Allstate Insurance faces $60 million lawsuit after restructuring
6/25/2008

Company tried to enforce non-compete clauses after more than 70 agents quit rather than work under new terms
Allstate Canada’s attempts to cut costs by consolidating offices has left it facing a $60 million class-action lawsuit from some of its former agents.

On July 24, 2007, the insurance company announced it would be moving its 450 agents from 256 neighbourhood offices across Canada into 100 larger offices, beginning in May 2008. Most agents weren’t pleased, particularly senior agents, some of whom ran the neighbourhood offices as their own businesses, handling the hiring of staff and management of finances. However, under the consolidation, the 100 new offices will be owned and run by Allstate.

The consolidation also outlined significant changes to the contract terms of the agents, including taking away sales commissions on policy renewals. Allstate said it would guarantee agents’ level of pay for two years, but most didn’t bite as the changes would result in overall pay cuts for many, some by as much as 50 per cent.

Agents tried to discuss the situation with the company but it wouldn’t budge from its position.

More than 70 agents have since quit, though Allstate told the Toronto Star it had hired sufficient replacements. When some tried to continue working with clients as independent brokers, Allstate sued them for breaching non-compete agreements they had signed.

However, in March, the Ontario Superior Court of Justice found the agreements weren’t valid, considering the way Allstate and changed their contract terms and ruled the company couldn’t enforce them.

On May 20, three agents, Mark Cassels of Hamilton, along with Esther Kafka and Ken Patel of Windsor, launched a class action lawsuit on behalf of all the agents for making “substantive material changes to the employment contract terms with all of its sales agents,” which was a breach of contract and the Employment Standards Act. They also claimed Allstate’s guarantee of their level of income for two years was unlikely to be borne out.

The case hasn’t been heard yet, but in the March decision that struck down the non-compete agreements, the court said there was a good chance Allstate will be found to have repudiated its employment contracts with the changes.
http://www.employmentlawtoday.com/login … cleid=1620

Written by Mark Gould, Esq.
Wednesday, 18 June 2008

Fairness. It’s a simple principle that guides the lives of most Americans. Yet for insurance companies, the principle is often overlooked and brushed aside for one reason: profit. House Bill 1407 is now on Governor Ritter’s desk awaiting his signature to make it the law. The new law would require insurance companies to pay double damages plus attorney fees if they are found to have unreasonably delayed or denied a valid insurance claim. The law is the culmination of years and years of insurance company abuse against its policyholders by unreasonably denying claims or delaying the payment of valid claims.

Colorado needs this law. For too long insurance companies have made large profits on the backs of their policyholders. This law would help policyholders stand up against multi-billion dollar corporations. In 2005, the year of Hurricane Katrina, it was estimated that the insurance industry made over $40 billion dollars in profit and $63 billion in 2006.

It’s hard to imagine a world without insurance. Insurance is a wonderful social tool that allows us to pool our money and transfer the risk of loss from us to the insurance company. At its core, insurance is an agreement (a contract). You agree to pay premiums and the insurance company agrees to pay claims. The insurance company takes your premiums and invests that money, and makes money on those investments.
However, when insurance companies don’t keep their end of the bargain and unreasonably deny or delay claims, they have breached the contract. In every insurance contract, the law presumes that the insurance company will treat the policyholder fairly. In law we call it the “covenant of good faith and fair dealing.” Cases in which insurance companies are sued for their breach of this covenant are also known as “bad faith” cases.

We all pay hard-earned money to insurance companies for the comfort of knowing that if something goes wrong, we have a financial security net that will protect our savings, homes, and prevent us from falling into bankruptcy. If insurance worked properly and insurance companies were guided by fairness and a sense of what is right, it would be a system without lawyers. Unfortunately, insurance companies do not act with a sense of fairness; they are motivated by money and go to great lengths to keep it. Because this is how the insurance companies work, lawyers are the last line of defense for policyholders.

Like most of us who invest in the stock market, insurance companies lose money. This becomes part of the problem. How will the insurance companies make up their losses? One way is to get more policyholders—thus, the incessant television ads and sponsorship of sporting events by insurance companies. The other way for the insurance companies to make money is to pay less money out on valid claims or to delay the claim. The longer the insurance company holds onto money for your claim, the more interest and money it makes. This is where insurance companies have focused their efforts for the last 15-20 years. This scheme is great for insurance companies, and horrible for policyholders who often find that their financial security net is gone when they need it the most.

Claims centers, the place where insurance companies process claims, have been converted into “profit centers.” Claims adjusters do everything they can to offer you as little money as possible to settle a claim—a process widely known as “lowballing.” Practically speaking, insurance companies need to make profits. This article is not intended as some anti-corporation or anti-profit rant. Profits for insurance companies are great. They generate jobs and ensure that there is money to pay claims. My fundamental problem with insurance companies is where and how they are making their billion dollar profits.

