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Washington OIC fines Allstate for low estimate, misstating Right to Appraisal rules

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The Washington Office of the Insurance Commission (OIC) has levied a $25,000 fine against Allstate for the mishandling of an auto insurance claim, according to a consent order signed by Insurance Commissioner Mike Kreidler last week. 

OIC says the fine comes after a consumer complained they received a low estimate from Allstate. The insurance company also incorrectly stated that a right to appraisal could not be invoked after repairs had been made, failing to conduct the appraisal in a timely manner. 

Allstate initially paid $8,816 for a vehicle crash claim filed in January 2023, an amount that the policyholder’s repair shop said was too low to return the vehicle to pre-loss condition, the order says. 

Months of battle between the policyholder and Allstate ensued until an umpire determined the cost of repair to be $29,395, more than $20,579 higher than Allstate’s estimate. In late October, nine months after the crash, Allstate paid the claimant $27,607.

The state’s order says Allstate used unfair methods of competition and unfair or deceptive acts or practices, specifically misrepresenting pertinent facts or insurance policy provisions. It also failed to make a good faith effort to settle a claim before exercising a contract right to appraisal. 

It is the first time that Washington’s OIC has issued a fine for a single violation, Jeff Butler, a public and independent adjuster, said Tuesday. He said historically, the OIC only takes action when it finds a pattern of practice of unfair and deceptive claims handling. 

“I the consumer advocacy team believes there is a violation, they document that,” Butler said. “They put it in a folder and at some point that folder fills up enough. Then it goes to the market conduct team for review to see if there is a pattern of practice of unfair and deceptive claims.” 

Butler, owner of Collision Consulting of Washington, said he was contacted by the policyholder after the repair shop said it was unable to repair the vehicle at Allstate’s estimate. 

“Allstate low-balled the heck out of this claim and in my opinion it was obvious,” Butler said. 

According to the state’s order, Allstate first paid $3,692 to the repair shop based on a estimate made based on photos of the vehicle. A supplemental estimate was completed on March 24, 2023 and an additional payment of $5,124 was distributed by the insurance company. 

At that time, Allstate said there were items in the repair shop’s supplemental estimate that it found were “unsupported and/or customary to the local market.” The insurance company also said labor rates were higher than the prevailing local market and noted new OEM parts. 

It notified the company that it could not reach an agreement with the repair shop, the complaint says. 

The policyholder invoked their Right of Appraisal on March 31, 2023 and proceeded with repairs notwithstanding the non-agreed estimates, the order says. Allstate informed the complainant that they should contact the company with their selected appraiser. The order notes that the claimant did not immediately notify Allstate with this information. 

On April 12, 2023, the policyholder demanded an appraisal. Allstate responded with a letter the policyholder received on May 24. It said the policyholder couldn’t invoke the Right to Appraisal as repairs were nearing completion. The company said the process needed to be started prior to repairs or in the early stages of repairs. 

Allstate was notified by Collision Consulting that it was the selected appraiser on May 25, the state’s order says. 

Butler said he also advised the policyholder to contact the OIC and file a complaint for misrepresentations of policy provisions and other violations of the unfair claims settlement practices act.’ 

“I let them (consumer) know what the rules were and what they needed to do to advocate for themselves,” Butler said. 

It became a tedious process of the consumer continuing to update the OIC, he said. This included diligently updating the complaint repeatedly with emails and correspondence. 

The order notes that Allstate also told the OIC that the Right to Appraisal could not be invoked as the company was notified of the policyholder’s appraiser after repairs were completed. 

“However, the Company’s auto policy documents do not stipulate that appraisers must be hired before repairs are completed,” the order says. 

Allstate stated they hired an independent appraisal firm on June 12, 2023 the order says. Yet, between July 7 and August 11, the company didn’t respond to emails attempts made by the policyholder asking about the status of the appraisal. 

On August 31, Allstate told OIC that the policyholder had been advised to speak with their hired counsel, the order says. It also said Collision Consulting had refused to provide a case file to support  its appraisal or supporting documents to the company’s appraiser. 

Butler said the opposing appraiser refused to inspect the vehicle themselves and demanded that the appraiser for the consumer do all of their investigation work at the expense of the insured.

“It is my opinion, that this action violates the insurer’s duty of upmost good faith, fair dealings and equal consideration, as well as the insurer’s responsibility to conduct a reasonable investigation at their expense,” Butler said.

Ultimately, an umpire awarded the complainant $29,395 to restore the vehicle to its pre-loss condition on Oct. 17, the order says. Allstate adjusted the award to $27,607 per the policyholder’s policy limitation. 

The OIC issued its order on May 1 of this year. It became effective June 17. 

Commissioners have the authority to fine, suspend and revoke the certificate of authority for a  carrier  to do misconduct for misconduct, Butler said. He said, in this case, Kreidler used the evidence submitted by the policyholder to invoke that power.

“They [OIC] brought the case in front of an administrative law judge and adjudicated the case through the process and fined Allstate,” Butler said. “In 33 years, I can’t remember this ever happening before.” 

Butler said it took the consumer outlining state rule violations each time they happened. He said claim experts can help consumers by providing them with this knowledge. 

Repair shops also can help consumers by informing them there are claim professionals available such as public adjusters or lawyers who are able to assist when insurance companies fail to follow rules, Butler said.  

Washington Independent Collision Repairers Association (WICRA) presented a survey of members about the impact of photo estimating on their businesses to the OIC in July 2023 during a workshop. 

On average, the 30 independent shops said they see more than 1,000 photo estimates at their businesses each month. About 93% of auto claims were settled solely on the insurer’s review of photos.

Eighty percent of the shops said none of the photo estimates they reviewed were accurate.

Seventy percent of shops said they had to resubmit information to the insurer multiple times before receiving a response or payment.

During the workshop, Kreidler commented, “I believe we have some serious issues right now. We’ve seen a 63% jump in complaints about claims issues, on average… I know supply chain issues have caused some repair delays but I’m especially concerned with the increase in consumers with complaints about the claims experience that do not involve supply chain problems… Some of the most concerning issues we’re hearing involve the issue of the use of photo that can produce very little repair estimates. Actual human adjusters are not inspecting the damage and insurers are not thoroughly explaining why they disagree with a consumer’s repair estimates.”

The OIC has reported a historic volume of complaints since 2021 according to its latest historic trends report released in July 2023.

 The report “makes it clear that auto insurance complaints are responsible for the majority of complaint volume, and a sizable portion of the increase in complaints. Several items in particular are worth noting from the available data:

 • Claim Delays, Unsatisfactory Settlement Offers, and Claim Denials are consistently the top three reason codes cited in auto insurance claims handling related complaints.

• Adjuster Handling issues are growing exponentially, with 2023 already surpassing the previous high point in 2022 just 5 months into the year.

• Claim Delays in particular have reached concerning levels, with this one reason surpassing virtually all other reasons combined in the last year.

Butler said repair shops can work with state groups, such as WICRA,  as another way  to help consumers. 

“Shops can showcase how much insurance can undervalue claims and perhaps that work is what helped the commissioner see that there is a bigger problem than they thought,” Butler said. “They didn’t think there was any problem before because very few consumers were complaining.” 

The OIC is supposed to be there to protect consumers, Butler said.

“When they can see that insurance companies are acting in bad faith, the regulators are supposed to take action to protect the public interest,” Butler said. “However, without people speaking up, the regulators won’t understand there is a problem and the state legislature will not have the data from the insurance commissioners to see that legislative reforms are very needed.” 


Photo courtesy of JHVEPhoto/iStock

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