Good Hands People? 

Allstate's hard line in accident cases is leading to claims of injustice.

One day in March 1997, Lance Rutledge's friend Kenny Aigner came to visit. They grilled steaks, had a couple of beers, then jumped into Aigner's car to see Rutledge's girlfriend, who was working at a bowling alley on Cleveland's West Side. Rutledge says he didn't know that his friend drank 13 to 15 beers and smoked pot that day.

"He's the kind of guy, unless he was on a two-day drunk or something, you wouldn't be able to tell. He handled alcohol very well."

But not well enough. On Lorain Avenue in Cleveland, Aigner rear-ended an unmarked police car. Rutledge smashed his head into the windshield and emerged from the car bleeding. Aigner drove away, but was soon pulled over and eventually found guilty of drunk driving.

Rutledge was left with facial scars and neck and shoulder injuries. His medical bills totaled about $3,800, and a plastic surgeon estimated that work on the scars would cost another $2,000.

"I actually probably lost, in the first year [after the accident], six months' worth of work," says Rutledge, who had painted houses and hung wallpaper. He lost out on some jobs because of physical therapy appointments; other days, he'd go home after two hours, feeling "so much pain, I couldn't stand it."

Rutledge asked Allstate Insurance Company, which insured Aigner, for reimbursement. But Allstate was willing to pay only $4,300. So Rutledge sued Aigner.

"His company gave me no choice. I wasn't looking to get rich. If they would have paid medical [expenses] and offered something -- $10,000 plus lawyers' fees, 15 grand, give me something -- I would have settled for it in that first year."

But Allstate hardly budged. To many, its stubbornness in cases like Rutledge's is legendary.

Over the last few years, the company has acquired a reputation as the toughest in the business to go up against in court. Plaintiffs' attorneys complain that Allstate makes low offers on injury cases, then refuses to compromise, daring injured people to go to trial. This stance has frustrated so many lawyers that they've organized seminars in several states, including Ohio, on how to fight Allstate.

Critics say the insurer scares lawyers away from pursuing legitimate cases -- and uses questionable tactics to discourage accident victims from suing. Officials and judges in several states have declared that mailings Allstate sent to injured people amounted to illegitimate legal advice.

Allstate's aim "is not to do the right thing," charges Todd Rosenberg, an attorney in Mayfield Heights. "It is to pay as little as they can possibly pay while discouraging as many people from seeking legal representation as they possibly can."

Allstate's defenders say the company's tough dealing is just part of a trend. Juries often side with Allstate, they say, because the public, too, has become more skeptical and less generous in certain kinds of injury cases. From a business perspective, its hard-line stance keeps rates down by fighting runaway lawsuits and inflated medical bills.

But trial lawyers also argue that Allstate is more likely to make its customers endure long trials, and that when they get hit by uninsured drivers and have to make claims against their own company, Allstate may well put the screws to them, too.

The company put up a fierce fight against Lance Rutledge. Allstate's attorney argued that Rutledge was partially at fault for his injuries, because he didn't have a seat belt on (Rutledge says it was broken) and must have known Aigner was drunk.

"Their whole thing was, in the statement, he picked a steak up off my grill [with his bare hands]. That should've been reason to believe he was not acting normal. [But] they don't know Kenny. Kenny's a pretty wild guy. I've seen him pour a can of beans on the back of a pickup truck while we were out camping . . . pick up a hatchet, and use it like a spoon."

Though Rutledge claimed he'd lost more than $10,000 in wages, he could document only $750. Rutledge's attorney offered to settle for $50,000. Allstate held firm until the trial, when it increased its offer slightly: to $5,000.

At the trial, in August 1999, the jury awarded Rutledge $80,000. Since the verdict exceeded the coverage limit on Aigner's policy, Aigner owes his former friend more than $15,000. (Rutledge had also asked for $500,000 in punitive damages against Aigner, after learning how drunk he was, but the jury didn't award that.)

