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Secretive Allstate File Could Show 'Bad Faith'
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Published: January 23, 2008
Updated: 01/23/2008 12:24 am
TAMPA - Behind the fight between Florida's insurance commissioner and Allstate Insurance Co. is a mystery that could have come from a John Grisham novel.
Secret Allstate documents - known as the McKinsey documents - allegedly show how the insurance giant intentionally has made low-ball claims offers to its customers for years, netting Allstate billions of dollars in the process.
But the McKinsey documents have never seen the light of day.
Trial lawyers who have sued Allstate in recent years have eagerly sought them, and Allstate reluctantly has turned them over to lawyers under subpoena. However, each time a judge has prohibited lawyers from distributing them to the media and the public under a protective order.
Florida now is demanding the documents from Allstate and other insurers in a broad-based investigation of the companies' business practices, including alleged collusion with other insurers and their claims handling procedures. The issue came to a head last week, when Insurance Commissioner Kevin McCarty suspended Allstate's right to issue new insurance policies in Florida. A judge later lifted McCarty's suspension.
Allstate spokesman Mike Siemienas said the company intends to turn over the documents, but Florida might not find them all that revealing. The McKinsey documents at issue concern auto insurance - not the hot-button issue of homeowners insurance. Some of the strategies laid out in the documents were just ideas and never became Allstate policy, Siemienas said.
Still, Whitney Buchanan, an Albuquerque, N.M., trial lawyer who has seen the elusive documents, said that if Florida's insurance commissioner receives them, they could go a long way to showing that Allstate has not been playing fair.
"These documents are devastating to them in bad faith litigation," Buchanan said.
The McKinsey documents were drafted in the early 1990s, when Allstate hired the consulting firm McKinsey & Co. to review its business practices. Some of McKinsey's ideas became company practice, said David Berardinelli, a Santa Fe, N.M., trial lawyer who has sued Allstate on occasion.
In the course of one 2001 lawsuit, a judge ordered Allstate to give Berardinelli the McKinsey documents for a short period. The documents bore a watermark that prevented them from being reproduced, but the lawyer took numerous pages of notes on what he saw. He later turned those notes into a book called "From Good Hands to Boxing Gloves," which is marketed only to lawyers.
File Explains 'Fast Track' Strategy
One of Allstate's strategies: a "fast-track" settlement offer. Berardinelli claims the documents reveal how Allstate would offer insurance claimants an extremely low offer during the first 90 days after an auto accident. During these initial 90 days people are the most in need of money and most likely to accept a low-ball offer, Berardinelli said. Allstate claims adjusters were expected to persuade a certain percentage of customers to accept these fast-track offers, Berardinelli said.
Overall, Allstate tried to standardize the claims process, by using computer models that offered low-ball estimates of the value of a person's claim, Berardinelli said.
"They are charging people for coverage that they're never going to get," said Berardinelli, who has teamed up with Buchanan on occasion to sue Allstate. "That is fraud."
Siemienas, the Allstate spokesman, said Allstate investigates the merits of each insurance claim and bases its payouts on its investigation. It has no such standardized approach to payouts, he said.
Word of the McKinsey documents' existence spread among trial lawyers, and soon other lawyers began subpoenaing them from Allstate for their own insurance lawsuits.
Although some lawyers have received them, Allstate has gone to great lengths to prevent their dissemination to the public or the media. Four trial lawyers reached this week all said they are unable to give the documents to anyone else because of a protective order from the court.
Siemienas said Allstate seeks court orders because the documents contain trade secrets that could benefit Allstate's competitors if they were released.
In an ongoing Missouri case, a judge has ordered Allstate to turn over the documents to an attorney without benefit of the court order. But Allstate has refused, causing the judge to fine the company $25,000 a day until the company turns over the McKinsey papers to the attorney.