“Quest for Gold.” “Bring back a Billion.” “Advanced Claims Excellence or the ACE Program.” There is current litigation across the United States against Farmers, State Farm, and Allstate over these types of programs. Policyholders have sued both Farmers and State Farm claiming that these programs are and were designed to force insurance adjusters to deny or delay claims. In return for denial or delaying of claims, the insurance adjusters received bonuses. In a memorandum dated September 17, 2001, Farmers Insurance explained that “employees whose locations achieve their Quest for Gold goals, will receive 1.25% of their eligible salaries ($100,000 maximum).”

Naturally, the insurance companies claim that these programs were not intended to incentivize their claims adjusters to deny or delay payment on valid claims or to reduce the amount of payments made on valid claims. However, in court case after court case, evidence has been presented that shows these programs were specifically designed to delay or deny valid claims. At the center of the controversy is McKinsey & Co., a New York-based consulting firm that has worked for many large insurance companies, including State Farm and Allstate.

Goods Hands or Boxing Gloves? In 1992, Allstate Insurance retained McKinsey. In fact, “McKinsey’s advice helped spark a turnaround in Allstate’s finances. The company’s profits rose 140 percent to $4.99 billion in 2006, up from $2.08 billion in 1996. Allstate lifted its income partly by paying less to its policyholders. Allstate spent 58 percent of its premium income in 2006 for claim payouts and the costs of the process, compared with 79 percent in 1996, according to filings with the U.S. Securities and Exchange Commission.” You might question how an insurance company can make such a dramatic increase in its profits in just four years.

During court proceedings McKinsey was forced to divulge 13,000 documents relating to the “advice” it provided Allstate. McKinsey told Allstate things like “sit and wait” regarding claims. Delaying claims could, and most likely did, discourage policyholders from pursuing their claims. This delay forced many policyholders to just walk away. One less claim to pay means one thing for insurance companies: more profit. Many of my clients come to me because they “don’t want to deal with the insurance company.” While many of them could not put their finger on how they were being taken advantage of, they just knew it was happening.

Allstate was also advised by…*(interesting article but abrubptly ended here).
http://northdenvernews.com/content/view/1360/2/

Fla. court declines jurisdiction in Allstate suit
Last updated June 18, 2008 4:04 p.m. PT

By BRENT KALLESTAD
ASSOCIATED PRESS WRITER

TALLAHASSEE, Fla. — The Florida Supreme Court declined Wednesday to grant Allstate Corp. an injunction to force Florida insurance regulators to let the company write new car insurance and other policies in the state.

The company sought the action after the Office of Insurance Regulation ordered it to stop writing the policies for failing to comply with requests for documents on its business practices.

However, Allstate since turned over most of the documents and was allowed to resume its entire line of business in Florida.

The company had turned to the Supreme Court after the 1st District Court of Appeal rejected its effort for an injunction last month. “The Supreme Court’s decision reassures Floridians that the office has full access to insurers’ books and records and upholds the office’s actions in its efforts to protect consumers,” state Insurance Commissioner Kevin McCarty said Wednesday.

Allstate officials did not immediately return phone messages for comment on the court’s decision.

Allstate, which has been backing off the high-risk homeowners market in Florida, was stripped of selling car insurance policies for two days in May before complying with OIR’s long-standing request for documents on its ratemaking policies.

If the high court accepted the case it could have effected Allstate’s scheduled September hearing before the Department of Administrative Hearings, said Ed Domansky, spokesman for the Office of Insurance Regulation.

The scheduled weeklong hearing involves the alleged failure of Allstate’s 10 Florida companies to comply with the document request, falsely asserting trade secrets and the false certification of its September 2007 rate filing.

Allstate, based in Northbrook, Ill., has been at odds with Florida regulators for seeking increases on homeowners’ policies exceeding 40 percent.
http://seattlepi.nwsource.com/business/ … state.html

http://www.allstateinsurancesucks.com/phpbb/viewtopic.php?f=17&t=3027

I Received This In An E-mail And Thought It Would Be Great Here. It is very costly for some to do what is right!

Just a note to say, keep up the good fight!!!

I am not certain if I will be of any assistance to your group of concerned consumers; however, to understand what I am doing, I would direct you to the following:

http://ciaw.org/KOVR-CBS13-112207.html

ABOVE: Shortly after it aired, I was banned from the insurance industry… Across the US, adjusters and PI firms have been advised by major insurance carriers NOT to assign files to me or my company, Onvideo Investigations, http://www.subrosavideo.com

http://ciaw.org/whereisthefraud.html

After 30 years as an Insurance Fraud Investigator, I have become an advocate for the injured/disabled, specifically, Chronic Pain Patients.

It is my intention to produce an educational tool for claimant’s to use as they navigate the claims process. This is in the infancy stage and is just a work in progress for now. But, I believe it will be something the insurance industry will NOT want to see in print or on television.

I have worked for Allstate in the past and have seen first hand the abuses they commit.

Public Broadcasting’s Now with David Brancaccio ran a fascinating program last Friday about the insurance industry and their performance in the wake of certain disasters such as the San Diego wildfire in California four years ago.

PBS, relying heavily on an article in the September issue of Bloomberg Market Magazine entitled The Insurance Hoax by David Dietz and Darrell Preston, devoted a half hour to its thesis that some major insurance companies, notably State Farm and Allstate, have gone to great lengths to shortchange customers in order to build their stock values and reward stockholders.

