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Corporate Gag Orders, The Real Lawsuit Abuse
Published on Tuesday, September 19, 2000 in the Seatlle Times
Corporate Gag Orders, The Real Lawsuit Abuse
by Maria Diamond
 
By now, many of you have stood in the driveway and scanned the tire walls of the family car for the word "Firestone." And with more than 50 deaths attributed to the tires, you have cause to be concerned. The debate has now centered on the time when Firestone executives knew about the deadly defect.

Chances are, we may never know. The power of the gag order enables corporations selling defective products and services to conceal damaging information. Corporate lawyers are paid to protect the company image so profit margins don't shrink in the wake of consumer lawsuits. Gag orders are a stock defense strategy to ensure that lawyers of future victims or ambitious journalists must dig deep to unearth the dirty secret.

Judges typically grant gag orders when a company's trade secrets are clearly at risk and reject them when the public interest is at stake. That does not stop corporations from trying to get them. Whether the public gets a peek largely depends on the willingness of the injured citizen to run the gauntlet of legal hurdles to fend off gag orders. The higher the stakes, the fiercer the battle.

Two cases here in our own backyard illustrate the lengths companies will go to use gag orders to hide damaging information. Both cases could set legal precedents that could cost these companies millions. Washington residents Janet Jones and Mindy Sitton have each decided to go the distance with two of the nation's auto insurance giants - Allstate and State Farm.

Jones, a Des Moines mother, was severely injured in an auto accident when a teenager ran a stop sign. Allstate illegally directed its adjuster to advise Jones of her legal rights and offered her $25,000 to settle the case. Allstate's release also caused Jones to sign away her rights to pursue full recovery of her damages. The practice of directing claims adjusters to engage in the unauthorized practice of law is the subject of more than 50 lawsuits against Allstate nationwide and numerous state attorneys general investigations. Jones' case is one of the first to have a copy of the company's internal claims manual outlining the insurance company scheme to bilk accident victims.

When the teenager hit Jones' car, her minivan rolled. A defective seatbelt caused her to be ejected from the van, leaving her with broken bones in her face, body and the loss of one eye. Allstate left Jones with more than $75,000 in medical bills and no further legal remedies. She contacted an attorney who filed a lawsuit against Allstate. Her attorney spent the next six months fending off Allstate's attempts to put a gag order on the case. A King County Superior court judge rejected Allstate's request for a gag order and unsealed court records in January of this year. The case is now under appeal and will be spotlighted in an ABC "20/20" investigation this fall.

Kirkland resident Mindy Sitton faithfully paid her insurance premiums to State Farm for more than 30 years. She was stunned when the company refused to pay any of her medical bills from an auto accident that left her with painful injuries to her back and neck. She hired an attorney who has subsequently filed a class-action lawsuit against State Farm for its practice of wrongfully denying the payments of legitimate auto insurance claims.

State Farm's corporate lawyers have already informed Sitton's attorney they will not hand over any evidence unless State Farm gets a favored hush from the judge in the form of a gag order.

Meanwhile, what corporate lawyers don't want Sitton's lawyer to find out in court, NBC "Dateline" has been broadcasting this summer in two hour-long segments. A 15-month investigation by "Dateline" reporter John Larson revealed the company has in fact paid outside claims-review companies to create bogus medical reviews to deny medical claims of accident victims. By doctoring doctor reports, State Farm has fraudulently rejected claims like Sitton's and increased its bottom line at the expense of its policyholders.

The explosive material was discovered in cases brought in Idaho, Oregon, Alaska against State Farm. Thanks to the power of a television network, which could afford to bankroll its own investigation, journalists succeeded in getting this information to the public in spite of the requests for gag orders. The story has already initiated a nationwide investigation by state insurance commissioners and a bipartisan investigation at the congressional level.

Proponents of the free market should oppose gag orders. Gag orders only increase litigation. If consumers have an opportunity to make choices based on what they know, they are more likely to make choices that will prevent future injuries or they will avoid companies with unfair business practices. When corporations are allowed to hide the facts, more consumers must go to court in search of the truth.

Maria Diamond is president of the Washington State Trial Lawyers Association, an organization of more than 3,500 plaintiff attorneys statewide. She practices personal injury law at the Seattle firm of Levinson, Friedman, Vhugen, Duggan & Bland, P.S.

Copyright 2000 The Seattle Times Company

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