had overpaid a $475 claim by $35 so that USAA could then charge the claim back to the policyholder.

$35 dollars: that was the level of fraud at which Duane Divich was evidently operasting.

If Duane Divich had ever realized that his name was so ultimately Googlizable, he'd had never tried to coverup the adjuster error/fraud: and he'd never have tried to extort the Koenig's silence by theatening to make the Koenig's uninsurable.

Duane Divich used subscriber funds - money owned by the members of USAA - to prosecute Koenig in the Bexar County District Court. Robert T. Herres and Robert G. Davis permitted the use of USAA subscriber funds to prosecute and to then jail Robert J. Koenig for questioning Duane Divich's handling of a $475 claim inflated by $35 so that it could be charged back to Koenig's family.

The Bexar County District Court is in essence a private court which is owned by USAA: it is unquestionably true that every judge belonging to the Bexar County District Court is somehow connected to USAA.

That is the Duane Divich story.