$20 Million Jury Verdict Shows Allstate's True Colors
By Gerri Elder
A Lake County, Indiana jury entered a $20 million verdict against Allstate this week. On its face, the case looks like one of those dramatically reported by anti-litigation lobbyists: Kenneth Allen began with a claim for $7,000 in medical bills and $18,000 in lost wages and ended up with a $20 million verdict.
When examined more closely, the case is a perfect illustration of what's wrong with insurance companies in America, and with Allstate in particular. The critical question that never gets asked in these cases is "Why did it take so long and become so expensive to resolve this case?"
The insurance lobby does a good job of disseminating the vague impression that the reason for all of these added expenses-expenses that they say ultimately make insurance more expensive for everyone, drive companies out of business, and prevent professionals from practicing in certain areas-is greed. And it is. But it isn't, as they imply, the greed of personal injury victims or injury lawyers.
The recent verdict against Allstate is just one of many recent decisions that show exactly where the real problem lies: with insurance companies that refuse to pay legitimate claims in hopes of maximizing profits.
Kenneth Allen's $25,000 claim became a $20 million case because Allstate didn't pay the $25,000. Interestingly, Allen's injury occurred in 1995, the same year that Allstate adopted a radical new approach to claims processing designed specifically to minimize payouts and maximize profits. The plan was devised by professional consultants, was complex and involved extensive employee training, but it boiled down to this: settle the case below value, or make the claimant suffer for standing up for his rights by dragging the case out for years.
Allstate succeeded in making Allen suffer, too. His doctor and a psychiatrist testified that the ten year battle with Allstate had contributed to high blood pressure, heart problems and a stroke.
It would be pretty to think that this case was an oddity, but a recent book about Allstate's claims processing tactics reveals just the opposite. Not only is this standard practice at Allstate, but the same consulting firm that designed the Allstate approach has provided services to several other major insurers, according to author David Bernadinelli.
In fact, recent bad faith cases have been so egregious that state governments have begun to step in to individual cases in hopes of facilitating fair settlements. In some of these cases, it's been the insured's own carrier, a carrier that had been collecting the injured party's premiums for years, that has acted in bad faith.
Now, Allstate has announced that it will devote more time and resources to fighting Kenneth Allen, appealing the Indiana jury's verdict.