Bad Faith Insurance Bible: Screw the Common Man

This Cowboy has told ayone who would listen how big insurance companies intentionally screw their customers to save a buck to pay for some obscene executive bonus. Ole Michael Sasso over Tampa Tribune way tells the story of Allstate and what they is hidin' from them insurance boys in Florida. Pull up a chair and learn more:

Secretive Allstate File Could Show 'Bad Faith'

By MICHAEL SASSO, The Tampa Tribune

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.