After legal fees, Rutledge netted $54,000. He used some of it for a down payment on a "little cottage" in Bay Village. "I guess it was worth the wait," he says. But his scars are permanent, and every now and then, he claims, a shard of glass still works its way up out of his skin. "It's been four or five years, and I've still got glass coming out of my head."

Craig Bashein, Rutledge's attorney, says Allstate dragged both Rutledge and Aigner through a trial unnecessarily. "Every other insurance company I've done business against would've settled that case," claims Bashein. (Aigner could not be reached, and Allstate's attorney, Matthew Grimm, declined comment, citing a confidentiality agreement with the company.)

"Allstate doesn't get it," Bashein says. "They litigate and waste the court's time over small cases that could be resolved by arbitration or by settlement. Instead, they put their insureds through trial. They lowball claimants, they run up litigation costs by forcing small cases to trial, and even on large cases, they fail to evaluate fairly."

In October 1999, 200 lawyers packed a Holiday Inn in Strongsville for a seminar titled "You Don't Have to Get Hammered by Allstate." A total of almost 600 other lawyers turned out at similar seminars in three other Ohio cities. The event was inspired by conferences in other states -- some with the more aggressive title "How to Hammer Allstate" -- and Ohio trial lawyers' frustration with the company.

One speaker, West Virginia attorney James Peterson, may well be Allstate's No. 1 enemy. He's tried to have the insurer punished in every state he can for the letters it sends to people injured in crashes with its customers.

In 1995, a woman came to Peterson. "She's a college-educated person. Her husband's in real estate. She was in an accident, and within a day of the accident, she was contacted by an [Allstate] agent who told her over the phone, 'You don't need a lawyer.'"

Then, Allstate sent the woman two mailings. "Because you have been involved in an accident with an Allstate policyholder, we consider you our customer and will provide you with quality customer service," began one letter. A brochure titled "Do I Need an Attorney?" warned that people who hire lawyers to handle auto insurance claims typically wait longer to get their claims settled. "Attorneys commonly take between 25 and 40 percent of the total settlement you receive from an insurance company, plus expenses incurred. If you settle directly with Allstate, however, the total amount of the settlement is yours."

The mailings convinced her to settle her claim without hiring a lawyer. But her injuries lingered. Eventually, she turned to Peterson for help.

"Based [on] my jury verdict research, [the settlement] was five to six times too low," says Peterson. "She said, 'I'm still hurting. I didn't get the medical care I needed.'"

Peterson filed a complaint with the West Virginia State Bar Association, accusing Allstate of the unauthorized practice of law. "They were giving legal advice to these claimants, when in fact there was [an] adversarial relationship between them. Allstate has a stake in selling these claims short."

Then Peterson obtained a copy of a 1995 Allstate training manual, which trial lawyers have passed around ever since it was subpoenaed in a case against the company. It shows that the mailings are part of a company strategy.

"Our communications with claimants should reinforce the central theme that claimants do not need attorneys to receive fair treatment or a fair settlement," the manual says. But another part reveals that people with certain kinds of injuries got more money from Allstate if they hired a lawyer. "Represented claims settle for 2-3 times more than unrepresented claims."

In 1997, a West Virginia State Bar committee agreed with Peterson, finding that Allstate engaged in the unauthorized practice of law. Last year, a federal appeals court let the ruling stand.

Since Allstate was using the two mailings nationwide, Peterson spread the word. State officials and bar committees in at least 10 states have filed actions against the insurer. (No action has been taken in Ohio.) The Pennsylvania attorney general successfully sued Allstate for willfully misleading consumers. Last year, a judge in Washington state ruled that an Allstate agent had dispensed illegitimate legal advice; an appeal is now before the state's Supreme Court.

Officials in New York and New Jersey ordered Allstate to change the mailings; the company now uses new versions nationwide. The "Customer Service Pledge" was renamed the "Quality Service Pledge." A disclaimer was added saying that the interests of Allstate and the claimant may differ, says Peterson.

"It's just old wine in a new bottle," he says. "It's not quite as offensive as it used to be. But the intent is still to make sure [claimants] don't hire a lawyer."

