Allstate's Bad Faith: Lawsuits And Consequences

Allstate, one of America's biggest insurance companies, has been sued for bad faith insurance practices on multiple occasions. Bad faith insurance practices refer to an insurance company acting in bad faith towards a policyholder, violating the implied covenant of good faith and fair dealing that is included in every insurance policy. Allstate has been criticised for its method of processing insurance claims, which involves denying the claim, delaying payouts, and defending its case for as long as possible. This strategy has led to multiple lawsuits and fines, including a $22 million settlement in Pennsylvania, a $10.5 million punitive award in Missouri, and the largest fine in Maryland's history for raising premiums without notifying customers.

Allstate's bad faith insurance practices

Allstate Insurance Company has been the subject of numerous lawsuits and has been criticised for its bad faith insurance practices. Bad faith in the context of insurance refers to an insurance company acting with "reckless disregard" for its policyholder, or a "frivolous or unfounded refusal to pay the proceeds of a policy".

Allstate has been accused of and sued for:

• Denying legitimate injury and property damage claims
• Employing strategies to reduce payouts, such as using a three Ds strategy: deny, delay, and defend
• Overcharging homeowners
• Raising premiums without notifying customers
• Unfairly deducting workers' compensation benefits from uninsured/underinsured motorist (UM/UIM) claims
• Failing to include general contractor's overhead and profit (GCO&P) in structural loss insurance claims

Allstate has faced legal action from both customers and former employees. In one case, Allstate was forced to pay $14.5 million on a claim it could have settled for $100,000. In another, Allstate settled a bad faith claim for $22 million, the largest bad-faith settlement in Pennsylvania history. Allstate has also received the largest fine in Maryland's history for raising premiums and was fined $70 million in Texas for overcharging homeowners.

Allstate's three Ds strategy

Allstate, America's biggest insurance company, has been criticised for its "three Ds" strategy: deny, delay, and defend. This strategy involves denying claims for insurance benefits, delaying payouts for as long as possible, and defending their case when the injured party seeks legal help.

The company has been sued multiple times for bad faith insurance practices, with former employees claiming they were rewarded for keeping the amount of money paid on claims low, even if they had to lie to their customers. Allstate has also been fined for raising premiums and changing policy terms without notifying customers, and for overcharging homeowners.

Deny: Allstate's first step in the claims process is to deny the claim for insurance benefits. This means that they refuse to pay out on legitimate injury claims, leaving their insured customers on the hook for expensive medical bills and other damages.

Delay: After denying a claim, Allstate delays making any payouts for as long as possible. This tactic can leave injured people desperate and more likely to accept a low offer.

Defend: If the injured person does not accept the low offer and seeks legal help, Allstate defends its case and prolongs the process, forcing injured people to jump through hoops to get their rightful benefits.

Allstate's bad faith conduct in liability claims

Allstate, one of America's biggest insurance companies, has been repeatedly criticised for its bad faith insurance practices. A report by the American Association for Justice condemns Allstate for continually putting its profits over policyholders, stating that the company uses a combination of "lowball offers and hardball litigation" to boost its bottom line.

Allstate's 'Three Ds' Strategy

The report also reveals that former Allstate adjusters claimed they were rewarded for keeping claim payouts low, even if they had to lie to their customers. Some former employees said that the company used a “three Ds” strategy: deny, delay, and defend.

Allstate's History of Lawsuits

Allstate has been involved in numerous lawsuits, with complaints filed against the company greater in number than those filed against almost all of its major competitors. Here are some notable examples:

