Colorado Trial Practice Blog : Colorado Injury Lawyer & Attorney : Mac Hester : Personal Injury, Auto Accident, Medical Malpractice : Serving Denver, Colorado Springs, Aurora

Your own insurance company owes a duty of good faith and fair dealing to you, its insured, because of your contract (the insurance policy) with the insurance company and because it is the law of Colorado. This is a "first party" contract.

The insurance company for the person or entity that  injured or damaged you (the liability insurer) does not owe a duty of good faith and fair dealing to you. The liability insurer owes a duty of good faith and fair dealing to its own insured, the person or entity that injured or damaged you. You are in a "third party" relationship with the liability insurer. So the liability insurer is not required to treat you fairly or to deal with you in good faith - which is why they usually don't.

1.  If your own insurance company (the first party insurer) violates the policy, then you can sue it for breach of contract - in which case you can recover common law contract damages if you win the case (and possibly additional statutory damages as discussed in paragraph 4). 

2.  If the first party insurer willfully violates the policy, then you can sue it for willful breach of contract - in which case you can recover common law contract damages and non-economic damages (emotional distress) if you have proved the willful conduct by clear and convincing evidence.

3.  If the first party insurer acted unreasonably in violating the policy or in handling your claim and it either knew that its conduct was unreasonable or recklessly disregarded the fact that its conduct was unreasonable and you were damaged, then you can recover common law contract damages (If you are pursuing policy benefits. then you may be able to get additional statutory damages as set forth in paragraph 4.), economic damages (past and future) and non-economic damages (past and future). This is called first party "bad faith" breach of contract or first party bad faith handling of your claim.

4.  If the first party insurer denied or delayed payment of policy benefits without a reasonable basis, then you will be able to recover double damages (two times contracted for benefits), court costs, and attorneys fees pursuant to C.R.S. section 10-3-1116 if you win your case.

5.  If the jury (or judge in a trial to the court) finds beyond a reasonable doubt that the first party insurer acted in a fraudulent or malicioius or willful and wanton manner, then you will be able to recover punitive damages (damages to punish the defendant). Punitive damages cannot exceed the amount of actual damages.

Fort Collins Colorado Insurance Bad Faith Lawyer Mac Hester

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Allstate, over the past several years, has implemented scorched earth insurance claim and litigation tactics, which were developed in large measure by McKinsey & Company. McKinsy was inspired by military strategy and tactics, especially the strategy and tactics advocated by Colonel Boyd of the U.S. Air Force (e.g., "OODA Loop") which subsequently were adopted by the U.S. Marines and implemented in the first Gulf War ("shock and awe") and in the invasion of Iraq ("seize the initiative"; "change the game"). McKinsey decided to focus on "change the game" and Allstate adopted McKinsey's plan and implemented it as "The New Game: 'Good Hands to Boxing Gloves'". The adandonment of the good hands metaphor in favor of the boxing gloves metaphor illustrates Allstate's strategy of confrontation and combat and implementation of intimidation tactics that are designed to bludgeon claimants and claimant attorneys into submission by making pursuit of claims unpleasant, stressful, time consuming and financially, mentally and emotionally expensive and by making claims uneconomic; e.g., incentivizing claimant attorneys to decline "soft tissue" cases and/or settle them cheaply and forcing claimants to drop claims or settle them cheaply.

Attorney David Berardinelli reveals McKinsey/Allstate tactics in his book "From Good Hands to Boxing Gloves: How Allstate Changed Casualty Insurance in America" and reveals the following quotes from McKinsey's materials obtained in an insurance bad faith lawsuit against Allstate:

Page 1426 "Improving Allstate's casualty economics will have a negative impact on medical providers, plaintiff attorneys, and claimants.

Page 1427 "Establishing new market values will require aggressive new litigation strategies."

Page 1609 "Align 'alligators' with 'attorneys.'"

Page 2827 "Objective Keep attorneys out."

Page 2929 "Winning the Economics Game; New plays, New game plan, Changing the rules, New game..."

Page 2932 "Capturing the opportunity will require reducing the number of represented claimants and more agressively managing the claims that do become represented."

Page 2939 "Aggressively manage those cases that become represented through...more aggresive litigation approaches."

Page 2939 "Many plaintiff attorneys yield to more aggressive tactics."

Page 2982 "Claims is an economic game. We will win the economic game."

Page 4216 "The New Game Plan: 'Zero Sum Game'... somebody has to win and somebody has to lose...We want to win by modifying the rules and regulations to our advantage."

Page 5226 "Roll Out: 'Build new evaluation system around Colossus..." [Colossus, a computerized claim valuation software program, will be discussed in a subsequent article.]

Page 5403 "Do not re-evaluate approved settlement amount. Stand firm on final offer with no real negotiation."

Page 6325 "These strategies will include significantly higher levels of litigation to establish lower values."

Page 6449 "Early Test Results Favorable: Test: Targeted: Evaluation '175 files through system, 37 settlements at approximately 50% of historic medians.'"

Page 8028 "Based on the existing levels of performance, the four process steps should ultimately yield between $375 million to $475 million a year in casualty by 1997." [Increased profit due to reduced payment of claims.]

Page 8043 "The first important step is to establish aggressive goals and tie compensation to performance against these goals." [Claim adjuster compensation is tied to limiting/reducing payment of claims.]

Page 10059 "Recommended Attorney Performance Measures: Measure: Results: Percent of cases closed at or below evaluated amount." [In house attorneys are compensated and retained or fired based on limiting/reducing payment of claims.]

Page 10069 "Outside Counsel Compensation Approach: Measure: Deviation from evaluated amount plus expenses; Resulting action: Base fee raised or lowered or Gain or loss of cases or Bonus at end of year." [Outside defense attorneys compensation and continued retention based on limiting/reducing payment of claims.]

Page 11545 "Colossus Training Checklist: Prior to MCO training: - Determine the number of tuning regions, - Complete initial tuning by evaluation consultants; Post training: Verify tuning: - Spot check closed claim study, - Create scatter graphs and calculate payment rates, - Retune as necessary." [Tuning, essentially, means that if the computer spits out numbers that Allstate management thinks is too high, then Allstate will re-program the computer to spit out lower numbers so that Allstate will have higher profits.]

The above quotes come from Litigating Minor Impact Soft Tissue Cases, Koehler, Karen K. and Freeman, Michael D., ATLA Press, Thomson-West, 2005, vol. 1, 2005 supp. pp.67-74 which notes that the quotes are "unverified" in the sense that attorney Berardinelli obtained them while reviewing the McKinsey materials while under a temporary protective order. The court ruled that the McKinsey materials (and thus quotes derived therefrom) were not protected trade secrets. Allstate appealed, but their appeal was dismissed as untimely filed.

Fort Collins Colorado Personal Injury Attorney Mac Hester

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