Institutional Bad Faith 101 — How Allstate’s DOLF Program Works

We recently reported on the CNN study that found insurers like Allstate and State Farm have systematic programs to force their insureds to settle for less insurance proceeds than the insurance company promised them in their insurance policies. CNN concluded that these programs have resulted in billions of dollars of excess profits for insurance companies. Allstate alone has given $23 billion of profits to its shareholders in only twelve years of using such a program.

How do those programs work? Let’s look at Allstate’s program, which it calls DOLF — Defense of Litigated Files. Allstate makes the insured a lowball offer. If the insured refuses to settle for less than the insurance benefits she bought, the claim will be litigated. In fact, Allstate will send a letter telling the insured that this is the only offer they are going to get and that, if the lowball offer is not accepted, Allstate will vigorously litigate the claim. So, instead of the insurance benefits she paid for, the injured insured is threatened with years of litigation to get what she was promised and deserves.

There is a theoretical possibility that Allstate will increase its offer, but only if the insured provides documentation of some “value changing event.” An example would be a doctor’s report that the insured needs surgery. But even if there is a significant change, the system is tilted against you. In one case, Allstate representatives testified at trial that new information about a significant value changing event did not go back to the original adjuster. Instead, it went from the Allstate defense lawyer to the “gatekeeper” in the Allstate claim office. The gatekeeper decided the adjuster did not need to know about the new information. That made it impossible for the adjuster to reevaluate the claim on the basis of the new evidence. Such a reevaluation was required by the insurer’s duty of good faith and by state claim handling regulations.

Some of you may wonder if that “gatekeeper” just made a mistake. No, he did not. He played his role just as Allstate intended. The job title of the “gatekeeper” is Evaluation Consultant. Any value changing information was supposed to be reported to the Evaluation Consultant, who was to decide if it was important enough to pass on to the adjuster. One of the key functions of the Evaluation Consultant is to ensure that adjusters do not weaken and pay more than Allstate’s lowball offer. The best way to do that is to keep them out of the loop in DOLFed cases. In that case, the adjuster was still assigned to the file, but was not even told of a court-ordered settlement conference-Allstate sent someone else, who knew very little about the file, in his place.

By the way, this was not a case where Allstate’s liability was in question. The insured had been injured by a drunk driver who ran a stop sign and then fled the scene of the wreck. This was a claim under the Allstate underinsured motorist (UIM) coverage. You would think that if anyone deserved the good hands treatment, it would be a young girl injured by a drunk driver. Obviously, Allstate did not. Do Allstate actions towards this poor girl sound like the caring, good hands treatment you hear about in all those fancy television ads where Allstate wants you to buy their policies?