Allstate Insurance Corp., the largest publicly-traded U.S. home and auto insurer, is the latest “investor” to square off against the banking industry over mortgage-backed securities. Allstate claims it was “misled” about the safety of investing in mortgage debt; you remember: the debt which, ultimately, went sour during the economic meltdown.
To prove its point, Allstate has filed suit against JPMorgan, alleging negligent misrepresentation and securities violations, stating that the banker knew that the “bundle of loans” it was selling were very likely filled with loans to borrowers who were likely to default. Allstate claims that JPMorgan fraudulently sold it more than $750 million of these “toxic” mortgage-backed securities in order to get higher ratings on securities than what it deserved. Allstate seeks to undo the securities purchases, which occurred between 2004 and 2007 and/or recover lost principal and interest, as well as other damages in an amount to be proven at trial including losses and court costs.
Allstate maintains that JP Morgan abandoned its underwriting standards and misrepresented key information about the underlying mortgage loans. The insurer claims that the company presented securities backed by the mortgages as safe investments to Allstate and others by concealing relevant facts.
This looks like a case of “greed on greed” to me. Did JPMorgan misrepresent the value of these “toxic” assets to Allstate? Was Allstate dealt the same “Bad Hand” they deal their policy holders? JP Morgan says this is simply a case where Allstate is looking for someone to blame for a downturn in the economy and losses on an investment it made. Allstate probably failed to do its homework before purchasing these securities and now it suffers from a serious case of “buyer’s remorse”. So, what will Allstate do about recovering these losses if it loses the lawsuit? You guessed it! It will raise premiums, blame “lawsuit abuse” or “frivolous lawsuits” for its poor investment decisions, lobby for more unnecessary tort reform, and continue its sordid policy of “delay, deny, confuse and refuse” in its claims handling of victims with serious injuries or serious property loss caused by negligence. You see, whenever a liability insurance company loses substantial money on its investments, it turns on those it is supposed to assist and provide insurance coverage and benefits to; it turns on its own policy holder and/or injury and casualty victims.
Can a citizen turn to the government for help? This situation arose, in part, from the government’s bailout of the banking industry. Most citizens now feel that this Wall Street bailout was unreasonable. Government bailouts for big business have been going on for years. The last time liability insurance companies had significant investment losses, the first round of State sponsored tort reform resulted. The cry was that “juries are out of control.” Another was that doctors can’t afford malpractice insurance because of the “greedy trial lawyers.” It was a smokescreen for bad investment decisions then, and the same is true today. Why doesn’t the government bailout “Main Street”?
Efforts to limit a person’s right to collect damages in court have nothing to do with “frivolous lawsuits” or “jackpot justice,” but it does have everything to do with bad investment decisions and greed. Just as the Republicans in Congress are now trying to balance the budget (after years of unwise spending while cutting revenue) on the backs of the poor and middle class, insurance companies have engaged in this practice for years; first these carriers make atrocious investment decisions, then they “delay, deny, confuse and refuse” to conserve assets, then they seek government bailouts in the form of tort reform, using their favorite catch phrases, like “lawsuit abuse”, “frivolous lawsuits” and “jackpot justice”. Why does the public stand by, silently, and let them get away with it? Why do we only become vocal when we or a precious family member becomes a victim?
It is ironic that this insurance company is pursuing litigation because it failed to do its own investment “homework”. If Allstate was negligent in not qualifying what it was buying, isn’t it responsible for its own misfortune? Is this a “frivolous lawsuit”? Insurance companies like Allstate blame large damage recoveries on “runaway juries” or on “greedy trial lawyers”. Allstate is portraying itself as the victim here as it does when lobbying for more tort reform. While calling itself the “Good Hands People”, it happily takes premiums from policy holders and just as happily denies them when those same premium-paying policy holders seek the coverage paid for by their premiums. If you don’t believe me, ask Hurricane Katrina victims; ask serious automobile accident victims. Think about it; insurance is the only product in the marketplace that penalizes its customers for using it exactly as they are supposed to.
So here is Allstate, a greedy insurance company, crying that it was damaged by the big, bad mortgage giant to the tune of $750 Million. If Allstate prevails in the litigation, perhaps Congress should propose legislation that caps Allstate’s recovery at $250,000, but requires JPMorgan to pay the $750 Million award back to the taxpayers. Now that would be justice! After all, $250,000 is the amount that Allstate and its ilk happily lobby for (and spend millions of our premium dollars on) as a pain and suffering “cap” in liability cases. We could apply this “tax and cap” to every situation where one greedy, bailed out corporation sues another. We would balance the budget in no time and we wouldn’t have to do it on the backs of the poor, the middle class, the injured or disabled. What do you think?
