Allstate Awarded More Than $2.7 Million In Fraud Lawsuit Against Three Northwest Chiropractic Clinics.

Business Editors

SEATTLE--(BUSINESS WIRE)--Sept. 10, 2001

A King County Superior Court judge awarded Allstate Insurance Company and Allstate Indemnity Company more than $2.7 million in a fraud lawsuit against the owners and operators of three Northwest medical clinics for fraud and violations of the Consumer Protection Act, Criminal Profiteering Act, and federal RICO.

The final judgment represents Allstate's largest-ever award in a fraud case in the Pacific Northwest. The judge's award is for treble damages, attorney's fees, and costs and follows a jury's verdict of $850,000 in actual damages.

Allstate sued the defendants, Hugh Nguyen and his wife Tracy Cao Nguyen, owners and operators of First Healthcare in Seattle, for fraud and violations of the Consumer Protection Act, Criminal Profiteering Act, and federal RICO. At trial, Allstate presented evidence showing that the Nguyens misled the company into paying fees not owed by submitting false medical billings for payment; that they illegally owned and operated the clinics without a medical license; and that they illegally recruited customers by paying persons associated with local law firms for referrals. Allstate also presented evidence to show that the Nguyens created a conspiracy with others to conceal these illegal activities from Allstate and the insurance industry.

In 1995, the Washington legislature created legislation requiring insurance companies to fight fraud as a part of doing business in the state. Allstate Special Investigative Unit Manager Stephen Detert testified that Allstate has embraced the legislation and the tools it provides to the industry because insurance fraud increases the average insurance customer's premium by an estimated $200 per year.

During the closing argument, Allstate's attorney Petrea Knudsen Reilly of Bullivant Houser Bailey, told the jury that Allstate regards fighting insurance fraud to be as much a part of customer service to its honest customers as returning their phone calls. Reilly urged the jury to send a message that insurance fraud will not be tolerated in the Northwest.

The defendants in this case included the Nguyens for their ownership of First Healthcare in Seattle and two clinics in the greater Portland area named Pain Care Chiropractic Clinic. According to Peter Fabish, another attorney for Allstate, the Nguyens took extraordinary steps to avoid a successful prosecution. Allstate presented evidence to show that they failed to cooperate with the judicial system throughout litigation, altered financial documents, concealed computer evidence, and even allowed patient files to be destroyed in direct contradiction with laws requiring ongoing maintenance of the files.

This trial win comes on the heels of Allstate's victory in a California court earlier this year in which a jury handed down an $8.2 million verdict against firms charged with insurance fraud. Allstate has filed a number of similar lawsuits in Washington and throughout the nation, emphasizing its zero tolerance for insurance fraud.

"Allstate is committed to fighting insurance fraud across the country," said Edward J. Moran, assistant vice president for Allstate's Special Investigative Unit. "We will aggressively pursue individuals we believe to be engaged in fraudulent claim activities to protect our honest customers. We do not think it is fair for our honest customers to pay for acts of a few unscrupulous individuals. The National Insurance Crime Bureau estimates that various insurance fraud schemes cost consumers $20 billion a year. That's why Allstate will use every legal means at its disposal to help make our customers' lives, homes, autos and families safer."

Allstate discovered the fraud through the efforts of its Special Investigative Unit. The 632-member unit gathers evidence and prepares cases for civil and criminal prosecutions. Allstate also works closely with law enforcement officials to assist with the criminal prosecution of those accused of automobile insurance fraud.

The Allstate Corporation (NYSE:ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate(R)" slogan, Allstate provides insurance products to more than 14 million households and has approximately 13,000 exclusive agents in the U.S. and Canada. Customers can access Allstate products and services through Allstate agents, or in select states at allstate.com and 1-800-Allstate. Encompass(sm) and Deerbrook(sm) Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group includes the businesses that provide life insurance, retirement and investment products.