Missouri Judge Dismisses $7 Million in Fines Against Allstate

August 4, 2008

A Jackson County, Mo., judge agreed on July 23, 2008, to throw out a contempt order against Allstate Insurance after determining the company had finally complied with his directions to release confidential documents.

The Kansas City Star reported on its Web site that the decision negates more than $7 million in fines that Allstate had accrued after Judge Michael Manners last year began levying penalties of $25,000 a day against the company in a bad-faith case.

The two sides agreed to settle the case on confidential terms earlier, avoiding a trial. During a hearing, Manners agreed that the company was no longer out of compliance with his order to release the confidential records and lifted the contempt order.

The case stems from an 8-year-old accident 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, Mo., 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 aimed at generating big earnings while keeping claims payments low.

Allstate refused to turn over the records, saying they contained trade secrets and would reveal the company’s trial strategy. In September 2007, 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.

The company, facing issues over the records in several states, including Florida, agreed in April to post 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.”

Florida’s insurance commissioner, Kevin McCarty, suspended the company’s ability to sell insurance there after it refused subpoenas for the records that state. 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.

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