October
08
Allstate learns a $22 million-dollar lesson: the story of a bad faith lawsuit
posted in: Insurance Companies

This week, Allstate Insurance settled a bad faith claim for 22 million dollars.

The settlement, the largest bad-faith settlement in Pennsylvania history, is important because Allstate may finally be forced to re-think the notorious practices of denying legitimate injury claims.

A car crash results in catastrophic injury

Patrick Hennessy was a passenger in Ryan Caruso’s car when Caruso rear-ended another vehicle, and then stalled out in the road.

Mr. Hennessy was pushing Caruso’s car to the side of the road when he was hit by another vehicle, driven by Shawn Robertson, Jr.

The second crash crushed Mr. Hennessy. After months of intensive treatment, the young man’s leg had to be amputated above the knee.

Robertson, the driver of the car that hit Hennessy, was uninsured. However, since Caruso’s rear-end collision had started the chain of events that led to Hennessy’s injury, attorneys argued that his insurance company should cover the damages.

Allstate makes a big mistake

Mr. Caruso had $250,000 worth of coverage from his insurance company, Allstate.

He expected—very reasonably—that Hennessy’s medical bills alone were significantly more than that, so his insurance company would turn over the policy maximum $250,000 and be done with it.

Allstate refused to pay the claim, despite several opportunities.

By refusing to pay on the insurance policy, Allstate put its insured on the hook for Mr. Hennessy’s injury.

That is called “bad faith.”

When you buy insurance, you enter into a contract with the insurance company. You pay them, and they are required to:

  • Fully and promptly investigate your claim
  • Consider all of the circumstances supporting your claim
  • Respond to all requests for information or communication in a timely matter

Bad faith” means that the insurance company is failing to uphold its end of that contract. Read more about bad faith claims.

Last year, Mr. Hennessy’s case against Caruso went to trial. A Philadelphia jury issued a $19,145,000 verdict.

Mr. Caruso assigned his rights for a bad faith claim against Allstate to Mr. Hennessy and his attorneys, which allowed them to go after Allstate for the verdict above the policy limits of $250,000.

This week, Allstate settled that claim for $22 million.

That’s 88 times the amount of the original claim, which it should have paid five years ago.

“It was a protracted but ultimately successful battle between a young man with a catastrophic injury and the largest insurance company in America”

– Mr. Hennessey’s lawyer, Matt Casey

Allstate, America’s biggest insurance company, is well-known for their method of processing insurance claims: delay, deny, defend.

First, it denies the claim for insurance benefits. Then, it delays paying out as long as possible. When the injured person is desperate, Allstate makes the lowest possible offer. If the injured doesn’t accept that offer and seeks the help of an attorney, Allstate defends its case as long as possible. It forces seriously injured people to jump through hoops just to get their rightful benefits.

We hope that bad faith cases like this will force Allstate to stop this abhorrent practice.

 

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