Insurance behemoth Allstate has carved out quite a niche for itself on this blog - unjust rate hikes (rejected and rolled back in California; foisted upon helpless Illinoisans), record profits, and have we mentioned they were ranked the nation's worst insurer?
Sure enough, Allstate returns to its place of (dis)honor thanks to several bad faith lawsuits.
Yesterday, the Missouri Court of Appeals upheld a $16 million verdict after Allstate failed to settle a drunk-driving case.
After a drunk driver crossed a highway median and slammed into a
passing vehicle, severely injuring its occupants, the occupants offered
to settle with Allstate for $50,000, the maximum of the driver's insurance policy. But Allstate took six months to respond, much longer than the 60 days that the settlement required. On top of this, Allstate
never told the drunk driver exactly how much he was liable for, or even
advised him of his right to legal defense. So the victims sued
the driver instead. That case settled for $3.5 million. In turn both parties got together and sued Allstate for not settling the claim in the first place and acting in bad faith.
“Allstate’s failure to recognize the severity of the Johnsons’ injuries
and the probability that the claim would far exceed Davis’s policy
limits; its failure to investigate the claim and respond to the demand
in accordance with insurance industry standards and its own good faith
claim handling manual; and its failure to advise Davis of the demand,
his likely exposure for an excess judgment, and his right to retain
counsel, are all circumstances supporting a reasonable inference that
Allstate’s refusal to settle was in bad faith,” Judge Paul Spinden
wrote.
Oh, and also Allstate's defense was, in part, that the victims were not that badly hurt. Nice.
Although Allstate argued that it was unsure the crash had caused the
Johnsons’ injuries, Kansas City lawyer Walter Simpson, testifying as an
expert witness, pointed out that they had to be cut out of the
wreckage, were flown by helicopter to the hospital and received
intensive care. [For a combined 75 days!]
And Allstate had just been slammed with another bad faith payout in a Kansas City court a few weeks earlier! Moreover, hundreds of claims have emerged over the last year from the aftermath of Hurricane Katrina, with victims alleging insurers acted in bad faith in trying to wriggle out of claims payments across the region. These cases are largely ongoing, but Allstate was first to be slapped with major punitive damages.
All this reprehensible behavior this serves as an important backdrop for State. Sen. John Cullerton's bill on improper claims liability. The bill, SB2109, creates civil penalties for insurers who commit "improper claim practices," eliminates the $60,000 damage cap on actions against insurers for bad faith delays, and institutes harsher penalties on insurers who bring fraud claims in bad faith against customers.
None of which would be a moment too soon. The bad faith cases against Allstate reveal the extent to which the company (and other insurers) will stall, obfuscate, and simply lie to avoid paying damages and fulfilling its responsibilities. In a state with no insurance regulations to speak of, the Illinois consumer is already badly exposed, and the damages wrought by flooding this spring and summer will undoubtedly lead to more clashes between victims and stonewalling insurance companies.
The Cullerton bill would at least offer some protection for Illinois consumers, and may help decide whether the 2008 flood aftermath features a repeat of the Katrina insurance episode.
Allstate's well-known marketing campaign asks rhetorically, "are you in good hands?" A lot of vulnerable Allstate customers are probably not so sure.
