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Allstate Insurance Co. rigged a computer program to produce artificially low values for injury claims, sent fraudulent information to state regulators to avoid scrutiny, and accepted lawsuits over its claims handling as a cost of doing business, an attorney for a Richmond woman argued yesterday in the first day of a $1.425 billion civil trial.
Pointing to internal company documents that Allstate has fought to keep secret, Lexington trial lawyer J. Dale Golden accused the insurance giant of using various delay tactics and schemes to batter injury victims into accepting low-ball offers for pain and suffering.
Golden represents Geneva Hager, of Richmond, who is suing Allstate in Fayette Circuit Court for bad faith over the way it handled an insurance claim arising from a 1997 wreck.
Golden showed jurors 23 slides of what are known as the McKinsey documents, which were created by an international consulting firm hired to redesign Allstate's claims-handling processes in the 1990s.
The most controversial document, which plays off the company's slogan, showed how Allstate wanted to redistribute settlement times. The 90 percent who settled within 250 days -- and accepted paltry offers, Golden says -- were in 'good hands.' The 10 percent who held out got 'boxing gloves.'
The documents called for the insurance company to take an 'alligator approach' with plaintiff attorneys. 'Sit and wait,' one slide said.
Golden showed jurors a slide stating that Allstate could make $475 million from the new claims-handling process, called Core Claim Process Redesign and implemented in 1995. That estimate was later increased to $700 million, and another document forecast an increase in Allstate's stock price.
Golden said Allstate's hardball tactics are so profitable that only a massive jury verdict against it will deter it.
'You have to make the cost too great for them to use boxing gloves on my 3-year-old daughter, or anybody else in the state of Kentucky,' Golden told jurors. 'Or any other grandmother, or any other grandfather, mother, father, daughter, a son. Anybody.'
Golden showed performance evaluations that he says shows that the adjuster who handled Hager's claim was under orders to cut her claims payouts by 13 percent in 1997.
Allstate uses a computer program called Colossus that is intended to provide consistency in evaluating claims for subjective injuries such as pain and suffering. But Golden said Allstate skewed the data the program relies on to produce artificially low settlement ranges.
And, if that failed, Allstate adjusters manually entered 'offsets' to create an even lower value, he said.
Golden also accused the insurer of fraudulently redesignating claims so the Kentucky Department of Insurance doesn't catch on to its practices.
Attorneys for Allstate said its claims-handling processes were designed at a time when bodily-injury payouts were increasing faster than medical inflation, even though crash rates were not increasing.
Working with McKinsey & Co., Allstate found that soft-tissue injury claims arising from minor impact accidents were rife with fraud, exaggerated injuries and 'padded' medical treatment, attorney Floyd Bienstock said.
Bienstock said the claims targeted for 'boxing gloves' are the 10 percent thought to be fraudulent.
He said Golden is cherry-picking and distorting the McKinsey documents, which are actually 12,500 PowerPoint slides. Contrary to Golden's claims, the McKinsey documents show that Allstate tried to settle cases more quickly, he said.
But the new claims-handling processes do call for Allstate to apply more scrutiny to claims it suspects are fraudulent. Allstate attorney Mindy Barfield said Allstate has an obligation to do that to protect its policyholders.
Hager suffered neck and back injuries in 1997 when a truck loaded with firewood rear-ended her Dodge Dakota on Man o' War Boulevard. It took nearly two years to resolve her accident claim with Allstate, which insured the firewood truck's driver, Thomas LaPointe.
Barfield blamed delays in handling the claim on her previous attorney, Paul Kaplan. She said Kaplan refused to consent to routine requests for medical records.
Only Hager and her husband, William, claimed injuries from the wreck, Barfield said. LaPointe estimated that he was only driving 5 miles an hour when he struck the truck.
William exaggerated his injuries, and Geneva Hager did not disclose a workers' compensation claim and pre-existing back condition, Barfield said. Allstate had ample reason to investigate her claim, she said.
Barfield said Geneva Hager continued running a pest-control business while the claim was pending.
Bienstock said Geneva Hager's settlement demands for her bad-faith lawsuit increased from $7,298, to $75,000, to $6 million and finally to $1.425 billion last month.
Hager has had homeowners insurance from Allstate since 1995. And since January 2006, she has had Allstate automobile insurance.
'Is that the sign of somebody who thinks they have been mistreated?' Bienstock asked.
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