The Bloomberg article leads off with a story about a State Farm customer who was visited by a company rep who informed her, after the largest wildfire in California history, that she would receive only $184,000 of the estimated $306,000 cost of replacing her home.

Thus, the authors conclude, this customer learned a secret about the insurance industry; “When there’s a disaster, the companies (that) homeowners count on to protect them from financial ruin routinely pay less than what policies promise,” sometimes only 30 to 60 percent of the cost of rebuilding, “even when carriers assure homeowners they’re fully covered, thousands of complaints with state insurance departments and civil court cases show.”

PBS interviewed homeowners who said that their coverage had been switched by their company from “full replacement” to “extended replacement” coverage before the fire. When they questioned their agents they were told that extended replacement was much better than full replacement “yet, once claims were submitted, they were offered settlements that came nowhere near covering their rebuilding costs.”

Bloomberg says that, by reducing what it pays out on losses, companies have achieved huge profits over the last 12 years. Casualty insurers reported record profits last year - $73 billion, 49 percent higher than in 2005, and this in the wake of Hurricane Katrina.

Property owners, who pay more than $50 billion a year in insurance premiums, find that their carriers systematically deny and reduce payment on claims and change policy coverage with no clear explanation.

They ignore or alter engineering reports and sometimes ask their adjusters to lie to customers Bloomberg said, citing as sources court records and interviews with former employees and state regulators.

California’s Lieutenant Governor John Garamendi served for eight years as the state’s insurance commission where he imposed $18.4 million in fines against carriers for mistreating consumers. He is quoted as saying that “the first commandment of insurance is ‘Thou shalt pay as little and as late as possible.’”

It was in the 1990’s, following Hurricane Hugo which cost the industry $4.2 billion in claims that the industry began looking for ways to increase profits by “streamlining” claims handling. Key to this streamlining was a New York State consulting firm, McKinsey & Co. McKinsey worked for Allstate Insurance, developing methods for the company to pay out less in claims.

Allstate has fought for years to keep the 13,000 pages of documents produced for it by McKinsey from becoming public, and while under orders from two different courts to produce the information, continues to fight disclosure. An attorney representing claimants got his hands on some of the documents among which were PowerPoint slides which advised Allstate, in a take off on the company’s decades old self-description as “the Good Hands People” to use “Good Hands or Boxing Gloves,” by first making a low offer on a claim and if that offer is accepted, the customer is treated well; if the customer protests or hires an attorney, Allstate should fight back.”

Another slide displays an alligator with the caption “Sit and Wait.” The slide says Allstate can discourage claimants by delaying settlements and stalling legal proceedings. One claimant told Brancaccio that his insurance company demanded not only invoices for such routine claims as for debris disposal but then insisted on testimony from the contractor who hauled the debris - testimony that was scheduled and postponed, scheduled and postponed in an attempt to wear down not only the claimant but his witnesses.

McKinsey was apparently good for Allstate’s bottom line. The company’s profits rose 140 percent to 4.99 billion between 1996 and 2006 while the company dropped the percentage of premium income spent on claim payouts from 79 percent in 1996 to 58 percent last year. This loss ratio changes each year based on events such as natural disasters but the general trend since Allstate hired McKinsey has been down.

And Allstate’s stock has jumped 400 percent between June 3, 1993, the day Allstate went public and July 11 this year while the Standard & Poor’s 500 Index tripled. State Farm’s profits doubled in the 10 year period ended in 2006.

Several months ago we detailed how many insurance companies were reducing their exposure to risk (and improving their bottom lines) by raising premiums - some times astronomically - and thereby forcing homeowners to drop coverage in disaster prone areas or by withdrawing from the insurance market altogether in riskier areas. Premiums have also skyrocketed or policies cancelled for homeowners in less risky areas who have submitted even one substantial claim.

Companies have invested in computer programs that estimate the cost of rebuilding a home or of treating people injured in automobile accidents, including factoring in pain and suffering or permanent impairment.

Lawsuits have asserted that insurers have manipulated these programs to pay out as little as possible and there have been allegations that some companies have pressured or rewarded adjusters who have keep claim payouts down by lying about coverage or denying claims.

Companies have even been accused of changing policies retroactively. One case in New Hampshire was found in favor of the plaintiff against Hartford Financial Services Group which, it is alleged, deleted the replacement cost portion of a homeowner’s policy on a mansion which was destroyed by fire.

Of course much of the country is familiar with the on-going battle in the Gulf States over whether the homes destroyed by Hurricane Katrina were the result of wind or flood water. If wind, the insurance company loses; if flood waters then the losses are laid off on the federally sponsored flood insurance program for those homeowners who have such coverage or on the homeowners themselves if they do not.

Are Allstate and State Farm alone in using McKinsey-like tactics? And where are state and federal governments in all of this? Maybe, just maybe insurers have overplayed their hand because of a Katrina victim named Trent Lott. Also the companies have had plenty to say about the story and the television program in the last few days. To be continued…
http://www.mortgagenewsdaily.com/821200 … urance.asp