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Allstate's `customer service' charade.

The company's service pledge misleads injured people and seeks to dissuade them from hiring an attorney.

For years, Allstate's advertising slogan has been "You're in good hands with Allstate." The company wants to portray itself as one that people can rely on in times of loss. Unfortunately, Allstate has taken advantage of this image in its claims-disposition process and attempts to convince injured people to take less than full recovery for their damages.

The campaign aims to decrease Allstate's auto claim costs by negotiating directly with people injured by Allstate policyholders. The goal is to seek out those who have not retained counsel to help them with the claims process and dissuade them from retaining counsel. What is paradoxical is that the company calls this customer service.

The so-called customer service process is carried out in the following manner:

* A claim representative calls the injured party to establish rapport with the person and obtain the facts of the collision. Representatives are told to show "empathy" and act as an advocate in the claims process so as to make people feel they are not dealing with an adversary.(1)

* The representative then sends a letter to anyone not represented by counsel to "reaffirm" the phone conversation.(2)

* The follow-up letter includes the Customer Service Pledge, which "promises" that the company will conduct a quick and "fair" investigation of the claim.(3)

* A brochure, Do I Need an Attorney?, is then selectively mailed to injured claimants who have not retained counsel or who are still deciding whether to do so.(4)

Allstate has even changed the incentive structure for its claim representatives, rewarding them based on the percentage of unrepresented claims they process.(5)

The problems the pledge creates by hiding the adversarial nature of the interactions between a policyholder's insurer and the injured person are significant and can be demonstrated by an analysis of Allstate's own materials.

The pledge

The Customer Service Pledge is a followup to a phone call or face-to-face meeting that takes place almost immediately after Allstate has been notified about a claim. Claim representatives are to establish early contact and immediate "rapport" with the injured person. The representative is to give a "clear ... explanation" of the claims process, showing "genuine empathy" about the person's injuries and "act[ing] as [an] advocate in [the] claims settlement process."(6)

The model for claimant contact is based on the findings of focus groups Allstate conducted in Philadelphia with claimants who had settled bodily injury claims between $5,000 and $15,000.(7)

After the initial contact has been made, the claim representative will send a cover letter, a medical/wage release authorization form, and the Customer Service Pledge. It contains the following statements:
 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. In an effort to provide you with this quality
 customer service, we promise you the following:

 (1) We will fully explain the process, take the time to answer all
 questions and concerns that you may have, and keep you informed throughout
 the claim process.

 (2) We will conduct a quick, fair investigation of the facts in your case.

 (3) To the extent that our policyholder was at fault in the accident: We
 will assist you in providing for the repair of your vehicle and arranging
 for a rental vehicle; we will help you determine if you are eligible to
 receive compensation for any injuries you may have suffered; and we will
 discuss fair payment of your claim when you feel you are ready.(8)

The problem is this pledge never addresses the fact that Allstate and the injured person are adversaries. In fact, the pledge hides the adversarial process by calling the injured claimant a customer who is entitled to quality customer service. The pledge is meant to lull an unsophisticated claimant into a false belief that Allstate has his or her best interests at heart.

Why would Allstate risk consumer fraud charges on such a heavy-handed campaign? The answer is supplied by Allstate itself. According to the insurer, people who file claims with the aid of counsel settle for two to three times more than people who do not retain counsel.(9)

The influence the pledge has on claimants has been studied by researchers at the University of Massachusetts at Amherst. The study found that almost one-third of those surveyed believed Allstate was concerned about them and would deliver on its pledge. The study also found that older adults were more likely to be skeptical about the pledge than younger ones.(10)

Allstate's aim to establish rapport and put the claimant at ease is a prelude to the intended goal, which is to eliminate attorneys from the process.

The brochure

The Do I Need an Attorney? brochure provides the arguments for eliminating attorneys from the process. It includes five questions with answers that would lead an uninformed claimant to believe an attorney is not necessary. The questions and answers follow:
 (1) Am I required to hire an attorney to handle my claim? No. In fact, each
 year Allstate settles claims directly with many accident victims with no
 attorneys involved in the claim settlement process.

 (2) Will an attorney make the claim settlement process faster for me? A
 recent study by the Insurance Research Council found that people who settle
 insurance claims without an attorney generally settle their claims more
 quickly than those who have hired attorneys.

 (3) How much are attorneys' fees and who pays for them? Attorneys commonly
 take between 25 to 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.

