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Former Casualty Manager Testifies Against Allstate - Cites Good Hands to Boxing Gloves Claim Handling

The following is an article on Allstate's claim handling practices, discussed in the Trial Guides book From Good Hands to Boxing Gloves.
Former casualty manager testifies against Allstate
By Brandon Ortiz
Allstate's claims practices sent injury victims to biased doctors and
subjected them to intimidating interviews and invasive medical record
requests in an effort to bully them into accepting low-ball offers for
their pain and suffering, a former Lexington casualty manager
testified yesterday.
Allstate Insurance Co. overhauled the way it handles claims in 1995.
The overhaul created a dehumanizing process that boosted profits but
denied soft-tissue injury victims in minor wrecks the compensation
they were entitled to, said former Allstate regional casualty manager
Debbie Niemer.
Niemer testified yesterday in a Richmond woman's $1.425 billion civil
trial in Fayette Circuit Court challenging the way the insurance giant
handles claims.
"If they just wouldn't have been so consumed by the numbers and
allowed the human element," Niemer said. "If they had allowed the
adjusters to see the person, not just the number, it would have been
different."
Geneva Hager, 60, suffered neck and back injuries in a rear-end crash
in 1997 in Lexington. Her insurance claim with Allstate, which insured
the truck driver who hit her car, was not settled until December 1999.
Hager is now suing Allstate for allegedly handling her insurance claim
in bad faith. Her attorneys say that the way Allstate handles claims,
specifically soft-tissue injuries -- such as whiplash -- in
minor-impact wrecks violates Kentucky's Unfair Claims Settlement
Practices Act.
The trial began Monday and is scheduled for eight days. It is
scheduled to continue Monday.
Niemer agreed with Hager's contention that Allstate systematically
drags out claims to force injury victims into accepting unfair offers.
"Here we are, 10 years later," Niemer said. "They drug the claim out."
Niemer made several allegations that hurt Allstate's case that its
claims-handling -- then and now -- investigates each claim on its
merits and makes fair settlement offers.
She said Allstate kept a list of doctors who are most likely to say
that an injury victim is faking injuries. The outcome of the diagnosis
is never in question, she said.
The value of soft-tissue injuries in minor-impact car crashes were
capped at $2,500, which amounts to setting the value of the insurance
claim long before the wreck even occurred, Niemer said. Allstate calls
such insurance claims MIST cases, for minor-impact soft-tissue injury.
Niemer said documents that hurt Allstate's contention that a crash
victim is not really hurt were left out of claims files. If a computer
program that evaluates the value of claims spit out a value not to
Allstate's liking, it manipulated data so it would produce a lower
figure. If adjusters paid out too much in claims, they were punished
in their evaluations, Niemer said.
Allstate kept a log of plaintiff attorneys, noting which ones were
aggressive and which ones caved in, she said.
By forcing plaintiff lawyers to jump through hoops, Allstate drove up
the cost of litigation, Niemer said. That created a disincentive for
lawyers to take up such cases, because the payout was already so low.
Several law firms stopped taking such cases, she said.
"It was something that Allstate prided themselves in with the MIST
program," Niemer said. "Plaintiff attorneys knew they were going to be
in for a long, hard, costly battle."
Three years ago, Niemer told J. Dale Golden, Hager's lead attorney,
that Allstate's strategy in the lawsuit would be to blame everything
on Paul Kaplan, Hager's previous attorney.
"This followed the history that Allstate had," Niemer said. "They
weren't going to take responsibility. It was going to go on Paul
Kaplan, or Mrs. Hager, or an adjuster or a supervisor. By the end of
this, it could be me, for all I know. That's Allstate's history. I've
seen it. I've been a part of it. And I'm not proud of it."
Allstate's case has thus far focused on Kaplan's refusal to grant
Allstate a blanket authorization to obtain medical records. Employees
who worked on Hager's claim have said they suspected she was
exaggerating the extent of her injuries and think she and Kaplan tried
to conceal a pre-existing back condition and worker's compensation
claim in 1992 for a fall at a dry cleaner.
But Niemer said Allstate had exploited some medical authorizations by
obtaining records that had no relevance to the injury claim. And she
echoed an argument Golden has made repeatedly throughout the trial.
After Hager filed suit in July 1998, Allstate had the power to
subpoena medical records, she said.
Some of Niemer's testimony could also benefit Allstate.
During cross-examination by Allstate attorney Floyd Bienstock, Niemer
said that none of the employees who worked on Hager's claim
purposefully dragged it out.
"Mrs. Hager was the victim of a process," Niemer said.
Niemer acknowledged that she wrote in Hager's claim file that the
claim did not warrant the policy holder's $25,000 policy limits a
month before Hager filed suit. And she could not rule out that Kaplan
shared some blame for the two-year delay.
Niemer transferred the case to claim analyst Ben Urso, a veteran
employee who was well-liked by trial lawyers. Niemer said she could
not remember why she transferred the case, but she said it could have
been because she feared Kaplan was using the case as a setup to a
bad-faith lawsuit.
Allstate claims-handling processes were developed by international
consulting firm McKinsey & Co. in the 1990s. The heart of Hager's
lawsuit has been 12,500 PowerPoint slides called the McKinsey
documents that were produced during the overhaul.
One slide calls for claimants to getting "boxing gloves." Another says
"Allstate gains" and "others must lose." Golden has cited the slides
as evidence that Allstate set out to systematically violate Kentucky's
insurance laws.
Allstate has said those slides are referring to unscrupulous trial
lawyers, chiropractors and fraudulent claimants. The insurer says its
processes call for claims to be settled more quickly, but it has said
that it vigorously investigates claims that it suspects are
fraudulent, exaggerated or have "padded" medical treatment.
Niemer said she saw some of the McKinsey documents, which Allstate has
fought to keep secret, for the first time yesterday. She said their
connection to Hager's case is clear.
"If it is a minor impact accident, that doesn't necessarily mean that
somebody is not injured," Niemer said. "Allstate did not take that
approach. And I think that is where this comes in. Somebody is going
to lose if they gain. Unfortunately, Mrs. Hager lost."
Golden asked Niemer why she agreed to testify. Niemer's husband, John,
still works for Allstate.
The reason is twofold, she said.
"The first is, I would like to apologize to Mrs. Hager for the
experience she had," said Niemer, who was interrupted by an objection
by Allstate's lawyers.
Niemer was not allowed to finish her apology.
[Update 2021: This article, along with almost all other articles and videos about McKinsey's Involvement at Allstate, have been removed from the internet.
The original post was available at:
http://www.kentucky.com/211/story/194537.html
Journalist Brandon Ortiz who wrote several articles on this issue went on to become a lawyer in California.]
For more on McKinsey and Allstate's impact on the handling of insurance claims, please read From Good Hands to Boxing Gloves: How Allstate Changed Casualty Insurance in America.]
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