Mark Bello has thirty-three years experience as a trial lawyer and twelve years as an underwriter and situational analyst in the lawsuit funding industry. He is the owner and founder of Lawsuit Financial Corporation which helps provide legal finance cash flow solutions and consulting when necessities of life litigation funding is needed by plaintiffs involved in pending, personal injury litigation. Bello is a Justice Pac member of the American Association for Justice, Sustaining and Justice Pac member of the Michigan Association for Justice, Business Associate of the Florida, Tennessee, and Colorado Associations for Justice, a member of the American Bar Association as well as their ABA Advisory Committee, the State Bar of Michigan and the Injury Board.
@thumbnail.jpg "Mark M. Bello")
Experienced attorney, lawsuit funding expert, certified civil mediator, and award-winning author of the Zachary Blake Legal Thriller Series. The series features super-trial lawyer Zachary Blake handling "ripped from the headlines" legal and political issues of the day. The series currently consists of Betrayal of Faith, Betrayal of Justice, Betrayal in Blue, Betrayal in Black, and Betrayal High, with a sixth Zachary Blake novel due out later this year. To learn more about these topical social justice legal thrillers. please visit markmbello.com. Mark is a member of the State Bar of Michigan, a sustaining member of the Michigan Association for Justice, and a member of the American Association for Justice.
8 Comments
layla Fanucci
Mike Rothrock
I am a personal injury trial lawyer who routinely fights Allstate in court. I agree with Allstate that me and others in my profession file too many frivolous lawsuits. I only disagree as to why they are frivolous. The reason is largely because Allstate absolutely refuses to do what they contract to do and what is fair and pay the claimant what they are owed under the law, despite evidence that clearly supports the claimants position. I find it ironic that Allstate is now suing over this. I just wish the public would educate themselves more on how the insurance industry works and focus less on the 30 second sound bites that the U.S. Chamber and companies like Allstate pump out with their billions of dollars in funding from record profits.
Mark Bello
Mike: I understand the point you are making, but filing suit because "Allstate absolutely refuses to do what they contract to do and what is fair and pay the claimant what they are owed under the law, despite evidence that clearly supports the claimants position" does not a frivolous filing make! Allstate's behavior is the pursuit of "frivolous defenses". As I have pointed out in many previous posts on the subject, the pursuit of "frivolous defenses" is a far greater problem than the pursuit of "frivolous lawsuits". Thanks for writing.
Chris
This has to be one of the most biased, uninformed blogs/articles I have read in a good while and the internet is chock full of them so that says a lot. You so one-sidedly opine that Allstate, as a 'greedy' insurance company, systemically denies, delays, and confuses it's customers. Aside from the fact that such and opinion is baseless in the discussion of this lawsuit, what you fail to highlight is that the ratio of claims that are litigated vs. settled in a timely satisfactory fashion is minuscule. This is not unique to Allstate but industry-wide.
Further, your article seeks to punish Allstate for buying into these ill-fated loans and that Allstate didn't do it's homework so now it wants to cry foul. Let me ask you this: should the unscrupulous mortgagees on which these predatory loans were made be similarly punished? Since you are a former attorney you undoubtedly are familiar with the practice of operating with clean hands (or one would hope so) . I ask you, if a financial company does not fully disclose the reasonable risk involved in an investment to the investing party is this not an overt act of material misrepresentation? In this case are JPMorgan Chase ' hands not soiled on both sides of the equation relative to the mortgagees and Allstate?
Your cries of Allstate lobbying for capped awards on injuries are not only ill-placed in the context of this matter, but belie the fact that frivolous lawsuits brought about by greedy attorney's drive up the cost of insurance and healthcare for all. Add to that - which you so conveniently ignore in your article of rampant hypocrisy - that in many bodily injury lawsuits the plaintiff attorney walks away with a significant portion of the settlement, that customarily amounting to 33%. This often time leaves the injured plaintiff with just enough money to pay their medical bills with little more left over to enhance the quality of their life after all is said and done. I have yet to see one of these ambulance-chasing trial attorneys handle an auto-liability case pro bono.
Is my reply a bit one-sided? Sure it is, but the points you have raised as to the reason Allstate should not be victorious in it's lawsuit with JPMorgan Chase do not begin to address the real issues underlying this matter. The fact is, this matter is just another beaming example of a greedy financial industry that brought our entire economy to it's knees. The ramifications of which are still becoming manifest and likely will for years to come.