Allstate's fine in the Missouri case has grown to $2.4 million, according to new documents from the Florida Office of Insurance Regulation, which is watching the Missouri case. Rich Halberg, a spokesman for Allstate, acknowledged that there is a court order to produce the documents, but he said the judge hasn't enforced it and that Allstate hasn't incurred a fine.
What the documents mean - and how Florida's insurance commissioner might use them - is debatable.
2nd File Deals With Homeowners Policies
The McKinsey documents that have raised such a fuss nationwide were developed for auto accident cases, Halberg said. They don't relate to homeowners insurance, which has become such a major issue in Florida in recent years, he said. McKinsey & Co. created other documents for Allstate involving homeowners insurance, Halberg said, but they are not the documents that lawyers have targeted.
A spokesman for McKinsey, Mark Garrett, said in a telephone voice mail that McKinsey does not comment on matters relating to its clients.
Trial lawyers say the documents have become hot property in both auto and property insurance lawsuits.
William "Chip" Merlin, a Tampa trial lawyer, said he has subpoenaed the documents from Allstate on several occasions, and they have helped him secure settlements from the insurer on behalf of clients in auto and homeowners cases. The documents can show juries that a customer's insurance claim wasn't handled properly and that Allstate tried to keep unhappy customers from hiring attorneys, Merlin said.
Buchanan, the Albuquerque lawyer, said the documents helped him secure settlements from Allstate, too.
Still, Merlin said the documents alone aren't enough to win a lawsuit against Allstate.
In Lexington, Ky., trial lawyer Dale Golden subpoenaed Allstate for the documents and filed a class-action lawsuit against the company on behalf of auto accident victims. Even though he had the supposedly damning documents, a judge declined to make the lawsuit a class action, meaning he could not represent a wide group of people. Golden also later lost the case when he brought it on behalf of a single client.
Golden said he is appealing. He said the length to which Allstate has gone to prevent public disclosure shows how damaging they are.
"What else is Allstate hiding?" Golden asked.
Reporter Michael Sasso can be reached at msasso@tampatrib.com or (813) 259-7865.
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Reader Comments
Posted by ( scottybcoder ) on January 23, 2008 at 2:36 a.m. ( Suggest removal )
Allstate will probably be crushed by the weight of the stupidity of their board.
The way they treated their customers after the last round of hurricanes was so pathic that it even incensed stupid people.
Imagine a giant wind pushes a giant wall of water inland and knocks down houses.
Then imagine that an insurance company refused to pay claims on the argument that the customers didn't have flood insurance.
Nobody needs somebody to tell how wrong that is.
These turkeys canceled my homeowners last years after decades of my loyalty to them.
My property is 17 miles from the nearest water and 72 feet above sea level.
Now I ask you, do these dudes really need anybody to help them destroy the company?
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Posted by ( robertj1954 ) on January 23, 2008 at 5:13 a.m. ( Suggest removal )
I hope people are paying attention. Finally the corporate greed of this company has seen the light of day. The arrogance of Allstate is something Floridians should not tolerate.
People do have choices in the purchase of insurance. I would love to see a tsunami of Allstate customers dumping their insurance business with them.
That will get the attention of the insurance business and perhaps then we might see some REAL relief from this ridiculous insurance crisis that is ruining the housing industry.
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Posted by ( timinfla ) on January 23, 2008 at 6:23 a.m. ( Suggest removal )
This ins company also ruined my family back in 1990 after a traffic accident that left my father burned over 50% of his body and ended his career as a postmaster.. he had to get an attorney just to get his PIP this was his ins company and screwed him royal
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Posted by ( JackNelsonSteward ) on January 23, 2008 at 6:58 a.m. ( Suggest removal )
Do you think Allstate is the only insurance company that conducts business this way?
The whole point of the insurance business is to collect as much money as possible in premiums and pay out as little as possible in claims. That is what the world famous "fine print" is for.
All insurance companies operate in this way, including your health insurance company. Makes you wonder if it's all that good an idea to include insurance in the health care system, huh?
