Allstate facing new lawsuit over attorney Internet bids.Allstate is facing a multimillion-dollar class action lawsuit class action lawsuit
A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax in Chicago over its practice of seeking low bids on the Internet for legal representation of its insureds. (Maya v. Allstate Insurance Co., No. 01-006084 (Ill., Cook County Cir. Ct. May 23, 2001).)
The lawsuit requests punitive damages Monetary compensation awarded to an injured party that goes beyond that which is necessary to compensate the individual for losses and that is intended to punish the wrongdoer. , as well as other relief. Plaintiff attorney David Novoselsky of Chicago has asked for an injunction to make Allstate stop soliciting lawyers over the Internet.
"Allstate has chosen to pool or aggregate claims against its insureds and 'retain' counsel based upon a 'bidding' system where a group of potential lawsuits are advertised for review by various attorneys, with an invitation to place a bid over the Internet for the lowest possible cost of representation," the plaintiffs allege To state, recite, assert, or charge the existence of particular facts in a Pleading or an indictment; to make an allegation.
allege v. in the complaint. "Allstate then accepts this bid for anonymous retention" and later assigns Individuals to whom property is, will, or may be transferred by conveyance, will, Descent and Distribution, or statute; assignees.
The term assigns is often found in deeds; for example, "heirs, administrators, and assigns to denote the assignable nature of such cases to the bidder.
The plaintiffs have filed a claim under Illinois's Consumer Fraud and Deceptive de·cep·tive
Deceptive or tending to deceive.
de·ceptive·ness n. Business Practices Act, as well as common law claims of fraud and breach of contract.
Allstate defends its practice, saying it continues to provide quality legal services legal services n. the work performed by a lawyer for a client. to its insureds. In an interview, Pat Gallery, Allstate's vice president of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.
When a person begins a civil lawsuit, the person enters into a process called litigation. services, said flat fees for legal representation have existed for decades. Gallery, who noted that the company also seeks out lawyers recommended by claims representatives and other sources, said price is not the only factor it considers when deciding which attorneys to hire.
He said the practice could benefit policyholders. Their cases would probably close sooner "because there's less incentive to do a lot of legal work," he said.
He added that it is in Allstate's best interest to provide quality representation because increased litigation losses would be reflected in the company's expenses through higher payouts.
John Budlong, a Seattle attorney suing Allstate for bad-faith claims practices, said an insurance company's failure to adequately defend its policyholders could leave them facing judgments that exceed their insurance coverage. "This appears to be another example of Allstate trying to turn its claims operations into a profit center by providing less defense for the customers' premium dollars," Budlong said.
The lawsuit is the latest in a series of actions against Allstate related to its legal practices. In June, Florida Circuit Judge Paul Siegel ruled that staff attorneys had violated vi·o·late
tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates
1. To break or disregard (a law or promise, for example).
2. To assault (a person) sexually.
3. Florida Bar The Florida Bar is the mandatory state bar association for the state of Florida. It is the third largest such bar association in the United States. Its duties include the regulation and discipline of attorneys. rules by using private firm letterhead that failed to note their affiliation with Allstate.
In April, a Pennsylvania state court judge ordered Allstate to pay $250,000 in civil penalties for violating the Unfair Trade Practices and Consumer Protection Law. (Commonwealth of Pennsylvania v. Allstate Insurance Co., No. 1009 M.D. 1998 (Pa. Commw. Ct. 2001.)
Allstate reported in July that its second-quarter profits dropped 63 percent, leading to a sharp drop in its stock price. When asked whether the second-quarter losses could lead to further measures to control litigation expenses, Gallery refused to comment.