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Allstate faces class action lawsuit over alleged UM/UIM coverage denials

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Insurance | Legal
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A California man has filed a class action lawsuit against Allstate accusing the insurer and its subsidiaries of breaching its contracts with policyholders in the state and unlawfully denying benefits to thousands of claimants.

The lawsuit, filed on May 3 in the Superior Court of California, County of Fresno, states that Allstate’s recent corporate-level decisions violate California law that dictates how uninsured motorist (UM) and underinsured motorist (UIM) benefits are to be calculated. This has left claimants receiving less than what they are owed while the plaintiff’s attorneys say Allstate has increased its rates in the state by an average of 30%.

The plaintiff, Jeffrey Sundquist Jr., was one of four occupants in a work vehicle that was hit head-on in 2018, killing two of his co-workers.

Allstate refused to pay benefits based on workers’ compensation payments made to others and for losses that weren’t compensated by worker’s compensation, according to the complaint.

Sundquist has spent years “in protracted communication with Allstate, receiving denial after denial and changing explanations for the non-payment,” the suit says.

“We believe that California’s Uninsured Motorist Act makes clear that insureds have rights to certain benefits and compensation under their policies,” said Frank Nunes, president of Nunes Law and one of the plaintiff’s attorneys, in a news release. “We intend to fight for the thousands of Californians we believe were underpaid because of Allstate’s corporate-level decisions.”

According to the lawyers for the insured, Californians who settled a UM/UIM claim in which the insurer deducted workers’ compensation benefits from the claim may be entitled to more compensation even if the claim was settled two years ago.

“Although California law allows Allstate to contract with its insureds to provide for an offset of its UIM liability by amounts insureds receive from workers’ compensation, the law does not allow Allstate to write (or interpret) its policy language in a way that effectively ‘transfers’ its workers’ compensation offset between different individuals insureds,” the lawsuit states. “In addition to violating the statute, Allstate also fails to abide by its own policy language which broadens the benefits available to UIM claimants by limiting the types of losses that can be offset using workers’ compensation benefits.”

The suit states Allstate’s alleged actions are contract breaches with policyholders and are acts of bad faith.

Allstate, and its subsidiaries by using a template contract from the insurer, act in bad faith by “disregarding well-established California law both through its unlawful claims denials as well as by failing to adequately investigate and analyze the nature of the losses covered by the workers’ compensation payments it uses to deny UM/UIM claims, and by failing to disclose and/or explain available policy benefits to claimants as required by California law,” the suit states.

Allstate is also accused of failing to abide by its own policy language, which Sundquist’s attorneys say limits the types of losses that can be offset using workers’ compensation benefits. An insurer can always provide more benefits than required by law, and Allstate did so but then refused to follow its language, according to the complaint.

“If you’re down and out after someone hurts you and you have Allstate coverage — whether it’s from your policy or the owner of the car’s policy — you expect Allstate to step up and do right by you,” Nunes said. “No one expects, or should have to endure, Allstate doing them wrong and playing games on how it calculates what its customers are owed.”

The lawsuit brings claims of breach of contract and bad faith and seeks punitive damages, compensation for the proposed class, and action from the court prohibiting the use of Allstate’s policies that allegedly violate California laws meant to protect policyholders.

“…none of the statute’s purposes are served by shifting the focus of the [legal] analysis away from preventing individual double recoveries in order to allow UIM insurers the largest possible reductions from their policy limits,” the suit states. “But that shift of focus is the only way to interpret [the law] in a way that allows insurers to reduce UM/UIM benefits for an injured individual using workers’ compensation payments made to another person for different injuries…

“Interpreting the statute to allow insurers to offset benefits in this way not only fails to serve the statute’s purpose but creates the inverse of the problem the legislature was trying to solve: it creates a windfall to the insurer at the expense of the insured.”


Featured image credit: JHVEPhoto/iStock

More information

Allstate’s auto premiums earned increased by nearly $1 billion in past year

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