This, by the way, is why a capitalist economy needs State oversight. Unregulated, business tends to drift into these practices to the point that it is potentially harmful to its customers. To "promote the general welfare" the government properly regulates business so that the public is protected from the more predatory of its tendencies.
and that is the end of "Sermonette" for this, the twenty third day of January, two thousand and eight.
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Posted by ( MrShrek ) on January 23, 2008 at 7:22 a.m.
(This comment was removed by the site staff.)
Posted by ( RRR ) on January 23, 2008 at 8:10 a.m. ( Suggest removal )
I wonder how hard it would be for tbo to accurately and consistently follow this story for the readers. Follow the money. Do some indepth research on the executive leaders and where the money went and is now and how it will be recovered. Salaries and bonuses and for more than just this year. C'mon tbo lets see what you can uncover and do.
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Posted by ( MrShrek ) on January 23, 2008 at 8:13 a.m. ( Suggest removal )
Corpexec...I think the "information levee" has been breached. This should result in a flood of info, as well as a newfound fairness to us , the consumers. As I stated in an earlier post, All the other insurance companies are watching this, and they will react accordingly. They will not want to get caught up in this. This will be a learning experience for the insurance industry as a whole.
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Posted by ( rompous_wompous ) on January 23, 2008 at 10:26 a.m. ( Suggest removal )
@ first poster:
If the water rises from the ground up it's flood, always has been. Just beause YOU don't know what a flood is doesn't mean your insurance should pay for your lack of planing.
IF you are 17 miles from the coast you are still within the windborne debris area, I'm guessing thats why they decided they didn't really want your risk.
On the other hand, if Allstate has in fact not been opperating in good faith they SHOULD be sued. I can probably say I personally won't be buying a policy from them myself.
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Posted by ( FloridaCitizen ) on January 23, 2008 at 10:50 a.m. ( Suggest removal )
Shades of John Grisham's "The Rainmaker" is too apparent. Allstate and all like insurance companies should be driven out of business for these shady practices. Although this is property - not health - coverage, the hardships faced by their customers is similar! SHAME!!!
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Posted by ( abouttime ) on January 23, 2008 at 3:09 p.m. ( Suggest removal )
I sure hope Progressive is on the list for investigation for bad faith towards their clients. I wonder what documents they are hiding!!!!
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Posted by ( baloo ) on January 23, 2008 at 3:21 p.m.
(This comment was removed by the site staff.)
Posted by ( kimbo ) on January 23, 2008 at 5:24 p.m. ( Suggest removal )
Allstate is not the only one. Lets face it they are in it to make a profit. Why make them rich? Drop your insurance, quit paying. Put your money in a saving account. I started this years ago and it works. My first boss told me about it 50 years ago. Pay cash, do not owe and sleep well.
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Posted by ( ron ) on January 23, 2008 at 6:11 p.m. ( Suggest removal )
Lets get rid of all the insurance companies! That will fix them.
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Posted by ( twilitezone61 ) on January 23, 2008 at 7:11 p.m. ( Suggest removal )
i had allstate car insurance for years,
then i had a fender bender,and they didnt
do anything when i called back later,they
said i didnt file a claim.
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Posted by ( Chillyfil ) on January 23, 2008 at 7:16 p.m. ( Suggest removal )
Throw them in jail!
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Posted by ( Xcalibur ) on January 23, 2008 at 8:04 p.m. ( Suggest removal )
Allstate in Riverview wouldnt let me drop my insurance with them without providing proof I was insured through somoeone else. When I did, the sent my name to the stae anyway and I got arrested for driving on a suspended liscense. That was years ago, but I'll never forget it. Thank god Karma really does count for something.
"Thier Karma ran over thier Dogma."
