Allstate settled a bad-faith lawsuit in Missouri last week that helped net millions of dollars in fines against the company and prompted the release of controversial documents outlining the company’s alleged tactics for low-balling customers’ claims.
The suit stemmed from a September 2000 accident in an interstate construction zone. A man driving about 70 miles per hour reportedly rear-ended another man in a stopped vehicle. Three years after the accident, the man in the stopped vehicle was diagnosed with severe back and neck damage stemming from the crash and sued the man who hit him and Allstate for hundreds of thousands of dollars in medical expenses, the Kansas City Star reported.
Allstate agreed to pay the man $750,000 but never did, so he sued Allstate again, this time receiving a $1.2-million settlement. The other man sued Allstate for mishandling the case and acting “bad faith.” The company settled with him for an undisclosed amount last week, and a court hearing to approve the settlement is slated for July 21 – the day the case was set to go to trial, according to the Star.
An Allstate spokesman told the Star that the company was “pleased” the case was settled, but declined further comment.
Document Debacle
The settlement of the man who hit the stopped vehicle came after a struggle by both men’s attorneys to have access to documents outlining the company’s claims-handling and policy-writing strategies that included slides prepared in the early 1990s by McKinsey & Co. consulting firm. The slides outlined the company’s claims-payment system with an emphasis on large profits and low payments on claims and used the phrase “Good Hands or Boxing Gloves,” a play on the company’s slogan, to emphasize Allstate’s tough attitude toward claims.
Allstate initially refused to release the documents early last year, and a Missouri judge fined Allstate $7 million – $25,000 a day – and held the company in contempt of court for not releasing them. In November, the Missouri Supreme Court stepped in and ordered the documents’ release, and Allstate handed over around 120,000 pages.
The controversial documents also proved troublesome for Allstate in Florida earlier this year. The state’s insurance commissioner ordered the company to turn them over and suspended Allstate’s authority to sell insurance in Florida after the company didn’t release the documents. The company had to sign a sworn affidavit pledging to turn over the documents to Florida authorities before the suspension was lifted.
In April, Allstate posted the documents online with a statement saying, “Public criticisms by people with a vested interest in creating an inaccurate picture of the company’s claim practices have been based unfairly on only snippets from the documents taken out of context … Because of the need to address misunderstandings resulting from the growing misplaced focus by our critics on very small pieces of the whole, we have decided to make the documents public.”
For access to the documents, click HERE. To view our story about Allstate being named "worst insurer," click HERE. Click HERE for our story about Allstate’s release of the documents.
