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Trial lawyers question Allstate claims practices

Is attempting to bring more people more dollars to compensate them for their injuries faster than if they’d hired an attorney simply smart business practice — or does it constitute the unauthorized practice of law, misleading injured persons in Wisconsin?That’s a question Wisconsin trial lawyers and State Bar committee leaders have been asking in a dispute with Allstate Insurance Co. over its procedures for handling claims brought against its insureds.The dispute centers around two practices.The first is Allstate’s nationwide distribution of a pamphlet which was previously entitled, “Do I Need an Attorney?” and is now called, “The Role of Attorneys in the Claim Process.” The flyer states that people who don’t retain attorneys in making claims generally settle their claims more quickly. It also says that attorneys take up to one-third of a settlement amount.The second practice is the use of a “Customer Service Pledge” in letters from claims adjustors to persons making claims against Allstate insureds promising “quality service,” a quick and fair investigation of the facts, and, to the extent that its policyholder is at fault, “an appropriate offer of compensation.”Appleton attorney Kevin Lonergan of Herrling, Clark, Hartzheim & Siddall Ltd. is the president of the Wisconsin Association of Trial Lawyers. He said that WATL’s board of the directors hasn’t formulated an official policy position opposing the use of the brochure or the pledge, but it has informally discussed it, and thinks that they are inappropriate.“I think the plaintiffs’ lawyers feel that Allstate’s practices are outrageous, unethical and borderline on the illegal practice of law,” Lonergan said. “They are definitely misleading injured people into thinking that they’re going to be looking after their interests, when in reality, they know darn well that the only interests that they’re truly looking after are their own.”In agreement is Wausau attorney Shane W. Falk. Falk, of Seidl & Stingl S.C. He became aware of Allstate’s practices when clients, who had received the pamphlet and the pledge, retained him.Aren’t consumers sophisticated enough to understand the potentially adversarial relationship between them and the company?Falk said no. “Let the buyer beware? I don’t buy it in the insurance context,” he said. Injured people can be completely misled by the Allstate pamphlets, he added, and when they realize that they relied upon an adjustor’s poor advice, they can’t sue him or her for malpractice.Like Falk, Milwaukee lawyer Jonathan S. Safran has had clients who have received the materials from Allstate. The insurer has a reputation among plaintiffs’ lawyers for fighting zealously to protect its interests, and the pamphlet and pledge are just one of its strategies, he said.“When we see Allstate on the other side of a case, we generally know that it’s going to be a problem,” said the partner with Gendlin & Safran L.L.S.C.

Study questions Allstate’s practices

Bolstering the opinions disfavoring Allstate’s pamphlet and pledge to some extent is a February 1997 study from the University of Massachusetts in Amherst. The study entitled, “Belief and Intent: An Analysis of Public Response to Persuasive Messages, Case Study: The Allstate Campaign,” concluded that 67 percent of its respondents felt that the “Do I Need An Attorney” document “provided good information that they would, or might follow.”The study additionally found that approximately the same number liked the idea of a customer service pledge, but less than half of those who liked the idea of a pledge believed the company would uphold the claims of this pledge.“The study shows that these pamphlets are effective, and that’s precisely why Allstate uses them. If they didn’t work, they’d stop,” Falk said.Falk also pointed to the various legal remedies sought against the pamphlet and pledge in other states.According to the Association of Trial Lawyers of America (ATLA), as of last month, 12 states had achieved some level of success in preventing the use of the materials, or in forcing Allstate to revise them. A state legislature, insurance regulators, attorney generals, state bars and/or unauthorized practice of law committees have used varying approaches against Allstate. Among the states challenging Allstate is Washington, where King County Superior Court Judge Phillip G. Hubbard of Seattle ruled on Jan. 14 this year that Allstate had engaged in the unauthorized, negligent practice of law. Allstate has appealed the ruling.Meanwhile, in West Virginia, those opposing Allstate’s practices successfully employed a different tactic. The West Virginia State Bar’s Unlawful Practice Committee concluded in an ethics opinion dated Sept. 22, 1997, that the insurer had engaged in the unlawful practice of law.“The Allstate document ‘Do I Need An Attorney?’ which accompanied by the ‘Customer Service Pledge’ clearly portrays Allstate as a company attempting to furnish advice, service, or recommendations to individuals harmed by its insured under circumstances which imply the possession or use of legal knowledge and skill. The entire ‘Customer Service Pledge’ and the promises Allstate claims to make thereunder clearly imply the possession and use of legal knowledge and skill,” wrote the unanimous committee.Other actions include a nationwide class action filed in Illinois on Jan. 6, 1998, which is pending. ATLA additionally said that officials in Arizona, California, Colorado, Florida, Indiana, Kansas, Maryland, Michigan, New Mexico, Oregon, Tennessee and Texas are undertaking some type of action against the insurer.

Allstate’s perspective

An Allstate representative vehemently defended the company’s practices.“The ‘Role of Attorneys in the Claim Process’ flyer provides straightforward information to third-party claimants to assist them in making their own decision on attorney representation,” said Sharon Cooper, with the Media Relations Department of Allstate’s home office based in Northbrook, Ill. “The flyer does not disparage attorneys, does not suggest that attorneys have no role in the claims handling process, and does not suggest or imply that claimants should not seek the advice of an attorney.”Cooper added that in 1993 Allstate launched a large-scale effort to change the way it handled claims in order to increase customer satisfaction and better manage loss costs. “Managing losses, in turn, helps keep Allstate prices down for its customers,” she said.The pamphlet was revised in 1999, “in the normal course of business,” Cooper said. “The revision updated and clarified the information provided in the ‘Do I Need an Attorney?’ document.”As for the use of the pledge, Cooper said that it was used in Wisconsin several years ago, but that the document has undergone several revisions since then.“The current version eliminates the pledge itself, and provides much of the information from the pledge in a letter captioned, ‘What to expect in the claim process,’ ” she said.With regard to the University of Massachusetts study, Cooper stated, “We have seen the study, but had no involvement in the study or the report. The study speaks for itself — there is no need for us to comment or dispute its findings.”

Bar committee speaks out

Joining WATL in its concerns over Allstate’s practices is the State Bar of Wisconsin’s Consumer Protection Committee.That group, chaired by Madison lawyer Thomas D. Zilavy of DeWitt, Ross & Stevens S.C., recommended at the September 1999 State Bar Board of Governors’ meeting, in light of Allstate’s activities, and the activities of other individuals or groups, th
at the governors create a committee to study Wisconsin’s unauthorized practice of law statute, Sec. 757.30. The law requires local district attorneys to prosecute unlicensed persons who practice law, or those who purport to be licensed to practice law.In a June 1999 report, the Consumer Protec-tion Committee stated that it had obtained internal Allstate documents, including the “Do I Need An Attorney?” flyer and the “Customer Service Pledge.”“Another significant and complicated problem is represented by the current activities of Allstate Insurance Company (‘Allstate’) and other insurance companies in actively discouraging insureds and claimants from retaining lawyers to settle claims,” the committee reported.The report continued, “Internal Allstate documents made available to the Committee indicate that claimants against Allstate who do not retain counsel are paid less on a claim compared to payments made to claimants on similar claims who are represented by counsel.”The committee additionally reported that, “Because of a jurisdictional statute, even if the Wisconsin Department of Justice and the Wisconsin Department of Agriculture, Trade and Consumer Protection concluded that Allstate’s activities were violative of some

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