-X
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Posted by ( rcroskery ) on January 23, 2008 at 8:40 p.m. ( Suggest removal )
I have been an attorney for years and have dealt with dozens of insurance companies. Allstate is UNIQUE in my experience, by far the worst, greediest, cheapest and hardest to deal with. Their adjusters have little authority and can only make outrageously low offers, particularly in low-impact cases, where they use economies of scale and "bought and paid for medical opinions" where little changes but the name to drive up costs for thpose that seek to get something reasonable for their accident. They have great commercials--bought for with profits culled from the blood of milions of victims. If this is your company, my advice (granted, only one man's opinion) is drop them and change insurance companies before you have to file a claim.
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Posted by ( Preissfamily ) on January 23, 2008 at 9:26 p.m. ( Suggest removal )
So what is Crist doing about Taxes???
Anyone worried about that???
I was in an accident and the insurance company wasn't Allstate and they low balled me for months. After wards..I should have done what all those TV commercials told me to do. Get a lawyer. If no one does that in these days...shame on them, not the insurance companies. If that was our own business we'd do the same. The bottom line is ...when you buy insurance ..you type in the info and it comes back with the price. The agents do not have the ability to lower dollar amounts without lowering coverage. If Allstate or any other company saves you money..then what is wrong with that. By the way..anyone with Teenage drivers...check out Allstate's "Your Choice Auto" plan. Can't beat it.
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Posted by ( Mia ) on January 23, 2008 at 10:36 p.m. ( Suggest removal )
kimbo, I would like to drop my insurances, but car insurance is required by law and house insurance is required by the bank when you have a mortgage. Would like to pay cash if I could. Get sick and the hospital won't take you without insurance unless you pledge your house or put up the money. It's hard to win at this game. If you beat the system, my hat is off to you.
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Posted by ( Nightbiker ) on January 24, 2008 at 4:37 a.m. ( Suggest removal )
I don't know where you go to the hospital, but thats just plain false. You will not be turned away at the ER for treatment. Now, what you want by way of elective treatment may be hampered by your ability to pay and then again it may not. But no lifethreatening problems are turned away.
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Posted by ( wmgerald518 ) on January 24, 2008 at 7:52 a.m. ( Suggest removal )
As long as the insurance companies have the lobby and slush funds to pay off the elected officals nothing will be done. We as a nation have proven time and time again we are sheep. When people caught committing crimes are still re-elcted, when they sit still for no paper trails in elections and allow all of the outrages they have without a whimper it is not realistic that anything will result in this matter. It seems we all want justice but not enough to vote or actually demand accountability as it seems that is too much trouble.
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Posted by ( Reegor ) on January 24, 2008 at 11 a.m. ( Suggest removal )
Food for thought. What if Allstate took $5 for every policy and put it towards actuary to pay claims. Paid their admin costs and then everything else to their own allstates reinsurance program. Then they say they lost money on claims but our reinsurance company made $160 Billion last year???? That sounds fair right. After all their claims paying company lost money so they should be able to raise rates.
They can and have done that in Florida.
Amounts may be off but not far. They made $42 Billion in one quarter last year. Crooked as is gets. And you thought the local drug lord was bad!!!!!!!!!!!!
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Posted by ( USPALLC ) on February 8, 2008 at 8:05 p.m. ( Suggest removal )
Go ahead and check out: www.allstateinsurancesucks.com You will find so much dirt on Allstate not even funny.
Kind Regards,
Dimitry Manasov
www.USPALLC.com
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Posted by ( theinsurancespot08 ) on February 23, 2008 at 4:28 p.m. ( Suggest removal )
This investigation with Allstate is just the tip of the iceberg. The insurance industry is heavily regulated by the states, yet violaters continue to promote wrong doing to employees and staff. You would think that being closely watched already, those who would seek to do wrong would stay far away from implementing policies, "written or unwritten" that would allow or promote these types of behaviors. This just seems obvious to me, but who knows, in the quest for the almighty dollar, I may be behind the curve.
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