Allstate is one of the largest insurance providers in the United States. The company provides homeowners policies and auto insurance coverage for millions. Some loyal customers have remained with the company despite rises and inflation of some premiums, which caught the eye of Insurance commissioners in California. Allstate was in multiple lawsuits for allegations of deception, unfair business practices, and violation of some state laws. Allstate has settled many cases out of court. Some have gone to a jury, and other large lawsuits are still pending. Here are the ten biggest Allstate lawsuits in company history.
10. Allstate Adjusters class-action lawsuit Settlement amount: $5.5 million
A group of Allstate adjusters claimed that the company required its adjusters to work off the clock without compensation. The lawsuit filed in 2008 continued for a decade before it was settled. The class-action lawsuit further alleged that the company issued the adjusters inaccurate pay stubs. When the company changed its auto field adjusters from salaried to hourly wages, it neglected to handle all aspects of its policies for compensation. The result of Allstate’s treatment of the workers resulted in the company committing employment-related offenses of wage and hour violations. The private litigation was filed in a Los Angeles County California Superior Court as a civil action with the case name Christopher Williams v. Allstate Insurance Company. The settlement agreement was reached on September 7, 2018. The adjusters were forced to wait for ten long years before they were fairly compensated for their mistreatment. One would believe that Allstate would learn its lesson about shady practices, but this case was one of many and it was among the least expensive lawsuits that the company would face in the years to come. Most cases get settled far faster to help defray the high legal costs.
9. Allstate sued for consumer protection and insurance violations in 2010 Settlement amount: $10 million
Multistate financial regulators investigated claims against Allstate that alleged the company engaged in consumer protection and insurance violations. The company used a software program to handle claims made by policyholders involving bodily injury. The financial regulators from various states investigated the matter and discovered that multiple legitimate claims were denied by Allstate, which deflected the blame to its software claims management system. The civil case was handled through the judicial system at a state level. It involved damages to Allstate policyholders throughout the nation, who filed bodily injury claims per their policies. Evidence showed that Allstate indeed committed violations of insurance and consumer-protection violations that caused financial harm to their policyholders. With no other recourse, Allstate agreed to a settlement amount that paid $10 million to the various states represented in the civil action to resolve the dispute over the software program. The case was settled on October 18, 2010. This was one of the less expensive lessons that Allstate learned about shirking its responsibility to honor contractual promises with its customers.
8. DeHoyos, et al v. Allstate Corporation, et al Settlement amount: $11.72 million
Insurance Journal reports that Allstate was accused of discriminating against some of its customers and charging them higher premiums based on information obtained in their credit reports. Allstate denied the claims and proceeded to a case filed in the US District Court, West District of Texas-San Antonio division in 2001. Seven customers of African-American and Hispanic heritage claimed that homeowners and automobile policies issued by Allstate companies and subsidiaries were priced higher for persons in a minority class. The civil case was heard in a federal court that claimed consumer protection offenses, and discriminatory practices including non-employment. Allstate agreed to make changes to its practices and to financially compensate the victims of its illegal practices. The case was settled on February 21, 2007, with Allstate paying $11.2 million in the plaintiff’s legal fees and an undisclosed amount of monetary compensation. Allstate agreed to create a new insurance scoring algorithm and to make the algorithm available to the public. It also agreed to provide a credit education program to each member of the class settlement. Allstate agreed to create an appeals program for customers with unusual circumstances impacting credit history to request premium reductions.
7. Allstate sued for failure to pay on personal injury policies Settlement amount: $14 million
NU Property Casualty confirms that a class-action lawsuit was filed in the state of Florida against Allstate Insurance. Allstate was accused of failing to comply with insurance policies it issued providing personal injury protection benefits. Allstate reduced bills by covering a portion of the claims and applied deductibles to reduce the amounts. The Florida Supreme Court ruled that insurance companies must apply the full amount of the bill charged to the deductible instead of reducing the reimbursement rate. The situation cost Allstate $14 million.
6. Allstate penalized for consumer protection and insurance violations Settlement amount: $18.25 million
The New York Department of Financial Services investigated claims that Allstate Life Insurance Company of New York engaged in illegal practices that caused the company to commit consumer protection and insurance violations. The civil suit claimed that 6,500 current and former Allstate Life Insurance of New York policyholders bought replacement life insurance policies and annuities from the company. Investigations into the claims uncovered evidence that confirmed Allstate did not comply with the laws and regulations governing these policies, resulting in financial damage to its policyholders. Allstate committed acts that violated insurance and consumer protection regulations and were ordered to pay a fine of $1.25 million, and further, to provide $17 million in restitution to the policyholders that it had shortchanged. The case was settled on January 2, 2007. Allstate is a large company that brings in billions in revenue annually. It pays the fines and when it gets caught, it settles the individual lawsuits, but the disturbing part of the picture we’re seeing is that they keep committing violations that are harmful or unfair to their policyholders.