• In Maryland, Allstate received the largest fine in state history for raising premiums and changing policy terms without notifying customers.
• In Texas, Allstate agreed to pay over $70 million in fines after overcharging homeowners.
• After Hurricane Katrina, Allstate was one of several insurance companies that improperly denied property insurance claims by residents of the Gulf Coast.
• In Collins v. Allstate Insurance Company, the plaintiff sued Allstate for breach of an insurance contract and bad faith, alleging that the company refused to cover all the damages caused by a storm to his house.
• In Johnson v. Allstate, a drunk driver was sued for severely injuring a couple. Allstate, the driver's insurer, did not inform him that his policy limit would likely be exceeded and refused to settle. The couple was awarded $5.8 million in damages and $10.5 million in punitive damages to punish Allstate for its conduct.
• In 2014, Allstate settled a bad faith claim for $22 million, the largest bad-faith settlement in Pennsylvania history. Allstate refused to pay a claim for a man whose leg had to be amputated after a car crash, despite several opportunities to do so.
• In 2024, a $25 million settlement was approved for a class action lawsuit against Allstate, addressing grievances related to opaque pricing practices and inflated premiums.

Allstate's refusal to pay claims

Allstate, America's biggest insurance company, has been repeatedly criticised for its refusal to pay claims and its method of processing insurance claims, which involves delaying, denying, and defending. The company has been accused of using a "three Ds" strategy to pad its pockets, which involves denying, delaying, and defending claims.

One example of Allstate's refusal to pay claims is the case of Patrick Hennessy, who was involved in a car crash that resulted in a catastrophic injury. Hennessy's leg had to be amputated above the knee after months of intensive treatment. Despite having $250,000 worth of coverage from Allstate, the company refused to pay the claim, leaving its insured, Ryan Caruso, on the hook for Hennessy's injury. This case eventually settled for $22 million, 88 times the amount of the original claim.

Another example is the case of a drunk driver who severely injured a couple in a car accident. The drunk driver's insurer, Allstate, did not inform him that his insurance policy limit would likely be exceeded by the case and refused to settle on his behalf. As a result, the drunk driver was left exposed to millions of dollars in liability to the injured couple. A jury returned a verdict for $5.8 million in damages and $10.5 million in punitive damages to punish Allstate for its conduct.

In addition to these cases, Allstate has also been accused of denying legitimate injury claims and unlawfully denying benefits to thousands of claimants. In one instance, Allstate was sued for breach of contract and bad faith by David Collins, who claimed that the company refused to cover all the damages caused by a storm to his house. Collins alleged that Allstate treated the coverage of the interior and exterior of his property differently and placed its interests above his. However, the court concluded that there was no evidence of bad faith and granted summary judgment in favour of Allstate.

Allstate's mishandling of structural loss insurance claims

Allstate, America's biggest insurance company, has been repeatedly criticised for its mishandling of insurance claims, including structural loss insurance claims. The company has been accused of using a variety of tactics to avoid paying out on claims, including "delay, deny, defend". This involves first denying the claim for insurance benefits, then delaying payout for as long as possible, and finally making the lowest possible offer when the claimant is desperate. If the claimant does not accept this offer and seeks legal help, Allstate defends its case as long as possible, forcing the claimant to jump through hoops to receive their benefits.

Allstate has faced numerous lawsuits and settlements as a result of its mishandling of insurance claims. One notable example is the case of Collins v. Allstate Insurance Company, where Allstate was sued for breach of an insurance contract and bad faith based on its refusal to cover all the damages caused by a storm to the plaintiff's house. Allstate argued that there was no evidence of bad faith and that it had only agreed to pay for repairs to the damaged portions of the roof. The court concluded that there was insufficient evidence to establish that Allstate acted in bad faith and granted summary judgment in favour of Allstate on the bad faith count.

Another example is a $22 million bad faith settlement in Pennsylvania, which is the largest in the state's history. In this case, Allstate refused to pay a claim after a car crash that resulted in the amputation of one of the victim's legs. Allstate's refusal to pay put its insured on the hook for the victim's injury, which constitutes bad faith.

Allstate has also faced criticism for its handling of structural loss insurance claims under its homeowners' insurance policies. Policyholders have claimed that Allstate failed to include adequate compensation for general contractor's overhead and profit (GCO&P), leaving policyholders with expenses that should have been covered by their insurance. This alleged oversight could have significant financial implications for Allstate's customers.

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