Peterson has sued Allstate in Illinois, hoping to create a nationwide class-action suit. But a court has said non-Illinois residents can't join the suit; an appeal is pending.

Yvette McClain, Allstate spokeswoman for Ohio, says the mailings aren't deceptive. They're simply meant to "make sure claimants are informed of their choices and what they need to do if they've been in an accident," she says. "We've done research that shows claimants are somewhat confused by the claim process . . . Many believe they must hire an attorney if injuries are involved. We all know that's not true."

McClain would not comment on what the manual says. Despite its statements that Allstate wants to save money by discouraging people from hiring attorneys, McClain said that is not a goal of the mailings.

In August 1998, 22-year-old Rebecca Kemmett, a waitress at the Olive Garden restaurant in North Olmsted, was standing at the cash register when a car drove through the window. The next thing she knew, she was lying on the floor, with a cut over her right eye and a bruised knee and ankle. At the emergency room, 13 stitches closed the cut, and X-rays showed no broken bones. She stayed in bed for a few days, then struggled through the pain. Most of it went away, but a pain in her lower back didn't.

A year and a half later, she went to another doctor. An MRI revealed a herniated disc in her spine.

Her doctor declared she would eventually need surgery, says her lawyer, Mitch Weisman. "She has a bad back at 25 that's going to get worse and worse and worse with time." (Kemmett did not return Scene's calls.)

The woman who drove into the restaurant was insured by Allstate. Kemmett sued and demanded $75,000 to settle the case; Allstate offered $14,000. Court papers show Allstate's legal counsel didn't believe Kemmett's back injury was permanent and noted that a second doctor had said she wouldn't need surgery. (Allstate's attorney, Frederic Kramer, declined comment for this story.)

"My client said to me, 'I want enough to pay the bills and finish my last two years of college,'" Weisman says. "She probably could have, if I could have gotten her 20 [thousand]. We would have come under 50. But they wouldn't talk to us. There was nothing to discuss."

So Kemmett went to trial. In May, a jury awarded her $350,000. Since the policy limit was $100,000, the driver owes Kemmett $250,000.

Weisman has filed a claim that Allstate negotiated in bad faith. Bad-faith findings punish one side in a case for being stubborn and unreasonable in settlement negotiations. If the judge agrees, Kemmett will also win interest on the verdict: 10 percent a year for the time between the accident and the trial.

Meanwhile, the company has appealed the case after its request for a new trial was denied.

"The thing about Allstate is, they don't talk to you," Weisman says. "They're the only insurance company that doesn't talk." Settlement offers, he says, "are spit out by a computer [program] called Colossus. They don't even use their goddamned brain.

"They justify it because the jury system is tough on people with soft-tissue injuries. A typical back and neck thing, a jury doesn't get excited about."

Allstate's 1995 training manual explicitly singles out claims of soft-tissue injuries like whiplash and sprains, in which there's pain but no scars or other proof of injury visible to a jury. Minor-impact soft-tissue cases (MIST, for short) -- in which someone hires a lawyer, but the damage to the car is less than $1,000 -- are earmarked for "rigorous investigation" and "strong negotiation." In essence, Allstate figures that, if the car isn't too badly damaged, the person probably wasn't either.

"If you've got a property-damage claim in an auto accident of under $1,000 or $1,500," says attorney Rosenberg, "you will see offers that are incredibly low: sometimes less than the medical bills, sometimes slightly over the medical bills. They will fight those tooth and nail. They will try the case."

Allstate spokeswoman McClain wouldn't confirm that the insurer takes a harder line on MIST cases, but company officials have acknowledged and defended the policy in the past.

"We're more willing than before to litigate to ensure we pay the fair and right amount on each claim," McClain says.

Allstate has various ways of keeping settlement offers low, says Ralph DeFabio, who retired from the company in 1996 after 28 years as an adjuster. At the anti-Allstate seminar in Strongsville, he described the workings of the Colossus software program, which estimates claim value. (Other insurance companies also use Colossus, but Allstate is generally credited with being the first to adopt it.)