5. 2014 Bad-faith Allstate Lawsuit Settlement amount: $22 million
d’Amore Law reports that a lawsuit was filed against Allstate and alleged that the Hennessy v. Allstate Insurance lawsuit ended in a settlement amount of $22 million. It was the largest settlement of its kind in the state of Pennsylvania. Patrick Hennessy was a passenger in a car that rear-ended another vehicle, resulting in severe injuries to Hennessy, including amputation of a leg. Allstate issued a policy insuring him of $250,000. Medical bills exceeded that amount, but Allstate refused to pay the claim. The insurer committed acts of bad faith by refusing to pay. By law, Allstate was required to promptly and fully investigate the claim, consider the circumstances and respond to all requests for communication and information in a timely way. Allstate failed to live up to its end of the contract and it learned a $22 million lesson for denying legitimate claims.
4. Allstate sued for consumer-protection violations Settlement amount: $34 million
The California Department of Insurance investigated claims that Allstate Insurance Co. committed acts against its customers that fall into the consumer-protection arena of offenses. The civil suit filed in 2005, claimed that Allstate’s inflated premium prices caused financial harm to its policyholders. Evidence that supported Allstate’s role in committing insurance violations against consumers with inflated prices and various unfair business practices was confirmed. Allstate failed to charge its policyholders the lowest premium for which they were qualified upon renewal of their policies. The civil case was settled on June 27, 2005, with Allstate agreeing to a settlement of $34 million. Under the terms of the agreement, Allstate was required to pay out cash refunds of $4 million to the customers that it treated unethically and illegally with its inflated and unfair insurance premium rates. Allstate was further required to deliver an additional $30 million to the affected customers in premium returns and policy credits to compensate for its unfair practices. It was hoped that Allstate Insurance had learned a valuable lesson about shortchanging its loyal customers, but sadly, the behaviors would continue with further claims made against the company for its illegal and unethical premium calculations.
3. Texas Department of Insurance vs. Allstate Texas Lloyd’s (Allstate) Settlement amount: $71.3 million
Violation Tracker confirms that a lawsuit filed in 2008 accused Allstate Texas Lloyd’s, a subsidiary of its parent company Allstate, engaged in acts that qualify as consumer-protection-related offenses, primarily insurance violation. The Texas Department of Insurance investigated allegations of overcharging residential policyholders on their premiums that violated consumer protection and insurance laws in the state of Texas. An ongoing dispute with regulators from the TDI resulted in legal action being taken against Allstate, which resulted in a penalty amount of $71.3 million. Allstate was required to refund $71.3 million including rate reductions and credits for its illegal practices that victimized Allstate’s loyal customers in Texas. Allstate settled the dispute by agreeing to pay the penalty and to cease the illegal behaviors involving Texas policyholders. The case was settled on May 13, 2008, after a lengthy debate between the third-largest insurer in the nation and officials at the Texas Insurance Commission. Allstate fought the case until it had no option but to settle.
2. Allstate penalized for wage and hour violations in 2005 Penalty amount: $120 million
SEC Archives confirm that Allstate Insurance engaged in employment-related offenses resulting in violation of wage and hour laws. A private lawsuit was filed in the Superior Court of the State of California, County of Los Angeles in the William Sekly, et. al., v. Allstate Insurance Company. The class-action lawsuit alleged that Allstate Insurance failed to pay its workers’ overtime hours for hours worked that fit California’s definition of overtime work. The investigation of the claims made in the civil case discovered that the employees were classified as non-exempt workers and therefore entitled to receive compensation at the rate of California’s overtime payment requirements. Allstate denied any wrongdoing in the case and claimed that the company did not owe the workers compensation. The court saw the situation differently and ordered Allstate to pay the workers for the reimbursement of wages that were owed them under California State labor laws. Civil penalties were assessed against Allstate in a settlement amount of $120 million.
1. Allstate sued for overcharging in a 2015 class-action lawsuit Lawsuit amount: $ 1 billion-plus
Repairer Driven News reports that an expert from California Insurance Commissioner’s office testified that Allstate overcharged nearly $1 billion in inflated fees for some policyholders. A class-action lawsuit filed in 2015 in the US District Court for the Northern District of California claims that Allstate failed to provide ethical insurance premium calculations based on risk or loss for some auto insurance customers, choosing elasticity of demand to make the calculations. It resulted in loyal policyholders receiving inflated premiums with overcharges near $1 billion. Plaintiffs accused Allstate of engaging in unfair business practices and acts that violate Unfair Competition laws in California. Allstate charged customers likely to seek policies elsewhere lower rates to attract their business. The unfair practices penalized loyal customers who were less likely to leave as rates rose. Allstate also faced allegations that it provided misleading omissions about its determination of auto insurance premiums to hide its unjust and wrongful collection of higher premium payments from thousands of auto insurance customers. The actions violated California’s false advertising laws. Allstate argued for the dismissal of the lawsuit, but aspects of the charges got dismissed. The CDI is currently debating Allstate’s actions to determine if alleged violations are provable. Depending on the court’s ruling, there is a potential for a $1 billion reimbursement order with accompanying fines and civil penalties separate from what the district court rules.