 (4) If I don't get an attorney now, can I still get one later? You may hire
 an attorney at any time in the process. Under (state) law, in most cases,
 you have up to (#) year(s) after your accident to file a court action
 against the at-fault party.(11) Before you decide to see an attorney, you
 may wish to seek an offer with Allstate first. If an attorney believes he
 or she can achieve a higher settlement, you can then see whether the
 attorney is able to accomplish that. And you may wish to hire an attorney
 on the condition that the contingent fee apply only to the settlement
 amount in excess of what Allstate offered to you without the attorney's

 (5) Should I seek the advice of an attorney? Whether you should retain an
 attorney is your decision. Allstate will not penalize you in any way for
 retaining an attorney. An attorney may be able to provide valuable advice,
 and may be important in complex or serious cases. Again, however, you may
 wish to seek an offer from Allstate, and when retaining an attorney, make a
 condition that the contingent fee apply only to the settlement amount in
 excess of what Allstate offered to you without the attorney's

The brochure has proven effective, according to the University of Massachusetts study. Sixty-seven percent of those surveyed found the document persuasive and said they would follow its advice. Most thought the document was both factual and informational and would not consider hiring an attorney.(13)

Again, there are several problems with the Allstate brochure. First, there is no clear disclosure that the company is an adversary in any settlement talks or court proceeding.

Second, the information in the brochure is not accurate. Claiming that all fees are a certain percentage is intentional overstatement.(14)

The brochure's advice on when a person's statute of limitations begins to toll is also unclear or inaccurate, depending on the jurisdiction where the collision happened or the state of residence for the injured. Allstate has provided no basis for the information it gives in the brochure, nor given any explanation as to why that advice would apply within a particular state. The brochure is a business document giving legal advice, yet at the same time it is purposefully ambiguous.

Third, and most important, the Allstate claim representatives are practicing law without a license. The attempt to coerce people out of their rights by giving one-sided legal advice is explained in the Allstate training materials.(15) The representatives go through several steps to practice law in spirit while trying not to violate the letter of the law.

The scripts used by the company's claim representatives are the first indicators of Allstate's intention to stand as proxy for a claimant's counsel. Representatives are to discuss the statute of limitations and the claimant's ability to file a court action at any time and also to explain the "early settlement option" whenever the claimant is ready.(16)

Many state bar association would consider what the representatives do on a regular basis as the unauthorized practice of law. The representatives interpret statutes of limitation, explain claim valuations when it is in their interest to undervalue claims, give opinions based on a comparative negligence formula, and negotiate settlements in concert with Allstate legal counsel. Because of evidence of this behavior, Allstate has suffered setbacks to its campaign in a number of states.

State and consumer action

There are clearly two potential legal claims raised by the Allstate pledge. The first is fraud. Allstate establishes contact with a potentially unsophisticated adversarial party with no disclosure as to the true nature of the relationship between an insurer of the at-fault driver and the person injured by that driver.

The second is the practice of law without a license. In effect, Allstate is advising people about whether an attorney is needed for a legal matter that would be in dispute between two parties.

Decisions against Allstate in several states have either stopped the company from distributing the Customer Service Pledge letter and the brochure or forced Allstate to alter them to clarify certain issues for consumers or to accurately reflect the law.

New York

On February 3, 1997, New York negotiated a $15,000 settlement from Allstate to pay for investigative costs to the state and secured an agreement from the insurer to "clarify" the letter and brochure.(17) Allstate agreed to stop referring to third-party claimants as customers in the Customer Service Pledge and to eliminate language discussing the amount and the nature of attorney fees in collision cases unless they reflected New York's legal limits on fees.

The agreement forbids Allstate from telling claimants with collision injury claims that it will assist them in determining whether they are eligible for money damages. It also stops Allstate from telling them that providing medical and employment information will not affect their claims.

After an investigation, Attorney General Dennis Vacco decided that Allstate misled consumers into thinking they did not need attorneys. Although New York made Allstate agree to change the pledge and brochure, the new wording differs from the original wording only slightly:

* Customer Service Pledge

Original language: "We will discuss fair payment for your claim when you are ready."

New language: "If you qualify, we will make an appropriate offer of compensation for any injuries you may have suffered."(18)

* Do I Need an Attorney? brochure

Original language: "An attorney may be able to provide valuable advice, and may be important in complex or serious cases."

New language: "An attorney may be able to provide valuable advice, and may be able to help you advance your interests."(19)

West Virginia

On September 18, 1997, the Unlawful Practices Committee of the West Virginia State Bar found Allstate guilty of the unlawful practice of law because:

* Allstate did not present the brochure as a typical advertisement because the brochure targets those injured by Allstate drivers;

* The company expedited delivery of the documents immediately after the injury and before the claimant contacts an attorney;

* The brochure takes the form of a business document as opposed to advertising; and

* The brochure attempts to provide specific advice to individuals as to whether or not they should hire an attorney.(20)

The bar ordered Allstate to cease and desist from its unlawful practices. Allstate filed an action against the bar in federal district court, claiming the cease and desist order violated its First Amendment right to free speech. The judge dismissed the case, citing that under the Rooker-Feldman doctrine, the district court did not have jurisdiction over the action.(21)

Allstate is appealing the decision to the Fourth Circuit Court of Appeals, and a decision is expected soon.(22)


On October 1, 1998, the Connecticut Department of Insurance issued an order forcing Allstate to stop issuing Customer Service Pledge letters until they were reformulated in accordance with state insurance statutes and the unauthorized-practice-of-law statute. Allstate's resubmissions of the letter have not been approved, and the brochures may not be issued.(23)

The Connecticut legislative has implemented a statute that prohibits licensed insurers from sending oral or written communication advising against retention of an attorney in personal injury cases. After reasonable notice and an opportunity for a hearing, the insurance commissioner can impose a fine(24) or even revoke the insurer's license for violating the statute.

