McKinsey documents: smoking gun or blowing smoke?

The so-called McKinsey documents have become something of a Moby Dick in certain quarters, the legendary Great White Whale of the insurance world.  Some plaintiff lawyers have become positively Ahab-like in their obsession with these documents, which they say shows that Allstate systematically engages in bad faith claims practices to grind down accident victims. 

The McKinsey documents had a big test in state court in Kentucky in the Hager case, where on Wednesday, after a seven-day trial, a jury returned a unanimous verdict for Allstate after deliberating just 35 minutes.  Getting a zero verdict with the jury coming back that quickly is a big win for an insurance company, friends.  Here is more on the decision from an excellent story by Brandon Ortiz of the Lexington Herald-Leader (click here to read the story):

The verdict calls into question whether the so-called McKinsey documents are the dynamite evidence of systematic bad faith that trial lawyers across the country have claimed them to be. The documents, which are actually 12,500 pages of PowerPoint slides, were produced by consulting firm McKinsey & Co. as it overhauled Allstate’s claims-handling in the 1990s.

[Plaintiff’s lawyer J. Dale] Golden had showed jurors documents that described claims-handling as a "zero sum economic game" in which "Allstate gains" and "others must lose." Another says Allstate should "hold the line" with claimants and deploy "boxing gloves." The documents were the centerpiece of his case, and he cited them as proof that Allstate purposefully drags out claims and plays hardball.

But Allstate lawyers said Golden was cherrypicking quotes and taking the documents out of context, and the jury agreed. Attorney Floyd Bienstock, of Arizona, said the documents were referring to unscrupulous trial lawyers, chiropractors and claimants. He said Allstate’s claims-handling processes, called Claim Core Process Redesign or CCPR and implemented in 1995, were intended to vigorously investigate and root out exaggerated, "padded" and fraudulent claims.

Hager had sought $1.425 billion in the case — and no, that is not a typo.  This may not have been the best case in which to seek these Bill Gates-size numbers, as the Herald-Leader story explains:

Hager claimed she was permanently impaired by the accident, even though doctors who examined her said she had only a muscle strain that would clear up in a few weeks, [Allstate attorney Mindy] Barfield said. And Hager still ran her family’s pest-control business and started a tanning salon even as she claimed she could not work for two years.

Also, plaintiff’s attorney failed to connect any of the alleged bad faith Allstate practices — sending accident victims to biased doctors, monkeying with and redacting claims files, manipulating computer data to produce low-ball damage amounts and making invasive medical records requests — to this case. You can bet, however, this will not be the last we hear of the McKinsey docs.

If you want to read more about the McKinsey documents, here’s a 2006 story from BusinessWeek about David Berardinelli, the New Mexico trial lawyer who has made a side business out of selling strategies on how to take on Allstate.

UPDATE: I notice the Herald-Leader published a correction on a couple things in the story, none of which we were talking about here.  The correction can be seen here. 

4 Comments

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4 Responses to McKinsey documents: smoking gun or blowing smoke?

  1. Tex Mex

    What is missing from this story, and many that are similar, is that Allstate did not rear end Ms Hager – Allstate’s policyholder did. Therefore, even though Allstate has a finincial interest in keeping settlement values low, more importantly in my view is its contractual obligation to defend its policyholders against unreasonable demands. It is not obligated to pay sums pleasing to trial lawyers, even if that were possible. If I happen to cause an accident, I hope Allstate would take a hard line for me as well. That’s my stand. Are you in good hands?

  2. Good point. Also frequently missing from stories, although it was in this one, is that the goal of not paying carte blanche for nebulous soft tissue injuries is one almost everyone can agree with. On its face, the evidence that Allstate’s payouts decreased after the McKinsey documents were created is not necessarily an indictment of Allstate, it instead could perhaps be strong evidence that Allstate customers were instead being surcharged to pay for inflated claims. I’m sure more compelling injury cases must exist than this one, but this case is anecdotal evidence that the mere existence of the McKinsey documents does not show bad faith to every claimant who gets turned down.

  3. Michael

    in trhe same vein on the property claim handling side, see
    http://www.insurereinsure.com/BlogHome.aspx?entry=220
    re:
    Potential Class Action against State Farm and Its Claims Adjusting Software Company (October 9, 2007)
    Judge Stanwood R. Duval, Jr. of the United States district court of Lousisa federal district court sitting in Louisiana recently held that two homeowners could jointly file an amended complaint and proceed with their proposed class action lawsuit against State Farm Fire and Casualty Company and software company Xactware.

  4. Allstate makes controversial “McKinsey” documents public on website

    The Allstate Corporation, one of the the nation’s largest publicly held insurance companies, recently released approximately 150,000 pages of documents pertaining its review claim practices from the 1990s. Although, some media have regarded the documen…