Kentucky Injury Law Blog

An appeals court has upheld the $16 million bad faith judgment against Allstate Insurance Co. for the insurer’s failure to settle a claim for the $50,000 limit on an auto insurance policy. Virginia and Edward Johnson filed an auto accident claim against Allstate after they were seriously injured in a motor vehicle crash caused by Wayne Davis Jr., an Allstate policyholder, in March 2000. Edward spent 35 days in the hospital for his injuries, while Virginia stayed for 40 days. Their medical expenses for their hospital stay cost $320,000.

Although they initially agreed to settle for Davis's $50,000 policy limit with Allstate, the insurance company took 6-months to respond to their claim and by then the 60-day statutes of limitations for accepting the insurance claim had passed. When they were unable to reach a car crash settlement with Allstate, they sued Davis for personal injury.

Davis and the Johnsons reached a settlement agreement. As part of settlement, the couple agreed not to collect the $5 million judgment against Davis in return for giving the Johnson’s 90% of his bad faith insurance claim against Allstate for their refusal to settle his case with them.

Together, the Johnsons and Davis sued Allstate not only for its bad faith refusal to settle but also for equitable garnishment. Allstate had disputed whether the Johnson’s injuries were a result of the accident with Davis.

The Missouri Court of Appeals's decision upholds the verdict that a jury had awarded to them in 2006: $5.8 million in compensatory damages and $10.5 million in punitive damages.

Bad Faith Claims
Unfortunately, insurance companies have been known to wrongfully refuse to pay claims that they should cover. This goes against Kentucky law, which mandates that insurers exercise good faith when dealing with policyholders or others filing claims.

If you were injured in an auto accident an your insurance company or the insurer of the liable party’s insurance company wrongfully denied your claim, you may be entitled to damages from the insurance company for their bad faith practices. A Louisville personal injury lawyer with experience in dealing with both injury cases and bad faith claims can help you.

Missouri Court Upholds $16 Million Bad Faith Award Against Allstate, InsuranceJournal.com, July 30, 2008

Appeals court upholds $16 million verdict against Allstate, KansasCity.com

Related Web Resource:
State Insurance Laws, Badfaithinsurance.org

Following an 18-month investigation into the way the nation’s largest auto insurance companies handle claims involving minor motor vehicle accidents, CNN last year reported that there is a good possibility that the two largest insurers—State Farm and Allstate—will challenge any minor medical claim and offer to pay only a small fraction of all accident costs.

The news network says that the confidential documents it examined revealed that these actions are motivated by profits—papers that the companies are determined to keep private. The insurers reportedly execute this strategy by dragging victims of minor car collisions into court for cases lasting years in the name of supposedly fighting fraud.

When given the opportunity to respond to the allegations, both companies refused to engage in a discussion. State Farm said it addressed each claim on its own merits and that generalizations that it had adopted consultant recommendations like other insurance companies was inaccurate. The consultant the insurer was referring to, McKinsey & Co., works for both State Farm and Allstate.

One former Allstate claims agent, Shannon Kmatz, says that the company trained her to treat minor accident cases as fraudulent and to offer victims as little as possible. She says she has offered injury victims of minor accidents payments as low as $50.

Former insurance company insider Jim Mathis says the insurers’ strategy involves three D’s: delaying, denying, and defending the claim. The end profits for insurers that limit accident payments have reportedly been huge.

One victim involved in a rear-end accident, Ann Taylor, says that State Farm only offered her $2,000, even though her medical and recovery costs and lost wages related to her herniated disc muscle tears ended up costing $15,000.

Another injury victim initially offered $15,000 by Allstate spent years fighting her case in court until a jury awarded her $167,000 plus interest. According to industry insiders, however, 80-90% of accident victims do not contest what insurance companies offer them.

In Kentucky, our Louisville personal injury law firm helps clients file bad faith claims against insurers that refuse to pay accident claims or make unreasonably low offers to injury victims.

Related Web Resources:

Auto insurers play hardball in minor-crash claims, CNN.com, February 9, 2007

AAJ Report: Ten Worst Insurance Companies in America, July 9, 2008 (PDF)

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