Articles Posted in Insurance & Bad Faith Claims

The attorneys of the Alaska Personal Injury Law Group continue to watch closely as the insurance commissioner of Florida battles to obtain documents that show Allstate’s institutional bad faith claim handling practices. Allstate is using the same tactics of delay and obfuscation against the regulators that it typically uses in bad faith cases against Allstate in Alaska. A good example is the 12,000 McKinsey & Company documents that Allstate finally produced to the Florida insurance regulators last week, stamped as “trade secrets.”

As part of its public relations campaign, Allstate paints itself as the victim who is trying hard to find and produce the documents covered by the insurance regulators’ subpoena. The truth is that these crucial documents about Allstate’s bad faith practices were readily available all along. The McKinsey documents had been catalogued, numbered and scanned in prior bad faith cases, long before the regulators subpoenaed them. These catalogued documents were available to Allstate as paper copies and had also been copied onto computer CD-ROM or DVD. They were available to produce to the Florida insurance regulators with no more effort than a phone call.

There is no valid excuse for Allstate failing to produce the McKinsey documents to the Florida insurance regulators before the January 15 hearing for which they were subpoenaed. Allstate just wanted to hide them from the public and not be questioned about them at the hearings.

Will Allstate finally have to make public its own internal documents about claim handling practices and procedures that many insureds allege are bad faith programs that cheat them of the insurance coverage they paid for? Attorneys of the Alaska Personal Injury Law Group are watching closely as insurance regulators try to obtain these documents. Many of these documents are the very same ones our lawyers have been trying to get from Allstate in Alaska cases alleging bad faith and fraud by Allstate against its own Alaska insureds when they made a claim for the coverage benefits they paid for.

As I reported in an earlier article, the Florida Office of Insurance Regulation (FLOIR) subpoenaed from Allstate documents about its bad faith program for systematically low-balling and underpaying claims. This program, instituted in Alaska and the rest of the country in 1995, was created with the help of the McKinsey Company. The Office of Insurance Regulation states in a brief to the court that the insurance statutes required Allstate to provide these documents in response to its subpoena. More importantly, the regulators state that Allstate purposefully failed to provide the documents and willfully violated the insurance code by withholding them.

FLOIR also states that Allstate made misrepresentations to the court about documents it did produce. As Allstate typically does in bad faith insurance claims against it in Alaska and elsewhere, Allstate pointed to the thousands of documents it had produced. Allstate’s trick, of course, is to produce documents the opponent already has or that are meaningless, while sparing no effort to hide the important documents. FLOIR also stated to the court that many of the documents Allstate did produce were public documents it already had.

FLOIR also told the court that Allstate “falsely marked” as “Trade Secret” many documents that were publicly available, many even available on the internet. This “trade secret” ploy is a favorite of Allstate and other insurers in bad faith cases. Evidence harmful to the insurer is a “trade secret,” even if it is on the internet or otherwise publicly available. In our Alaska bad faith cases, Allstate has repeatedly claimed “trade secret” protection for documents we were able to find by investigating public sources.
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Yesterday I wrote an article about Allstate’s failure to provide documents required by a subpoena from the Florida Office of Insurance Regulation. Some of those important documents are the same claim handling documents that members of the Alaska Personal Injury Law Group are trying to get from Allstate in a class action for bad faith and fraud against Alaska insureds.

The documents we are seeking have to do with special programs Allstate implemented in 1995. There have been assertions in bad faith cases across the country that these programs systematically underpay compensation Allstate owes to its own insureds under their Allstate policies.

As noted in my article yesterday, the Florida Commissioner of Insurance suspended what was supposed to have been a two day hearing after only a half day, so he could consider what sanction to impose on Allstate to make them produce the documents. Since a court in Missouri was already fining Allstate $25,000 a day for refusing to produce documents, he concluded a fine would have no effect on Allstate. So he suspended the authority of three Allstate companies to write new insurance in Florida. The companies were Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Company. He later issued a Final Order that expanded the list to include all ten Allstate companies that had been served with the subpoena.

Have you ever felt like insurance rates hardly ever go down, even when the insurance industry makes record profits? Funny you should feel that way. Two current news items may help explain why. Both involve attempts by Allstate Insurance companies to obtain very large rate increases.

The first occurred in Florida. Allstate submitted proposed rate increases for various Allstate companies that would have increased rates by a whopping 28 to 42 percent. Insurance regulators denied the rate applications and Allstate appealed. At the beginning of the appeal hearing, Allstate withdrew its applications for the huge rate increases. The Office of Insurance Regulation had subpoenaed many documents for the hearing, but Allstate failed to provide them. After half a day, the Insurance Commissioner cancelled the hearing to consider sanctions against Allstate.

Inquiring minds would ask: Why would an insurance company withdraw its request for such huge rate increases if they were truly justified by the actual loss experience? If the loss experience was that bad, wouldn’t the insurance company need those increases to stay in business? Wouldn’t the insurer fight for those necessary rate increases? Some in Florida must have been asking those same questions, as the state Senate immediately announced it would require Allstate to attend hearings and testify.

A Missouri appeals court Tuesday upheld an $8 million punitive damages judgment imposed against State Farm Insurance. The case involved a lawsuit filed by two insureds who held an auto insurance policy with State Farm. The insureds accused State Farm of malicious prosecution and breach of contract.

As is common, the insurer was able to frustrate resolution of the claim for years. The case began over 10 years ago when the insureds reported the theft of a Toyota 4Runner, which was later found abandoned and burned in Miami County, Kan. State Farm declined to pay the $10,000 claim and, working through an industry investigative service, referred the case to Johnson County prosecutors, who charged Hampton and Vail with insurance fraud. This technique of getting the authorities to bring fraud charges is commonly used by insurers as a technique to intimidate insureds into abandoning even legitimate claims made against their policies.

After a jury acquitted the insureds of any wrongdoing in 2001, they filed the civil action against State Farm. In September 2005, the civil jury awarded them each $400,000. Later that year, a judge adjusted those amounts to $250,000 because of a statutory cap, and he also assessed the punitive awards.