Adjusters input symptoms, diagnoses, and treatments from medical reports into Colossus, along with claims of wage loss and whether the injured person has a lawyer. The program then compares the information to figures from past claims.

"It took the humanity out of evaluations," complains DeFabio. He argues that the program underestimates damages for pain and suffering.

He also says Allstate lowballs offers in another way, by using a medical bill review system to dismiss charges it considers unnecessary or excessive. That puts injured people in a bind, DeFabio says. "How do you, as a patient, tell your family doctor to go to hell -- you're only paying 30 of the 60 dollars of the bill?"

Allstate's method of dealing with smaller cases has succeeded in scaring some lawyers away from them.

"It's hard to justify trying a $5,000 and $10,000 potential claim if you're going to have to spend several thousand dollars to do it," says Rosenberg. "[Large] firms like ours, as a general rule, are avoiding these low-end cases and referring them to other firms."

Peterson's West Virginia firm is still handling them. "Many people [were] offered X amount of dollars with Allstate and didn't think it was fair," says Peterson. "In every case handled by this law firm, they ended up getting two to five times as much, after attorneys' fees."

Allstate says its strategy is sound. "Our evaluation and negotiation processes are resulting in fair and consistent payments to claimants," says McClain.

The Ohio Department of Insurance says Allstate's complaint ratio -- number of complaints compared to how much business it does in the state -- is "pretty much in the range of other companies."

But disgruntled people who sue the company see Allstate's much-advertised "good hands" close into fists.

In fall 1994, Akron hairstylist Krystal Jackson was picking up her daughter in a high school parking lot when a teenager rear-ended her. Jackson had injuries to her back, arm, wrist, and neck, and saw two doctors and a physical therapist. For a while, she says, she cut hair while wearing a back brace and taking pain medication that made her feel high. The pain felt like a charley horse, an intense cramp that came and went. She worked fewer hours, in part to make all her physical therapy appointments, she says.

She carried Allstate insurance, and because the driver who hit her was uninsured, she made a claim against her own company. But when she hired an attorney on her doctor's advice, she says Allstate turned hostile.

"I felt as if they take their hands, their big strong hands you see in the advertisement, and smash the little guy . . . in there like in a book."

But Jackson's case was complicated when a second driver rear-ended her, re-aggravating her injuries. Rhonda Davis, Jackson's attorney, says Allstate offered $4,600 -- about equal to her medical expenses before the second accident. The offer increased to $9,000 before trial.

Jackson held out for $15,000 and went to trial. But Allstate's hard line paid off. The jury awarded her only $7,500.

Doug Carpenter, a former Allstate vice president for Ohio and Kentucky, says the company's system is usually very good at predicting jury awards. "When plaintiffs' attorneys take Allstate to court, they find that, overall, they are failing to secure more for their client than that process said was actually due. Which, if you've hired a lawyer to represent you, is not good news."

Judge Richard McMonagle, presiding judge in the Cuyahoga County Court of Common Pleas, agrees. "Quite honestly, they're pretty accurate. They've been pretty much in the ballpark in their valuation of these cases.

"I've seen them offer, before trial in one case, 600, 700 bucks. [You say,] 'Come on, they've got to pay the lawyer, the defense lawyer, a couple thousand bucks just to be there.' [They say,] 'We understand, but this is what we believe the case is worth.' Sure enough, the jury comes back with 400, 500 bucks."

A report on jury verdicts tells a more complicated story. Plaintiffs' lawyers were actually able to beat Allstate's final offer by going to trial in 59 of 94 Cuyahoga County auto-accident cases over the last five years, according to a report prepared for Scene by the Ohio Trial Reporter service. (The picture may not be altogether complete: Plaintiffs' attorneys report to the service more often than defense attorneys, so the service may be more likely to record their victories.)

