Allstate Using Same Discovery Dodges Against Regulators As It Uses Against Insureds in Bad Faith Cases

The attorneys of the Alaska Personal Injury Law Group continue to watch closely as the insurance commissioner of Florida battles to obtain documents that show Allstate’s institutional bad faith claim handling practices. Allstate is using the same tactics of delay and obfuscation against the regulators that it typically uses in bad faith cases against Allstate in Alaska. A good example is the 12,000 McKinsey & Company documents that Allstate finally produced to the Florida insurance regulators last week, stamped as “trade secrets.”

As part of its public relations campaign, Allstate paints itself as the victim who is trying hard to find and produce the documents covered by the insurance regulators’ subpoena. The truth is that these crucial documents about Allstate’s bad faith practices were readily available all along. The McKinsey documents had been catalogued, numbered and scanned in prior bad faith cases, long before the regulators subpoenaed them. These catalogued documents were available to Allstate as paper copies and had also been copied onto computer CD-ROM or DVD. They were available to produce to the Florida insurance regulators with no more effort than a phone call.

There is no valid excuse for Allstate failing to produce the McKinsey documents to the Florida insurance regulators before the January 15 hearing for which they were subpoenaed. Allstate just wanted to hide them from the public and not be questioned about them at the hearings.

Why did Allstate already have these documents readily available in this organized form? Allstate hired the huge international law firm Steptoe & Johnson to fight production of these documents in insurance bad faith cases against Allstate all across the country. That effort is coordinated through the firm’s Phoenix office. Steptoe & Johnson oversaw the organizing, numbering and scanning. When Allstate loses one of these battles and a court finally orders Allstate to produce this evidence of Allstate’s institutionalized bad faith, these documents are produced in this same sequence with the same numbers. It is a package of crucial documents that each insured must fight to see when they sue Allstate for bad faith claim handling.

The Florida Office of Insurance Regulation (FLOIR) subpoenaed these McKinsey documents on October 16, 2007. Although it had three months to produce the subpoenaed documents, Allstate failed to produce the McKinsey documents and sent “know nothing” representatives to the FLOIR hearing on January 15, 2008. The Commissioner of Insurance called Allstate’s bluff and suspended its authority to write policies in Florida. As a result, Allstate has started to trickle out documents, complaining of the thousands of hours required to find them. To the contrary, many important documents, like these McKinsey documents, were at Allstate’s fingertips all along.

A few plaintiff’s lawyers throughout the country have seen these documents. The problem is that Allstate has generally been able to convince courts to allow the McKinsey documents to be produced as “trade secrets” that must be kept confidential. When a judge rules that they cannot be kept confidential, Allstate often settles that case immediately in order to keep them secret. A recent Missouri case shows the lengths to which Allstate will go to hide these documents from public scrutiny. A judge ruled that the documents are not entitled to “trade secret” protection. Allstate refused to produce them, so the judge has imposed a fine on Allstate of $25,000 a day for each day it continues to withhold the documents, with total fines now exceeding $2.5 million.

In this same way, Allstate labeled “trade secret” the copies it gave the Florida insurance regulators. If there is any justice in this land, the regulators will make them public so Allstate insureds in Alaska, Florida and elsewhere can see Allstate’s callous statements and the programs it uses to underpay its own insureds. If the regulators do not publish all the McKinsey documents, they should at least use the most damning ones to question Allstate about this scheme when the hearings resume. Insureds are entitled to know before they buy insurance that their insurer has a formal program of bad faith claim handling it intends to use to underpay them should a claim ever need to be filed.