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In the News: “$22 Mil. Settlement Reached in Allstate Bad-Faith Case”

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  • October 1, 2014

In the News: “$22 Mil. Settlement Reached in Allstate Bad-Faith Case”

P.J. D’Annunzio, The Legal Intelligencer    |  Comments

A bad-faith suit against Allstate Insurance Co. stemming from an auto-accident case that produced a $19.1 million verdict in Philadelphia has been settled for $22 million.

According to Legal sibling publication PaLaw, which tracks the largest verdicts and settlements in the state, the $22 million settlement in Hennessy v. Allstate Insurance reached Monday is the largest reported bad-faith settlement in Pennsylvania history.

Allstate and its agents—Kevin Broadhead, Paul Fraver, John Russell and Henry Ricci III—were the defendants in Hennessy. The plaintiff, Patrick Hennessy, sued Allstate for its refusal to pay for the judgment entered against its insured, Ryan Caruso, who was partially responsible for the accident that resulted in the amputation of Hennessy’s right leg.

Hennessy’s attorney, Matthew Casey of Ross Feller Casey in Philadelphia, said the underlying case that produced the $19.1 million verdict stemmed from Allstate’s failing to pay the $250,000 in coverage that Caruso’s policy afforded. As a result of being exposed to the multimillion-dollar verdict, Caruso assigned his rights against Allstate to Hennessy, allowing the plaintiff to sue the insurer, Casey said.

The $22 million settlement encompasses the $19.1 million verdict and subsequent delay damages plus interest, according to Casey.

“It was a protracted but ultimately successful battle between a young man with a catastrophic injury and the largest insurance company in America,” Casey said. “It is a testament to what one individual can accomplish through our civil laws when an injustice occurs.”

Allstate’s counsel, Marshall J. Walthew of Pepper Hamilton, did not respond to a call and email seeking comment.

The suit was initiated in the Philadelphia Court of Common Pleas, but had not been listed for trial. Allstate had previously attempted to remove the case to federal court.

Even though Allstate is headquartered in Illinois, its employees involved in the case reside in Pennsylvania, U.S. District Judge Lawrence F. Stengel of the Eastern District of Pennsylvania reasoned, remanding the case April 14 to the Philadelphia Court of Common Pleas.

In his opinion, Stengel said he did not agree with the defendants’ contention that Hennessy fraudulently joined Allstate’s Pennsylvania employees in the case solely to defeat diversity of citizenship.

He added that none of the claims against the Pennsylvania defendants are insubstantial or frivolous and makes specific allegations regarding those defendants.

For example, Stengel said, “The complaint alleges that Mr. Ricci created a likelihood of confusion and misunderstanding by ‘unfairly, fraudulently, and deceptively’ representing to the Caruso family before it purchased the policy that Allstate had internal policies that were consistent with its ‘Good Hands’ advertising campaign.”

Prior to Stengel’s ruling, Philadelphia Court of Common Pleas Judge John Milton Younge upheld the $19.1 million verdict in favor of Hennessy in the underlying case April 10.

Younge issued an opinion in response to an appeal filed by Caruso. Delay damages were awarded in the case, bringing the total up to about $20.2 million.

“The plaintiff was a young man who suffered an extremely painful above-the-knee amputation that will almost certainly cause complications in the future,” Younge had said.

“He testified to continuous phantom pain and an inability to ambulate properly, which will continue to plague him for the remainder of his life, estimated at over 40 years,” Younge continued. “Viewed from this perspective, the jury’s award was not excessive.”

The case dates back to July 2009, when Hennessy was a passenger in a car being driven by Caruso. According to Younge, Caruso rear-ended another car being driven by Bruce Reikow (dismissed from the case), which resulted in Caruso’s car stalling in the middle of the road. As Hennessy was pushing Caruso’s car off to the side of the road, another car being driven by Shawn Robertson Jr. rear-ended the Reikow vehicle, spun to the side and crushed Hennessy.

Casey previously said Caruso was found 45 percent negligent and co-defendant Robertson was found 55 percent negligent. Casey had said Robertson never responded to the lawsuit and a default judgment was entered against him. He added that Caruso was on the hook for the entire verdict plus a 6 percent interest rate.