While insurance companies are not without their opportunities to improve on issues concerning claims settlement, you bring shame to the practice of law and journalism by offering up such woeful, half-hearted cheap shots at an industry (insurance) that provides peace of mind to millions of Americans each and every day.
Mark Bello
Chris: Much of what you say about the lawsuit in question is true. However, your dislike for personal injury attorneys and your lack of actual research into the facts causes you to miss the point. I hate what the JP Morgans of the world have done to the US economy and the US taxpayer. I have no doubt that Morgan has "unclean hands". Between these two greedy corporations, making billions preying on their own customers, I could care less who wins. If Allstate was treated in an unscrupulous or fraudulent manner, it should win and win big, along with every other individual or corporation that was screwed by these crooks. But, again, that wasn't the point of the post.
The rest of your biased rant is, to put it mildly and professionally, just plain false. First, there are an enormous number of attorneys who have handled serious personal injury cases on a pro-bono or reduced fee basis. Coordinated Katrina and 9/11 efforts are just two "high-profile" examples. As to Allstate's claims and litigation conduct, do some research; this is a despicable company when it comes to applying appropriate standards of fairness and justice to claims against its insureds and, worse, claims on BEHALF of its OWN insureds. I suggest you read David Berardinelli's "From Good Hands to Boxing Gloves" for a litle taste af Allstate's claims/case handling philosophies. And, it is lawyers like David who prevent them from being even more despicable than they already are. Your 'claims litigated to claims settled' ratio statement is pure baloney. Unless you count heavily litigated cases that are settled after years of litigation, after the plaintiff is 'delayed, denied, confused and refused' for years, for as long as possible, as "settled rather than litigated".
Who is the hypocrite here? That lawyers do what they do on a contingency fee basis, risking their time and own money on cases that are vigorously and, often, frivolously, defended by billion dollar companies with the goal of wearing both the plaintiff and his/her lawyer down in time, paper and money, makes these lawyers heroes. Instead, people like you side with the billion dollar bullies and call the lawyers "ambulance chasers" or "greedy". What a load of crap! A lawyer, retained on a contingency fee basis, cannot afford to file a frivolous (worthless) lawsuit, and if he/she does, it is quickly tossed by the handling judge with costs assessed to the lawyer who brought it. "Frivolous cases" DO NOT increase the cost of healthcare. Caps are not about the frivolous case; they are about the SERIOUS case. Why would a "frivolous case" need a damages cap!?
If greedy insurance companies like Allstate did what they were supposed to do when they were supposed to do it, there would be little need for your "greedy" lawyers. But, they can count on people like you to blame the lawyers instead of them.
Insurance companies receive premiums (money) to give people "peace of mind"; they do this for profit, and they rarely offer that peace or any 'piece' of their profit without a fight. That is What David's "Boxing Gloves" is about.
My post is not about who is right and who is wrong in the lawsuit and, as I indicated above, you miss the point. The post is about the irony of a greedy cap-seeking insurance company filing a lawsuit for $750 Million, when that same company is part of an effort to limit those who sue the company to miniscule amounts when compared to the catastrophy that has befallen them. It is, quite simply, "profits over people". As I said, I'd like to see Allstate win, have their award capped, and have the balance distributed to the taxpayers. That is far better than what Allstate lobbies for: The plaintiff wins, the jury grants it millions for catastrophic loss, and Allstate pays a ridiculously low capped number, distributing the balance to its executives in bonuses, and its shareholders in dividends.
Insurance companies pocket billions at the expense of the weakest segment of our society, the injured and the disabled. And the only group that stands between that concerted evil effort is the trial lawyers. God bless them!
Chris
Mark,
One concessionary remark: Insurance companies (Allstate not excluded) do not like large verdicts and do much to dissuade potential litigants from pursuing actions in court rather than settle. This is largely because the costs involved and potential awards are typically substantially more than if the claims were settled out-of court. That much is inarguably true.
However, my main gripe with your 'article' is not so much the points raised, but the light in which you wish to amplify them.
As to the points in your response to me: Insurance is the largest and quite possibly only industry that is punished for vehemently defending it's foundational charter which is contract law. I say this in response to your Hurricane Katrina assertion. Aside from the fact that I lived in Jackson, Ms, less than 200 miles from where the hurricane made landfall, I worked for an insurance company at that time as a claims manager. I can tell you with personal reflection and conviction that we worked feverishly to, as much as possible, provide relief and restoration to the lives of our policyholders. Never before or since have I seen the purse strings of the company I worked for (which is almost as large as Allstate) open up so quickly and generously. I personally worked 32 days from Sept 1st, through October 2, taking off only enough time to sleep and see to my family's' own personal well being.
