William M. Shernoff

A Farm in Crivitz

Shernoff grew up on a farm in Crivitz, a small town in the north woods of Wisconsin. His family still owns the farm; it is kept now as a retreat. He earned his law degree from the University of Wisconsin in 1962, and he has credited the school with instilling a creative and progressive spirit that, in his words, still burns inside him.

He was admitted to the California bar in 1966 and built his practice in Claremont, a college town at the eastern edge of Los Angeles County — a storefront distance from the ladders and lunch pails of Pomona, and a long way from the downtown towers where the insurance companies kept their lawyers. He founded his own firm there in 1975. It is headquartered in Claremont still.

Michael Egan's Ladder

Michael Egan was an Irish immigrant who supported a disabled wife and a young daughter by working on rooftops in Pomona. One morning a rung of his ladder broke, and he fell twelve feet to the ground, seriously injuring his back. Surgery failed. His doctor declared him totally disabled.

Egan carried a Mutual of Omaha disability policy that promised $200 a month for life if an accident left him unable to work. The company paid for a few months and then stopped — reclassifying his fall as a "sickness," a category the policy cut off after three months. The decision rested on a brief medical examination and on claims employees who had never assembled a complete account of his condition.

Shernoff opened the trial with the family. Egan, his wife, and his daughter each took the stand to describe the day the claims manager visited their home, laughed at Egan, and accused him of faking — a visit that left all three of them in tears.

The claim file supplied the rest. It showed what the insurer had requested, which medical reports it had received, what its employees actually considered, and how the stated reason for ending benefits was reached. Records had not been fully gathered. Follow-up was minimal. Payment stopped without resolving the facts that bore directly on whether Egan would ever climb a ladder again.

Egan Becomes Law

In 1979, the California Supreme Court held in Egan v. Mutual of Omaha that an insurer may face tort liability when it unreasonably interferes with an insured's right to receive policy benefits, and that a jury may award emotional-distress and punitive damages for that breach.

The court gave the investigation itself legal significance. An insurer cannot fairly deny a claim without considering the facts that support coverage as well as those that might defeat it; it must give its policyholder's interests the same weight it gives its own. The opinion also examined the authority exercised by claims personnel in assessing when a corporation answers for the conduct of its people. Shernoff had tied each of those principles to the steps taken — and omitted — before Egan's benefits ended.

The doctrine spread far beyond California and far beyond disability insurance. Bad faith became one of the few genuinely new torts established in the twentieth century, and Egan is its cornerstone.

The Claim File as Evidence

The method Shernoff built in Egan became the discipline of an entire practice. A policyholder case begins with the contract, the loss, and the carrier's stated reason for withholding benefits. The claim file is then used to test that explanation against the work actually performed. Medical opinions, adjuster notes, reserve entries, internal referrals, recorded statements, correspondence, and changes in position identify who decided the claim and what information was available at the moment of decision.

The relevant records vary by line. Disability claims turn on capacity to work and the medical evidence of it. Health claims involve covered treatment, medical necessity, or rescission. Property claims require estimates, causation and engineering evidence, inventories, and valuation. Liability claims add defense and settlement decisions. At trial, the policy establishes the promised benefit, witnesses and documents establish the loss, and the claim file identifies the investigation and the decision makers, with expert testimony supplying the medicine, the engineering, the valuation, or the standards of fair claims practice.

Shernoff wrote the method down so others could use it. He co-authored the multivolume treatise on insurance bad-faith litigation that became the field's definitive text, and a continuing-education program bearing his name has trained a generation of lawyers in the same craft. For the public, he wrote Payment Refused, How to Make Insurance Companies Pay Your Claims . . . And What to Do If They Don't, and Fight Back and Win, books that walk policyholders through the machinery of a denied claim before they ever reach a lawyer's office.

Taking the Fight National

With Ralph Nader, Shernoff co-founded the National Insurance Consumer Organization, carrying the policyholder's side of the argument into public policy. In the 1990s he provided the funding that launched the consumer-law program at his alma mater, the forerunner of the University of Wisconsin Law School's Consumer Law Clinic. His cases have been featured in the New York Times, the Wall Street Journal, and Time, and on 60 Minutes — coverage that turned individual claim files into national questions about how insurance is supposed to work.

MGM Grand and American Samoa

The same discipline scaled to catastrophe. After the 1980 fire at the MGM Grand in Las Vegas, Shernoff represented the hotel company in the coverage dispute that followed, securing an $86 million insurance settlement in 1985. The claim required analysis of layered coverage, physical damage, business-interruption accounting, valuation methods, exclusions, and the positions taken by multiple carriers — proof that the tools forged for a Pomona roofer served a commercial policyholder measuring its losses in the tens of millions.

In December 1991, Cyclone Val battered American Samoa. Shernoff represented the territorial government in litigation against Affiliated FM Insurance Company, and in 1995 a jury returned an $86.7 million verdict, including $57 million in punitive damages. The proof addressed public buildings and infrastructure across the territory, the policies in force, the carrier's investigation, the amounts claimed, and the basis for withholding or limiting payment. Shernoff led teams of lawyers and specialists who assembled that record for a courtroom half an ocean away from the storm.

