INSURANCE FIRM PREYS ON VICTIMS OF LOW-IMPACT CRASHES, ATTORNEYS SAY
HERALD-LEADER STAFF WRITER
Allstate Insurance Co. is engaging in a systematic and fraudulent scheme to make obtaining fair offers for damage claims so difficult that victims accept low offers rather than pursue costly and time-consuming litigation, attorneys for a Richmond woman argued yesterday in Fayette Circuit Court.
Attorneys for Geneva Hager, who suffered neck and lower back injuries after being rear-ended by a 2.5 ton truck insured by Allstate in 1997, asked Judge Thomas Clark to allow them to proceed with an $800 million, class-action lawsuit against the company. The lawyers are seeking $6 million in damages for Hager alone.
If the lawsuit is given class certification, it could affect thousands who have been injured in wrecks with minimal property damage and filed claims against Allstate in the last 10 years.
At issue is not how much Allstate owes Hager for her claim. The insurance company paid Hager $25,000 -- the policy limit for the truck's driver, Thomas J. Lapointe Jr. -- more than five years ago. But Hager's attorneys argue it was only offered days after Clark set a trial date over her claim.
What's in dispute is whether Allstate acted in good faith while negotiating Hager's claim -- and whether its protocol for handling what the company calls "minor impact, soft tissue" claims violates Kentucky's Unfair Claims Settlement Practices Act.
The plaintiff's lawyers say Allstate illegally singles out cases with about $1,000 in property damage, trains adjusters to assume such wrecks can't result in severe injuries and drags out those cases so claimants will give up.
Allstate, however, contends it looks at each claim individually. It said separating low-impact wrecks is a legitimate way of weeding out fraudulent claims.
Defense attorney Mindy Barfield said Hager and her attorneys are motivated by greed and started plotting a lawsuit soon after the accident. "Their claim for ... relief is just a setup to get the money," she said.
Hager's attorneys say her case is proof that Allstate does not negotiate in good faith. Her injuries were so apparent the claim should have been settled quickly, they say.
Instead, Allstate forced her to file a lawsuit and dragged her claim out for 21/2 years, said attorney Dale Golden of Lexington.
Golden said that such delaying tactics are part of a coordinated strategy outlined in internal company documents that Allstate's lawyers successfully argued to have sealed in court records. Some of those documents were publicly disclosed at yesterday's court hearing.
Excerpts of the internal documents, which provide a blueprint for claims handling, were projected on the courtroom wall by Hager's lawyers. The documents described claims handling as a "zero-sum economic game" that Allstate must win and "others must lose."
"In order for Allstate to benefit, it must take the money from the injured victims and it's got to put it in its own pocket," Golden said in court. "That's exactly what Allstate set out to do, and it made no bones about it."
Executives knew hardball tactics would result in more bad-faith lawsuits, but accepted that as a cost of doing business since legal fees and damage awards would not outpace cost savings, Golden said.
"They are manipulating the justice system," he said. "They are taking advantage of the people who are most vulnerable."
Golden said Allstate singled out low-impact claims because they are typically not represented by lawyers who "are willing to go to the wall." Those attorneys tend be less experienced and more malleable, he said.
The documents called for Allstate to pull out the "boxing gloves" for claimants who retain a lawyer. Those who settled quickly were in "good hands."
By pounding opposing lawyers, the company set out to make it so expensive to get fair claim offers that law firms would refuse to take up soft-tissue injury cases, Golden said.
The company's projections showed the strategy could create an additional half-billion dollars a year in profits by 1998, he said. Allstate tied claims adjusters' compensation to their ability to stay within projected baseline payouts, Golden said.
He likened it to telling a meteorologist he could only forecast so many days of rain a year.
"The only way that can happen is if the weatherman says, 'OK, I'm going to predict rain regardless of whether it is going to rain or not,'" he said.
Neither party in the case will be able have the benefit of testimony from the adjuster who initially handled Hager's claim. Sarah E. Howard killed herself in Allstate's Lexington office in August 1999.
A few weeks later her son filed a lawsuit on her estate's behalf, alleging Allstate drove her to her death. It said Allstate overwhelmed Howard with work and belittled her after she filed a workers' compensation claim in 1998 and later when she asked for medical leave. The suit was settled out of court.
Golden made reference to Howard's case in his opening remarks yesterday.
Four days before Hager filed her lawsuit in July 1998, Allstate classified Hager's wreck as a more serious accident. Why that happened is a point of contention between the two parties.
Barfield said it was because claims adjusters realized her injuries were legitimate. That's evidence Allstate judges each case on its merits, she argued.
But Golden said Allstate "fraudulently" changed the classification after it caught wind of the lawsuit. He says the insurance firm would not have changed its stance if Hager had not hired a lawyer.
Allstate's lawyers vigorously defended the company's claims handling, saying it is a way to crack down on fraudulent claims that drive up insurance premiums. Allstate notes that Kentucky's Department of Insurance found the practice to be legal.
The company also accused the plaintiff's lawyers of selectively quoting and distorting its internal documents.
Barfield said Hager's lawyer Paul Kaplan, who is working with Golden on the case, dragged out the claim by refusing to hand over medical records of a prior medical condition. She said Allstate was justified in originally classifying the wreck as a minor accident, since Hager's vehicle only had a small dent on the rear bumper.
Allstate is also opposing Hager's motion to seek class-action status, saying her claim is not representative of passengers in low-impact accidents. Barfield also said there are so many individual factors in each accident that a class-action suit "would be a nightmare."
"Thousands of mini trials would have to take place," she said.
Both sides are waiting for Clark's ruling on the class-action issue. He gave no indication yesterday when that might come. Hager's trial is scheduled for September."
To learn more about Allstate's claim practices and how they have changed the insurance industry and the way insurance claims are handled, see the forthcoming book From Good Hands to Boxing Gloves: How Allstate Changed Casualty Insurance in America.