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Jury Rules for Allstate in Billion-Dollar Lawsuit Over Claims-Handling

Oct 9, 2007

LEXINGTON, Ky. _ Allstate Insurance Co., under siege by trial lawyers who say it drags out insurance claims, won a major legal victory Wednesday after a Kentucky jury unanimously found it was not responsible for a two-year delay in settling a woman's claim.

Trial lawyer J. Dale Golden had alleged that Geneva Hager, 60, of Richmond, Ky., was the victim of a systematic scheme by Allstate to bully car accident victims into accepting lowball offers for their pain and suffering. He had sought $1.425 billion in the seven-day trial in Fayette Circuit Court because, he said, it was the only way of ending a corporate culture of greed.

But a juror said Golden's arguments rang hollow with jurors, who voted 11-1 just minutes after beginning their deliberations. After only 35 minutes of discussion, another juror changed her mind and the verdict became unanimous, juror Betty Sherwood said.

"I thought the figure that Mrs. Hager was asking for was outrageous," said Sherwood, who is retired and lives in Lexington. "I thought that when I first went into the trial two weeks ago. But I didn't make a decision, I didn't read anything and I just made up my own mind that it was so obnoxious of her to ask for so much money _ for any money."

The verdict calls into question whether the so-called McKinsey documents are the dynamite evidence of systematic bad faith that trial lawyers across the country have claimed them to be. The documents, which are actually 12,500 pages of PowerPoint slides, were produced by consulting firm McKinsey & Co. as it overhauled Allstate's claims handling in the 1990s.

Golden showed jurors documents that described claims handling as a "zero sum economic game" in which "Allstate gains" and "others must lose." Another says Allstate should "hold the line" with claimants and deploy "boxing gloves."

The documents were the centerpiece of his case, and he cited them as proof that Allstate purposefully drags out claims and plays hardball.

But Allstate lawyers said Golden was cherrypicking quotes and taking the documents out of context, and the jury agreed.

Attorney Floyd Bienstock said the documents were referring to unscrupulous trial lawyers, chiropractors and claimants. He said Allstate's claims-handling processes, called Claim Core Process Redesign and implemented in 1995, were intended to vigorously investigate and root out exaggerated, "padded" and fraudulent claims.

"I just thought that everything, that all the evidence that Allstate presented, was fair," Sherwood said. "They're a business, and they are out to make a profit."

Bienstock said the processes actually expedite legitimate claims by measuring how quickly adjusters contact claimants and how long it takes them to close claims.

Hager's lawsuit had specifically challenged how Allstate handles minor-impact, soft-tissue injury cases, or MIST cases.

"What the verdict says is that this jury found CCPR and MIST to be fair and reasonable claim-handling practices that comply with Kentucky's Unfair Claims Settlement Practices Act," Bienstock said.

Golden said he will appeal the verdict. Last year Judge Thomas Clark overruled Golden's request to turn Hager's lawsuit into a class action representing thousands of soft-tissue injury victims in Kentucky. Golden said the outcome would have been different if he had won class certification.

"Certainly it takes away the argument that a certain individual is asking for too much money," he said. "That argument is nullified."

In his scathing closing argument, Golden told jurors that the only way to stop Allstate was to deliver a massive verdict that would create headlines across the country.

"If you award ten, twenty or thirty million dollars in this case, Allstate will be high-fiving all the way to the champagne store," Golden said.

Hager suffered neck and back injuries in July 1997 in a rear-end wreck in Lexington. Her injury claim was not settled until December 1999, four days after it was scheduled for trial.

Allstate had insured the driver who hit Hager's vehicle, Thomas J. LaPointe Jr. It settled the lawsuit for LaPointe's $25,000 policy limits.

He said McKinsey and Allstate determined that the insurance giant should place its focus on holding the line in minor impact cases, which constitute the large majority of injury claims. The payouts in such cases are typically small, and the lawyers who take the cases are young, he said.

Golden made much of a McKinsey document that asked if bad faith claims are an acceptable cost of doing business. He called it an illegal scheme that's made Allstate billions.

"It's ingenious," Golden said. "It's criminal, but it's ingenious.''

Hager had sought $475 million for mental anguish and $950 million in punitive damages from the insurance giant. Hager claimed that Allstate purposefully dragged out her injury claim from 1997 rear-end car wreck in Lexington for two years.

In her closing argument, Allstate attorney Mindy Barfield said Golden's case was built upon lies, distortion and greed. She said Hager and her previous attorney, Paul Kaplan, tried to conceal a previous injury and two pre-existing conditions: a form of arthritis and an abnormal curve in her spine. The blame for delays falls squarely on their shoulders, she said.

Hager claimed she was permanently impaired by the accident, even though doctors who examined her said she only had a muscle strain that would clear up in a few weeks, Barfield said. And Hager still ran her family's pest control business and started a tanning salon even as she claimed she could not work for two years.

The only secret documents in this case, Barfield said, were Hager's medical records.

"The plaintiff's case has never been about the truth," Barfield said. "It has been about sound bites. It has been about taking things out of context. ... Let me tell you what it is really about. It is about winning the lottery."

Even as Hager was claiming that Allstate is evil, she still signed up for an auto insurance policy in January 2006 and _ despite her denials _ is still a customer today, Barfield said.

"I don't go back to the same restaurant that gives me bad service," Barfield said. "It makes no sense.

___

(c) 2007, Lexington Herald-Leader (Lexington, Ky.).

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