The insurance industry seems to attract more than its fair share of determined claimants and obsessive litigants. In part, this may reflect the nature of the industry, where policyholders' obligations can be complex and difficult for them to understand and the consequences of misunderstanding them can be disastrous. It may also reflect the character of some policyholders, as those who are economical with the true nature and circumstances of their risk to gain cover on favourable terms may also be inclined to challenge decisions and pursue claims obsessively. In any event, declined insurance claims are fertile ground for longstanding grievances. 

Most litigation lawyers will have experience with obsessive claimants. Recently, their numbers seem to have increased, not only in the insurance market. One factor driving this may be the ready availability of misleading or simply wrong advice on internet forums, now supplemented by free AI tools. These are capable of producing an argument or submission to support a claim that, to the uninformed, appears compelling, but is without merit. 

All of this presents new challenges for insurers, brokers and other potential targets. Increasingly aided by AI tools, persistent and often irrational claimants may use a range of channels to pursue and draw out meritless claims. Insurers are increasingly faced with prolonged battles that consume internal resources and generate costs which, over time, may outweigh the value of the underlying claim. 

It is more important than ever for insurers and others who are targeted by obsessive claimants or litigants to understand the strategies and options available to them.

Who are they?

Obsessive claimants are typically people who have suffered a loss for which their insurer has declined cover often alongside other negative outcomes such as an unwanted retirement, a collapsed business or a failed personal relationship. Sadly, these events often mean that they have time on their hands to obsess about their misfortunes and pursue obsessively those whom they view as responsible.

There are certain characteristics that distinguish obsessive claimants from other dissatisfied policyholders: 

• Persistence: They will pursue claims and complaints obsessively for years.

• Inability to see any issue from a perspective other than their own.

• Fixations on individuals: Within the insurer or others such as regulators or external lawyers.

• Ingenuity in finding new and different ways to try and bring pressure upon the insurer. 

• Familiarity with legal processes and ways of circumventing barriers.

• Increasingly offensive or outrageous statements or conduct.

• Not afraid to lose: So they are not dissuaded by cost. 

While not all obsessive claimants fit this description, a disproportionate number seem to be retired men, many of whom once occupied positions of influence which they lost with the end of their career. Such people may seek purpose and meaning by finding a cause to fight for, however wrongheaded it may be. 

Obsessive claimants will pursue meritless claims through every available channel they can find, often including the following:

• Insurance and Financial Services Ombudsman (mostly for insurers)

• Financial Services Complaints Limited (mostly for brokers)

• Financial Markets Authority

• Commerce Commission

• Insurer's boards and CEOs

• Media 

• Courts 

They tend to be driven by an unshakeable belief that their cause is just and that they have been wronged, which they maintain despite never enjoying success in any of their efforts to pursue their claims. They live in hope that they will find a person within one of the various institutions to which they complain who will take the time to investigate and understand their complaint, and who will come to see things the way they do. Very often they are charming and solicitous to a new person who becomes involved in their matter, only to turn against them as - inevitably - that person disappoints them. 

They often file multiple complaints, proceedings or applications and appeal or seek review of every decision that goes against them. They file new complaints or proceedings whenever exisiting ones are dismissed, sometimes against the decision-makers. They may interpret failures as evidence of a cover-up or conspiracy against them. This can go on for years.

The enabling role of AI

Obsessive claimants are increasingly relying on AI tools to assist them in responding to insurers, identifying potential arguments and preparing claims and responses. They also use AI tools to generate what, at first glance, appear to be well-constructed arguments on policy wording, or submissions to regulators or dispute resolution bodies. In addition, AI tools may give them false encouragement by giving wrong advice, and by identifying potential causes of action, drafting submissions and preparing other court documents that seem compelling to the uninformed.

While AI tools may be perceived as a helpful aide to claimants who do not have access to qualified lawyers, their output is generally so inaccurate that it does more harm than good. The material generated, while confidently and eloquently expressed, is usually wrong. At times the source material may be 'hallucinated', meaning the AI tool has generated fake reference material to satisfy the wishes of the user. It may also be voluminous, meaning it can take a considerable amount of time to unpack and address the points raised. Judges are reporting that they are required to deal with increasingly large and detailed documents filed by obsessive litigants that appear to have been generated by AI.

Strategies for dealing with obsessive and vexatious claimants

Understand who you are dealing with and their likely patterns of behaviour

Obsessive claimants are not rational actors. They cannot be persuaded that their complaints are without merit and should be abandoned. It is futile to try. Often, engagement is what they are seeking and does no more than encourage them.