Northridge

The 1994 Northridge earthquake damaged or destroyed more than two hundred thousand homes and buildings, and Shernoff's earthquake work applied the Egan discipline across thousands of properties at once: document the damage before repair or demolition erased it, distinguish event damage from earlier conditions, obtain engineering and valuation evidence, and compare it with the insurer's estimates and file-closing decisions.

The claim files told their own story. A class action against Allstate alleged a widespread scheme in which adjusters altered engineering reports and construction estimates to shrink what policyholders were owed; the case resolved with Allstate agreeing to an independent re-evaluation of those reports and estimates and to notify twelve thousand additional policyholders of their potential claims. In another Northridge matter, Shernoff and his partner Michael Bidart established for the first time that California's unfair-business-practices law applies to the insurance industry — the carrier had quietly converted earthquake coverage from a policy rider into a separate policy in 1985 without telling the people paying for it — and the precedent, upheld on appeal, brought the insurer to the table for full restitution to every claimant, in a resolution valued at approximately $100 million.

The Stern Family's Policies

Mor Stern was a prosperous wine and spirits merchant in the Carpathian town of Uzhhorod. Like many Jewish families of means in prewar Europe, the Sterns insured their lives with Assicurazioni Generali, the Italian giant whose agents sold policies across the continent. Mor Stern was murdered at Auschwitz. His eldest son, Adolf, survived Buchenwald.

In 1945, Adolf Stern walked into Generali's office in Prague to claim his father's insurance. He was told to produce a death certificate. When he explained that the Nazis issued no such papers, he was mocked and forcibly removed from the office. For the next five decades, the Stern children and grandchildren petitioned the company and were rebuffed.

Shernoff took the family's case in 1998, filing an insurance bad-faith suit in Los Angeles Superior Court. He had first helped secure passage of a California statute allowing Holocaust-era insurance claims to be brought in state court until 2010 — legislation written for families whose contracts, correspondence, and heirs had been scattered by war, displacement, and the destruction of records. Over Generali's objection, the court ruled that the case could proceed under California law, the first ruling of its kind in the United States, and then set the first trial date any Holocaust-era insurance claim had ever received. Before the trial could begin, Generali's executives flew to California and settled with Adolf Stern and the other heirs. Five more survivor families' cases settled shortly after, and Shernoff went on to press claims against foreign insurers holding Nazi-era policies in courts across the country — and, when elderly survivors concluded that the international claims process itself was failing them, he carried that grievance into court as well.

The work — pursued for clients racing time, on policies their families could prove only through surviving contracts, insurer archives, and historical evidence — became the subject of the documentary On Moral Grounds, which was acquired and distributed by Sony.

Patsy Bates

Patsy Bates owned a hair salon in Gardena and was raising two children when she was diagnosed with breast cancer in 2004. She had health insurance through Health Net — until the company rescinded her policy in the middle of her chemotherapy, retroactively canceling coverage and leaving her with more than $129,000 in unpaid medical bills. Her treatment stopped for months, until charity paid what the insurer would not.

Shernoff took her case to arbitration, and the claim-file discipline did what it had done since Egan. Discovery produced internal documents showing the company had set goals and paid an employee bonuses based in part on how many policies were canceled and how much money was saved, and had credited rescissions with avoiding $35 million in claims over six years. In February 2008 the arbitrator, a retired judge, awarded Bates more than $9 million, most of it punitive damages, writing that it was "difficult to imagine a policy more reprehensible" than bonuses tied to canceling the coverage of the sick.

"We are going to put a stop to this practice," Shernoff said afterward. The prediction held. Health Net immediately froze rescissions pending independent third-party review, then agreed to a class settlement Shernoff negotiated that paid rescinded members directly, without requiring them to file claims — part of more than $40 million the company committed across the litigation and the regulatory reckoning that followed. State regulators forced reforms across the industry, and within two years federal law barred health insurers from rescinding coverage except for fraud or intentional misrepresentation of a material fact. A single hairdresser's claim file had helped end a national practice.

Fifty Years in Claremont

The firm Shernoff founded in 1975 — now Shernoff Bidart Echeverria LLP, after the partners Michael Bidart and Ricardo Echeverria who joined him — marked its fiftieth anniversary in 2025, still representing policyholders in disability, health, property, casualty, life, and liability disputes. Shernoff remains an active member of the California bar he joined in 1966, and his recent work runs to the matters he has always taken personally: medical-necessity denials overriding treating physicians, interrupted disability income, and the treatment of older policyholders whose legitimate claims are denied in what he regards as financial elder abuse.

"I view these as crusades rather than cases," he has said. A case ends with a verdict; a crusade ends when the injustice does. In Egan, an individual disability claim produced a California Supreme Court rule governing insurer conduct. Later matters challenged earthquake-claim practices, Holocaust-era policy denials, and health-insurance rescissions.