Given all the attention of the media and public on insurance related matters, I think this story is worthy of revisiting. A Missouri Appellate Court did not believe Allstate Insurance company's assertion that its failure to settle the claims of two car accident victims in a timely manner was not bad faith. Despite its slick commercials and claims of customer service Allstate's conduct spoke volumes about the way it handles claims. Allstate has long been viewed by Missouri personal injury lawyers as one of the worst when it comes to timely and fair claims payment.
The Allstate lawsuit stemmed from a car accident that occurred in March of 2000, when a truck driven by an intoxicated Wayne Davis Jr. collided with the subcompact car carrying Edward Johnson and his wife, Virginia. Both the Johnson's survived, but their medical bills came to at least $320,000.
The Johnson's initially agreed to settle for Davis' minimal insurance policy limits of $50,000, but Allstate did not respond until six months later. That was after the statutory 60-day limit for accepting had expired.
The Johnson's were forced to sue Davis, and he agreed to a judgment in excess of $5 million. However, the Johnson's also agreed not to collect on that judgment in return for Davis assigning to them of most of his claim against Allstate for its refusal to settle. The couple and Davis then sued Allstate in Jackson County Circuit Court, alleging the insurer had acted in bad faith when it did not respond in a timely fashion to the Johnsons' initial settlement offer.
Allstate defended itself by claiming that it lost the letter proposing the offer and responded late because it did not receive the Johnsons' medical records. Allstate, in like so many companies making insurance denials asserted that it was unsure the crash had caused the Johnsons' injuries, even though the couple had to be cut out of the wreckage, were life flighted by helicopter to the hospital and received care in an intensive care unit (ICU).
At the circuit court level, the jury did not accept Allstate's defense, and in November 2006, it found that Allstate had acted in bad faith. The jury unanimously awarded compensatory damages of $5.8 million plus 9 percent interest since the date of the judgment to the Johnsons. By a vote of 10-2, it also hit Allstate with $10.5 million in punitive damages.
Allstate appealed, but on Tuesday a three-judge panel of the Missouri Court of Appeals held that the jury's verdict was justified.
"Allstate's failure to recognize the severity of the Johnsons' injuries and the probability that the claim would far exceed Davis's policy limits; its failure to investigate the claim and respond to the demand in accordance with insurance industry standards and its own good faith claim handling manual; and its failure to advise Davis of the demand, his likely exposure for an excess judgment, and his right to retain counsel, are all circumstances supporting a reasonable inference that Allstate's refusal to settle was in bad faith," Judge Paul Spinden wrote in the panel's decision.
The Allstate lawsuit stemmed from a car accident that occurred in March of 2000, when a truck driven by an intoxicated Wayne Davis Jr. collided with the subcompact car carrying Edward Johnson and his wife, Virginia. Both the Johnson's survived, but their medical bills came to at least $320,000.
The Johnson's initially agreed to settle for Davis' minimal insurance policy limits of $50,000, but Allstate did not respond until six months later. That was after the statutory 60-day limit for accepting had expired.
The Johnson's were forced to sue Davis, and he agreed to a judgment in excess of $5 million. However, the Johnson's also agreed not to collect on that judgment in return for Davis assigning to them of most of his claim against Allstate for its refusal to settle. The couple and Davis then sued Allstate in Jackson County Circuit Court, alleging the insurer had acted in bad faith when it did not respond in a timely fashion to the Johnsons' initial settlement offer.
Allstate defended itself by claiming that it lost the letter proposing the offer and responded late because it did not receive the Johnsons' medical records. Allstate, in like so many companies making insurance denials asserted that it was unsure the crash had caused the Johnsons' injuries, even though the couple had to be cut out of the wreckage, were life flighted by helicopter to the hospital and received care in an intensive care unit (ICU).
At the circuit court level, the jury did not accept Allstate's defense, and in November 2006, it found that Allstate had acted in bad faith. The jury unanimously awarded compensatory damages of $5.8 million plus 9 percent interest since the date of the judgment to the Johnsons. By a vote of 10-2, it also hit Allstate with $10.5 million in punitive damages.
Allstate appealed, but on Tuesday a three-judge panel of the Missouri Court of Appeals held that the jury's verdict was justified.
"Allstate's failure to recognize the severity of the Johnsons' injuries and the probability that the claim would far exceed Davis's policy limits; its failure to investigate the claim and respond to the demand in accordance with insurance industry standards and its own good faith claim handling manual; and its failure to advise Davis of the demand, his likely exposure for an excess judgment, and his right to retain counsel, are all circumstances supporting a reasonable inference that Allstate's refusal to settle was in bad faith," Judge Paul Spinden wrote in the panel's decision.