It is important to understand the following elements of their psychology:

• Obsessive people cannot be persuaded that their claims cannot succeed. No amount of escalation by decision-makers will help. 
• The steps in a formal complaints process or legal proceeding can provide these individuals with a sense of control that they would otherwise lack. This is not affected by failure at every step. 
• This can manifest itself in challenges being made to every decision in a variety of ways, including complaints against decision makers and others who are involved in the matter, including lawyers. 
• They may not believe that they will prevail - but that will not necessarily discourage them if they achieve satisfaction merely from pursuing their claim. 

Their claims often follow a typical pattern: 

• The initial complaint is typically met with a measured, courteous response which expresses understanding or sympathy for their position. The claimant takes this as encouragement and disregards those parts of the response that are not consistent with their own views.
• They escalate their complaint, often by contacting senior people such as a chief executive or board members. When they reach a new contact, they treat that person's professional courtesy as an invitation to start over. 
• The cycle repeats, and when the claim or complaint is again declined, their frustration turns personal.
• Senior leaders may step in, expecting to resolve the matter through authority or goodwill, but this does not work. Their ability to persuade and influence others has little benefit when dealing with irrational claimants.
• When their internal avenues of complaint as exhausted, they begin with external bodies, such as dispute resolution schemes, regulators and the courts. 

A standard toolkit for resolving disputed claims and legitimate disputes will not work. A different approach is required.

Practical guidance for dealing with obsessive and vexatious claimants

It is very difficult to shake off a determined claimant. We recommend that insurers consider employing the following strategies where there is a concern that a person may become an obsessive claimant.

In the early stages of engagement

• Listen to them politely at first, and keep responses concise, neutral and factual, where possible. Avoid over-explaining, as this provides material for further complaints.

• Limit engagement only to what is strictly necessary.

• Document all interactions and carefully follow all internal policies when dealing with claimants. A failure to follow procedures will give a complainant more to work with.

• Be realistic about what you are likely to achieve by engaging with them. It is a mistake to think you are likely to persuade them that their complaint has no merit.

Once a decision has been issued

• Inform the complainant in writing that the matter has been determined and that your organisation will not be corresponding further on it.

• Then keep further engagement to a minimum. It is not necessary to respond to every email or phone call. This helps reduce the encouragement they receive from the process.

• Designate a single internal point of contact. Insist that only that person deals with the claimant where possible and warn other likely points of contact that the claimant may contact them. They should be provided with clear instructions not to engage or keep engagement to a minimum.

• If more than one person must deal with the claimant, have a clear position in response to each element of the claim or complaint and ensure consistency in communications.

• Ensure that all information provided is accurate. If an error is made, correct it promptly in writing, as errors may be seized upon as a new issue for dispute. 

Things to consider

• Consider whether a request for documents or personal information should be treated as a Privacy Act request. When possible, comply with deadlines for responding to such a request to prevent a claimant escalating it to the Privacy Commissioner. 

• Maintain professional standards in all internal communications. Assume anything written about the complainant may ultimately have to be disclosed to them.

• Brief front-line staff so they can identify the individual and know the appropriate protocol.

• If there is any concern for staff safety, act immediately and involve the Police where threats have been made.

• Keep in mind the potential reputational impact, particularly if the complainant goes to the media, and how to manage this. 

• Keep records of all communication. This may be helpful to rebut allegations about the way your organisation has handled the complaint or dispute. 

• If complaints are made to external bodies, keep responses brief and to the point, and do not respond to additional material provided by the complainant unless that is necessary. Advise them of any other complaints to other regulators that have been made (subject to confidentiality).

Legal tools are limited

• Harassment Act 1997 - requires a pattern of behaviour directed against another person that involves specified acts, which include making contact with that person by phone, correspondence, electronic communications or any other way. Civil restraining orders are available and criminal penalties apply if there is a threat to safety. 

• Courts have power under s166 of the Senior Courts Act to restrain vexatious litigants, and orders can now be sought by private persons for up to 3 years (formerly only the Attorney-General could apply and "persistent" proceedings where required). There are:

  • Limited orders: Relating to a particular matter only.

  • Extended orders: Relating to a particular matter or a related matter.

  • General orders: Preventing any civil proceedings.

Should you engage external counsel?

External lawyers will not necessarily have any more success in persuading an obsessive claimant to go away, and they can become a target themselves. They can, however, assist in the following ways: 

• Relieving pressure on your organisation so you are not distracted.

• Providing independent and dispassionate strategic advice for dealing with the claimant.

• Managing responses to external bodies such as the IFSO or the Privacy Commissioner.

• Protecting documents with legal privilege.

• Taking proactive steps to seek restraining orders where necessary.

• Defending any Court proceedings.

Conclusion

Obsessive and vexatious claimants are a growing problem for insurers, causing stress, disruption and cost that is often disproportionate to the importance of the issues they raise. This trend is likely to continue due to the availability of AI tools. It is important that insurers are aware of the risks they pose and identify them early to respond effectively.