New Jersey

On May 11, 1998, the New Jersey Supreme Court Committee on the Unauthorized Practice of Law issued an order for Allstate to slop sending the current form of the Customer Service Pledge letter and the Do I Need an Attorney? brochure. The committee drafted revisions to the letter for Allstate to incorporate if the company wished to continue using it.(25) Allstate incorporated the recommended changes.


The Unauthorized Practice of Law Committee of the Pennsylvania Bar Association adopted the West Virginia Bar's opinion on the Allstate letter and brochure in December 1997 but has yet to produce its own formal opinion.(26) Pennsylvania Attorney General Mike Fisher also filed suit in 1998 against Allstate under the Consumer Protection Act, claiming the letter and brochure have exacted a fraud against citizens.

The action states Allstate does not act in the interests of third-party claimants as it advertises but acts in its own interests. The attorney general noted, "Consumers have the right to decide for themselves if they want an attorney. They should not base that decision on the series of deceptive statements that we contend Allstate was making." He continued, "I find it hard to believe that this insurance company can at the same time represent its policyholders and the very people who were injured--that's just nonsense."(27)

North Carolina

On April 16, 1998, the North Carolina State Bar said the brochure constituted the unauthorized practice of law. The bar issued a warning letter to Allstate to cease distributing it. North Carolina Bar deputy counsel Doug Brooker noted that the state could take further action if necessary.(28)


On March 19, 1999, the state Department of Banking and Insurance forced Allstate to amend its pledge by clarifying that the claim representative is an employee of Allstate, not a person serving the claimant. Allstate also amended its brochure by eliminating references to attorney costs.(29)

Officials in several other states are undertaking action against the letter and brochure, including Arizona, California, Colorado, Florida, Illinois, Indiana, Kansas, Maryland, Michigan, New Mexico, Oregon, Tennessee, and Texas.

State officials have primarily used two methods against Allstate over the past four years. Aggrieved claimants and their counsel have filed complaints with their state insurance departments or attorneys general under a consumer fraud theory, like the actions in Connecticut, New York, Pennsylvania, and Vermont. When these entities make findings against Allstate, they can stop the letter and brochure and fine the insurer.

The other method has been to file a complaint with the state bar for the unauthorized practice of law, as occurred in New Jersey, North Carolina, and West Virginia. Both methods have proven successful.

Consumer actions

State officials are not the only ones involved in stopping Allstate's campaign. In two class actions, consumers are trying to recover the losses they sustained due to Allstate's brochure. These actions contend consumers shunned representation because of the letter and brochure and customer service representatives' statements, and suffered losses.

A class action has been filed in state court: in Connecticut,(30) and a national class action has been filed in Illinois.(31) The proposed class includes everyone in the United States who has been or will be involved in collisions with Allstate policyholders and received the letter and the brochure. The number of claimants involved in the class is expected to be between 300,000 and 500,000 people.(32)

Counsel for the national class action contend the damages for each member of the class is $8,677, based on a study from the Insurance Research Council. The study found that payments for unrepresented claimants with bodily injuries amounted to $3,262 on average. Payments to represented claimants amounted to $11,939 on average.(33) In total, about 50 private and class actions are pending against Allstate concerning the letter and the brochure. Eleven cases have already been settled.(34)

Several attorneys and attorneys general have relied on Allstate's Unrepresented Segment Training Manual to prove the company tried to confuse and influence third-party claimants to reject representation. Now, Allstate is attempting to cram the genie back into the bottle.

On April 26, 1999, Allstate asked a federal judge in New York to place a seal of secrecy on the manual. Allstate is also challenging a New York law that prevents insurance companies from steering insureds to selected auto repair shops with ties to the insurer.

The New York attorney general introduced the manual as part of a motion to dismiss. Allstate claims that if the manual were exposed, it would give away proprietary information.(35) The decision regarding the manual is pending.

After several years of taking advantage of third-party claimants, the tide is beginning to flow against the insurer. Its own documents and actions have galvanized enough support against it to have Allstate fighting to justify its actions to state insurance departments and to courts.

Until Allstate ceases its customer service activities, consumers should be wary. They are not in such good hands.


