Allstate Ignored Claim - Must Pay $16M In Damages
Allstates slogan, Youre in good hands, didnt meet its mark in this case. In fact, those hands were nowhere to be found for over six months. In March of 2000, a drunk driver in a truck hit a couple in a compact car head on. The couple had to be cut out of the car and airlifted to a hospital. They survived, but not without racking up medical bills for several hundred thousand dollars.
The truck driver only had $50,000 in insurance and the couple agreed to accept that amount even though their medical expenses were significantly higher. However, that never happened. Allstate ignored the truck drivers claim submission for six months. The couple then sued the truck driver and the parties settled for $5 million. But, where was this money going to come from?
The couple agreed not to collect the $5 million from the truck driver in exchange for his relinquishment of rights to sue Allstate for bad faith insurance practices. The driver agreed and a trial court awarded the couple $16 million over $10 million of that representing punitive damages. Allstate claimed that it lost the original paperwork and did not obtain the necessary medical records to resolve the claim, but nobody bought it and an appellate panel upheld the verdict. According to Appellate Court Judge Paul Spinden:
Allstates failure to recognize the severity of the [couples] injuries and the probability that the claim would far exceed [the truck drivers] 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 [him] of the demand, his likely exposure for an excess judgment, and his right to retain counsel, are all circumstances supporting a reasonable inference that Allstates refusal to settle was in bad faith.
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