A Kentucky jury will begin deliberations Wednesday deciding whether Allstate Insurance Company violated the Kentucky Unfair Settlement Practices Act by systematically lowering valuation of minor injury claims and bullying claimants into accepting artificially low settlements. The Plaintiffs alleged that Allstate systematically undervalued claims relying upon a consultant who, according to the on-line publication Bloomberg:
developed methods for the company to become more profitable by paying out less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident.
The Plaintiff Geneva Hager, who filed the bad faith suit against Allstate,
[S]uffered neck and back injuries in July 1997 after the vehicle she was riding in was rear-ended by a truck hauling firewood on Man o’ War Boulevard. The truck’s driver, Thomas LaPointe Jr., was insured by Allstate.
Hager’s injury claim did not settle until December 1999, four days after her lawsuit was scheduled for trial.
The jury will now consider whether the insurance company intentionally delayed resolution of the claim relying upon the consultant recommendations to become profitable by getting “”boxing gloves” and describing claims handling as a “zero sum economic game” in which “Allstate gains” and “others must lose.””
Allstate routinely relied upon a computer program known as Colossus to evaluate claims based upon data entered into this computer system. The Plaintiff alleged that Allstate claims representatives regularly manipulated data input into the Colossus program to lower payouts and then delayed and even harassed claimants into accepting artificially low settlements. Allstate argued that it simply used consultant recommendations to root out claimant fraud and identify inflated claims. The jury will now decide whether Allstate’s practices were appropriate.
I have previously written about insurance bad faith practices which may raise profits at the expense of policy-holders. Carriers engaging in systematic behavior to maximize profits betray contractual promises made to policy-holders should be held accountable to policy-holders for broken contractual promises. The Kentucky jury will decide whether Allstate’s business practices were simple tactics to root out claimant fraud or bad faith conduct by a powerful insurance carrier with unequal bargaining power.
For more information on this subject, please refer to the section on Car and Motorcycle Accidents.