(1.) There are several telephone scripts the claim representative is to follow exactly. See ALLSTATE INSURANCE CO., UNREPRESENTED SEGMENT TRAINING MANUAL 15-30 (July 1995) [hereafter ALLSTATE MANUAL]. To purchase the Allstate manuals mentioned in this article, go to the Exchange Web site home page ( and click on the red "Specials" button. From there, select either "Allstate CCPR Training Manual" or "Allstate Claim Policy-Practices-Procedures Manual" and complete the online order form.

(2.) See id. at 33-35. There are three versions of this letter, depending on whether the injured person has been contacted and whether that person has considered retaining counsel.

(3.) The three versions of the pledge are the "bodily injury" pledge, the "guest passenger" pledge, and the "uninsured motorist" pledge. See id. at 36-38.

(4.) See id. at 39-40.

(5.) See id. at 61 for an explanation of the disposition measurements for the claim representatives.

(6.) See id. at 10, which discusses the basic format for all claim representative contacts.

(7.) See id. at 3 (Exhibit 4), for a full explanation of those findings.

(8.) Id. at 7.

(9.) See id. at 3 (Exhibit 4), which shows that the average unrepresented Allstate BI connective-tissue claim settles for $3,464, while represented claims settle for $7,450.


(11.) This is the boilerplate language that is amended depending on the residency of the claimant.

(12.) ALLSTATE MANUAL, supra note 1, at 39.

(13.) U. MASS. STUDY, supra note 10, at 7.

(14.) One stipulation in New York state's settlement with Allstate in connection with its letters is that any reference to attorney fees has to be accurate. See The Attorney General of the State of New York, Assurance to Discontinuance Pursuant to Executive Law [sections] 63(15), In re Allstate Insurance Co., Feb. 3, 1997 [hereafter New York Agreement].

(15.) ALLSTATE MANUAL, supra note 1, at 24 - 27.

(16.) See id. at 28.

(17.) See New York Agreement, supra note 14, at 8.

(18.) Id.

(19.) Id. at 7; Cheryl Winokur, Critics Unmoved by Changes in Allstate Handout, N.J. L.J., Apr. 14, 1997.

(20.) See West Virginia State Bar Committee on Unlawful Practice, In re Unauthorized Practice of Law Complaint v. Allstate Ins. Co., No. 001-97 (Sept. 18, 1997).

(21.) See Allstate Ins. Co. v. West Virginia State Bar, 998 F. Supp. 690 (S.D.W. Va. 1998).

(22.) See Angela Wissman, `Before You Decide to See an Attorney ... `Suits Allege `Good Hands People' Go Too Far to Keep Lawyers Out of Claims Settlements, ILL. LEGAL TIMES, June 1999, at 1.

(23.) See Letter from George M. Reider. Jr., Insurance Commissioner for the State of Connecticut, to Paul Zitgerman, Counsel for Allstate Insurance Co., (Oct. 1, 1998).

(24.) See CONN. GEN. STAT. [sections] 38a-832 (1999).

(25.) See New Jersey Supreme Court Committee on the Unauthorized Practice of Law, Op. 32 (Letters Sent to Third-Party Claimants) (May 11, 1998).

(26.) Telephone interview with Pennsylvania Bar Association Unauthorized Practice of Law staff liaison Luann Bell (July 7, 1999).

(27.) See Wissman, supra note 22.

(28.) See Michael Dayton, Allstate to Be Cautioned for Unauthorized Practice of Law, LAW. WKLY., Apr. 27, 1998, at 1.

(29.) See Letter from Phillips B. Keller, Enforcement Attorney for the Vermont Department of Banking, Insurance, Securities, and Health Care Administration, to Paul Zigterman, Allstate Insurance Counsel (Mar. 12, 1999).

(30.) White v. Allstate Ins. Co., No. 398CV01586 (PCD) (Conn., New London Super. Ct. filed June 28, 1998) (removed to D. Conn. Aug. 7, 1998); telephone intenview with James C. Peterson, Partner at the Law Firm of Hill, Peterson, Carper, Bee & Deitzler (July 1, 1999) [hereafter Peterson Interview]. Peterson is co-lead counsel on the national class action in Illinois and was central to the West Virginia Bar decision against Allstate.

(31.) Martin v. Allstate Ins. Co., No. 98-CH-00603 (Ill., Cook County Cir. Ct. filed Jan. 16, 1998).

(32.) See Wissman, supra note 22.

(33.) See id.

(34.) Peterson Interview, supra note 30.

(35.) See Daniel Hays,Allstate Seeks Court Seal on Company Claims Manual, NAT'L UNDERWRITER, May 10, 1999.

Annette Wencl is ATLA's director of State Affairs. David Strickland is state research counsel for the association.
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Author:Strickland, David
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Date:Sep 1, 1999
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