Allstate to settle in disputed claims policy case

Friday, July 11, 2008 | 3:32 p.m. CDT; updated 1:04 p.m. CDT, Tuesday, July 22, 2008

KANSAS CITY — Allstate Insurance Co. has agreed to settle an insurance case that had attracted national attention over the insurer’s refusal — and eventual agreement — to provide key documents on how it evaluates and pays claims.

The company’s reluctance to release the records led to more than $7 million in fines from Jackson County Judge Michael Manners.

Manners has scheduled a July 21 hearing on whether to approve the settlement, which is the day the case was scheduled to go to trial.

Attorneys for both sides say the terms of the deal are confidential.

Allstate spokesman Mike Siemienas said the nation’s second-largest home and auto insurer was happy to resolve the case. He declined to comment further.

The case stems from an accident eight years ago on Interstate 70 involving Allstate policyholder Paul Aldridge, of Hawaii, who struck a truck from behind, severely injuring the driver. Aldridge later sued Allstate for bad faith after it refused for years to pay a claim.

Attorneys for both Aldridge and the accident victim, Dale Deer, of Warrensburg, requested a set of records prepared by consultant McKinsey & Co. on behalf of the insurance company that showed how it set up a claims payment system in the 1990s that was aimed at generating big earnings while keeping claims payments low.

One of the slides was titled “Good Hands or Boxing Gloves,” a take on the company’s slogan, “You’re in good hands with Allstate.”

Allstate refused to turn over the records, saying they contained trade secrets and would tip the company’s hand as to its trial strategy.

In September, Manners held Allstate in contempt and began fining it $25,000 per day.

The Missouri Supreme Court in November ordered Allstate to turn over the documents, leading the company to disclose more than 120,000 pages of records.

Other states also have fought Allstate over the records. Florida’s insurance commissioner, Kevin McCarty, suspended the company’s ability to sell insurance there after it refused subpoenas for the records. An appeals court later sided with McCarty. Allstate eventually signed an affidavit that it had turned over the records and would comply with future requests for documents, leading McCarty to lift the suspension.

In April, the company posted 150,000 pages of documents on the Internet related to how it handles customer claims.

“Public criticisms by people with a vested interest in creating an inaccurate picture of the company’s claim practices have been based unfairly on only snippets from the documents taken out of context,” Allstate said in a statement with the records. “Because of the need to address misunderstandings resulting from the growing misplaced focus by our critics on very small pieces of the whole, we have decided to make the documents public.”

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