It was quite a week for the insurance industry. First, New York's Eliot Spitzer had to step down as governor in the wake of a prostitution scandal, and then high-profile trial lawyer Richard “Dickie” Scruggs pled guilty to bribing a judge–and in a Hurricane Katrina lawsuit, no less!!! With the shortage of high-profile nemeses, the loss of these two powerful crusaders against insurer wrongdoing is a huge blow to industry reformers.

(To read all about the plea entered by Mr. Scruggs, click here.)

It is important to note that in the Scruggs case, the bribery took place in a legal battle among attorneys over $26.5 million in contingency fees from a Hurricane Katrina-related settlement with State Farm, not to influence a coverage decision.

Mr. Scruggs simply got greedy, preferring to assure his firm's piece of an already fat pie by paying off the judge. Shame on him, and it will serve him right to not only lose his law license, but to go to prison. He of all people should respect the integrity of the judicial system.

As the TV cop Tony Baretta used to lecture those he busted, “don't do the crime if you can't do the time.”

It's always shocking to see those who seemingly have unlimited power and resources–folks like Spitzer and Scruggs–so irresponsibly abuse their positions for personal gain. In Spitzer's case, the misconduct was more of a personal act (unless it's shown he used public or campaign funds for his illegal trysts), but even so, his misbehavior was outrageous because he himself had prosecuted others for committing similar crimes.

Mr. Scruggs has no such excuses. He was able to get State Farm to cough up $80 million in a Katrina settlement for his clients. For that service, he and his fellow attorneys charged a 33 percent contingency.

That might seem like a pretty stiff fee, but considering that the attorney takes all the financial risk if a suit is unsuccessful, and given the fact that average plaintiffs would not have access to top-notch legal talent without such jackpots at the end of the litigation rainbow, and granting that there is no limit to what a corporate defendant can spend to deflect a claim, what else can you do?

Still, whatever he earned from the judge's ruling should have been satisfactory. And even if Mr. Scruggs felt himself wronged, he had no business trying to corrupt the judge on the case to make sure he got what he believed to be his fair share.

Hopefully, the quick resolution of this matter–which I hope will end with jail time being handed out to Mr. Scruggs–will serve as a warning against other trial attorneys to play within bounds or suffer the consequences.

But for insurers, the party had barely ended over Mr. Spitzer's shocking demise before news of the Scruggs plea hit the NU daily newswire on Friday. But as I said when Spitzer announced his resignation, just because he was guilty of misdeeds, does not mean those he went after in the industry were victimized. It only shows he was no more honest than many of those he sued for wrongdoing.

Both sides need to clean up their acts big time.

What do you folks think?

Special Reports /

Don't Do The Crime If You Can't Do The Time

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