Caruso argued in a motion requesting a new trial that the jury should not have been allowed to assess his responsibility for Hennessy’s amputation and apportion the commensurate liability because Hennessy’s injuries occurred during the second accident while he was pushing Caruso’s car, according to Younge.

“Despite his erroneous phrasing, this first issue averred by Mr. Caruso is, in reality, a question of proximate causation or legal causation, and his argument failed because it is hornbook law that a tortfeasor is responsible for the consequences of his tort,” Younge said.

The second accident would not have happened, Younge said, if Caruso did not collide with Reikow’s car.

“The fact that the plaintiff’s right leg was not injured in the first accident did not relieve Mr. Caruso of responsibility for the harm his negligent conduct created,” Younge said. “Therefore, the extent of the plaintiff’s injuries in the first accident was irrelevant.”

P.J. D’Annunzio can be contacted at 215-557-2315 or pdannunzio@alm.com. Follow him on Twitter @PJDannunzioTLI.

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Allstate Hit With $16 Million Bad Faith Verdict

Posted by Michael Phelan
July 30, 2008 3:47 PM

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On March 24, 2000, a drunk driver got into his pickup, crossed the center line on a Missouri highway, and hit a compact car head-on.

The force of the collision pushed the car back more than 100 feet. The driver and the passenger (husband and wife) survived but suffered life-threatening injuries. Each was hospitalized for over one month and their combined hospital bills totaled $320,000.

Although the couple offered to settle for the drunk’s minimal insurance policy limits of $50,000, his carrier, Allstate Insurance Co., did not respond until six months later. That was after Missouri’s statutory 60-day limit for accepting had expired.

Allstate wishes it hadn’t applied its delay strategy in this case. On Tuesday, theMissouri Court of Appeals in Kansas City upheld a bad faith jury verdict against Allstate for more than $16 million in damages.

After Allstate failed to settle, the injured couple sued the drunk driver who consented to a judgment in their favor of more than $5 million — $2.5 million in actual damages, $1.5 million in punitive damages and more than $1 million in prejudgment interest.

The couple agreed not to execute on the judgment in return for the drunk driver’s assignment to them of most of his claim against Allstate for its refusal to settle.

The couple and the drunk driver then sued Allstate in Jackson County Circuit Court, alleging the insurer had acted in bad faith when it did not respond in a timely fashion to the Johnsons’ initial settlement offer.

Allstate claimed it lost the letter proposing the offer and responded late because it did not receive the couple’s medical records. The jury did not buy Allstate’s story. On Nov. 8, 2006, it found that Allstate had acted in bad faith and unanimously awarded compensatory damages of $5.8 million plus 9 percent interest since the date of the judgment to the plaintiffs. By a vote of 10-2, it also awarded $10.5 million in punitive damages.

Allstate appealed, and on Tuesday a three-judge panel of the Missouri Court of Appeals held that the evidence was sufficient to justify the verdict.

“Allstate’s failure to recognize the severity of the [plaintiffs’] injuries and the probability that the claim would far exceed [the defendant’s] policy limits; its failure to investigate the claim and respond to the demand in accordance with insurance industry standards and its own good faith claim handling manual; and its failure to advise [the defendant] of the demand, his likely exposure for an excess judgment, and his right to retain counsel, are all circumstances supporting a reasonable inference that Allstate’s refusal to settle was in bad faith,” the judge wrote.

The appeals court’s decision comes just a few weeks after Allstate settled another bad faith case in Kansas City on undisclosed terms. In that case, Jackson County Circuit Judge Michael Manners fined Allstate $25,000 per day — a penalty that ultimately grew to more than $7 million — for failing to comply with a court order directing it to turn over internal documents concerning its claim handling procedures.

Manners last week agreed to expunge the fine after finding that Allstate eventually complied with the order. Allstate had blamed its attorney, whom it later fired, for failing to inform it of the order.

Apparently, not even Allstate’s lawyers are in good hands with Allstate. That’s Allstate’s stand!