Plaintiffs' attorneys say that insurance companies have worked hard to convince the public that lawsuits are out of control. Potential jurors often cite the famous 1994 case of Stella Liebeck, the woman who sued McDonald's after she was burned by spilled coffee and was awarded $2.9 million by a New Mexico jury. Attorneys argue that people don't know all the facts in that case: that Liebeck had to have skin grafts because of third-degree burns, that McDonald's had ignored 700 complaints that its coffee was too hot, and that a judge eventually reduced the verdict to $640,000. But that hasn't stopped the case from becoming a popular example of runaway jury awards.

"The public does react a little to that bumper sticker you see once in a while: 'Hit me, I need the money,'" Carpenter says.

"Everybody's wising up a little," says McMonagle. "We had a case once where a kid, I think it was a three-year-old, went to a chiropractor 40 or 50 times . . . Kids that age fall out of trees and walk home!

"You can overdo any treatment. [People say,] 'The doctor kept telling me to come back!' Who's the devil in that?"

Juries are especially skeptical about soft-tissue cases, McMonagle says.

"The value of those has been reduced markedly, tremendously. The soft tissue is something you can't see . . . Juries want scars, stitches, X-rays of broken bones."

Two years ago, Allstate attorneys informed McMonagle that, in MIST cases, the company would no longer send its adjusters to pretrials, where settlements are often negotiated. No other insurance company had taken such a step. It was a clear sign that Allstate had adopted an uncompromising policy.

But in some ways, other insurance companies are following Allstate's lead. They, too, are getting tougher in negotiations and in court, say Carpenter and many trial lawyers.

That could mean increasingly clogged courts, says McMonagle. "If all these companies tag into Colossus and [adopt] a MIST policy, we're going to come to a grinding halt."

"Allstate would probably be proud that they're the most difficult company for plaintiffs' attorneys to squeeze money out of," says Carpenter. "If you were someone involved in an accident, you would probably want an insurance company who defended you to the fullest extent and didn't just fold. Allstate serves its customers extremely well, both by defending the individual and keeping down the rates for its policyholders."

In the past, insurance companies were too lenient, Carpenter argues, offering more than a claim was worth in order to get a settlement, which drove up costs in the long run. "This may be an overstatement, but for plaintiffs' attorneys, soft-tissue injuries were a little like pulling the handle on a slot machine. And it always came up at least three cherries."

Lawyers are out to get Allstate because it won't play the game anymore, he says. "In my opinion, the customer is probably netting a bigger check [by settling a claim early] than they would have had if they had an attorney."

It's hard to know whom to believe, since Allstate and trial lawyers are both out to make money, and they do that by beating each other up. What Allstate considers "excessive" doctors' bills are still bills an injured person probably has to pay. In trial-lawyer-speak, "justice" often means large sums of cash to compensate for hardships that most people find hard to measure, from pain and suffering to household chores an injured person can't do anymore.

Usually, the never-ending war between insurance companies and trial lawyers is conducted by gentlemanly rules of compromise, of give-and-take. Allstate has changed the rules -- and, some of the time, it's paid off.

But Craig Bashein, Lance Rutledge's attorney, says Allstate's stance can sometimes backfire and hurt its own customers. He points to Kenny Aigner, who ended up owing Rutledge thousands of dollars because Allstate insisted on going to trial, even though Aigner was at fault in the crash.

Like Rebecca Kemmett's attorney in the Olive Garden case, Bashein has asked a judge to rule that Allstate negotiated in bad faith. If his argument succeeds, Rutledge will win 10 percent interest on his jury award. In addition, Aigner would have a claim against the insurer for exposing him to financial loss. Bashein says he's in negotiations with Aigner, trying to convince him to assign his bad-faith claim to him, so the lawyer can demand the full verdict directly from the company.

Allstate customers run a greater risk of being dragged to trial, Bashein argues. "If [I'm] a consumer, the last company that I want insuring me is Allstate. I don't care if it's free."

Rhonda Davis, who has represented Allstate customers who have sued the company as well as people hit by Allstate drivers, agrees.

"My fear," she says, "is that I would be critically injured, and the person will have Allstate insurance. And you know, you can never predict who is going to hit you."


More by Erick Trickey


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