That aside, the contract issue I raise is what many reporters and attorneys ignore which is the heart of the battle most companies were and are still fighting against respective to Katrina. Specifically, the largest battles were not over home/property valuations, rather the wind vs. rain issue which specifically dealt with the terms of the policy. Attorneys and politicians alike fanned the flames of public sentiment that insurance companies could be so heartless as to raise such an issue when so many lives were lost and more lives still permanently affected. Why would these companies, with pockets seemingly as deep as the storm itself, assert such a trivial thing as 'policy adherence', 'clauses of specific performance' and oh yes, 'exclusions' at a time when lifelong customers have had their very lives swept away?
It's because insurance is a business and as such must be managed like one lest it become insolvent like the mortgage or auto industry. In much of the litigation surrounding Katrina, insurance companies fought for their right to do business by the terms of the policies they wrote. Meanwhile attorneys and politicians(where convenient to do so) played on the ignorance and emotion of a largely uninformed insurance-buying public in times of crisis. Suggesting that insurance companies solely had profit margins and dividends on the brain and cast a blind eye to the plight of it's financial lifeblood, Joe Policyholder. Suggesting further that policies have some retroactive clause that should allow the insurance company to pay for claims that are expressly excluded(water vs. wind, again).
You accuse me of being uninformed in my prior claim concerning ratio of claims settled to litigated. However your offering of proof, Hurricane Katrina, was the most destructive storm in recorded American history. That makes the situation isolated in itself so the litigation to follow was in no way in keeping with the normalcy or frequency of litigated claims. You ignored my point that attorneys rarely, if ever, offer pro bono work for auto-liability claims. Attorneys offering pro bono assistance on the most massive, publicized catastrophe in history is hardly a study in benevolence. It is in keeping with the attorney profile I hold which is to seize any opportunity to get free exposure and become the perceived champion of peoples' rights to ensure future business.
Obviously, you have your thoughts on the merits of insurance companies and you are entitled not only to have but express them as you have. It's the beauty of our society. But one would think, in the name of fairness, that you could dial back some of the massaging of fact and your personal 'truths'.
I thank you for engaging me this morning and responding to my earlier post. You may, if interested, have the final thought.
Mark Bello
Chris: I am very surprised to discover that you have worked in the insurance claims industry! :)
The Katrina issue that placed insurance companies in a bad light was not a "wind vs. rain" issue; it was a "storm vs. flood" issue. How could an insurance company (State Farm was the biggest culprit) make the argument that Katrina was a "flood", not a "storm" to deny coverage to its own policy holders?
As to pro-bono work, I respectfully disagree, there are many instances of lower profile pro-bono or reduced fee situations offered by attorneys. Compromises and fee concessions are made all the time; you just don't know about them. I offered the high profile examples because they were noteworthy, not because those kinds of fee concessions are uncommon. How many insurance companies offer policy holders their premiums back when they pay less than full value on a claim? Your accusations against attorneys who work for free until collection is unwarranted. I didn't ignore the point, I just don't agree with it.
I applaud your tireless work on Katrina; it is what claims adjusters and insurance companies SHOULD be doing. But your use of that experience to make your example is similar to what you accused me of doing. Why not apply those efforts to ALL claims and claimants? To the simplest of claims? Don't ALL of your policy holders deserve that level of effort? I'm not suggesting that carriers or adjusters lay down and pay everything submitted; you certainly have the right to question and qualify what you receive. All I ask is that when you receive the necessary proof, pay the claim! Why, for example, is it necessary to "shave a few bucks off" policy limits when the claim is worth more than the policy? Why is it necessary to pay what a claim is worth on the 'courthouse steps' when you could have done what was right and approriate two years earlier? Why must a claimant fight for every dollar he/she gets? I understand that insurance is a "for profit" business; but the people who seek the benefit of the product are often penalized for using it exactly the way they are supposed to. Why not apply a little compassion and fairness to the claims process instead of a businessman's "us vs. them" mentality?
You and I, obviously, come from opposite life experiences; perhaps we must, respectfully, agree to disagree. Thanks for the comments
Mike Bryant
Chris seems to have missed the giant disclosure of information that the court forced on Allstate in several states that exposed their practice of using the auto side to balance their losses in the other areas, the systematic attempts to work over non represented claimants, and their efforts to simply not pay claims.
Insurance companies are basically banks that are allowed to collect money and use the money to invest. They are expected to keep reserves up to pay claims and to fairly handle claims. Mark you do a very good job to point out the shenanigans.
It shouldn't be a special event when they pay proper claims.
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