NCPA - National Center for Policy Analysis

Insurers Discourage Victims' Hiring Of Attorneys

June 16, 1996

Auto insurance companies are taking on trial lawyers, and that has the lawyers very mad, indeed. Now the lawyers are fighting back with tactics some critics say deny the companies their free speech rights.

The war began two years ago, when Allstate Insurance set out to reduce the $4 billion cost of its car crash claims bills -- costs that were forcing the company to raise premium rates.

  • The company noticed that more and more of its claimants were hiring lawyers -- up from just 31 percent in 1977 to 46 percent in 1992.
  • In a test in Philadelphia, the company approached victims of Allstate-insured drivers, pointing out that lawyers typically take 25 percent to 40 percent of settlements and awards, and subtly urging them not to hire a lawyer but take a settlement instead.
  • Allstate says those without a lawyer typically net only $101 less than those with lawyers, but they get their money faster and with less unpleasantness.
  • Since the Philadelphia test, Allstate has taken its campaign nationwide and reports the proportion of claimants represented by lawyers has fallen by nearly 10 percent.

The lawyers went on the offensive by first complaining to state insurance regulators. When that got nowhere, they enlisted the support of their state bar associations, claiming that the insurers were practicing law without a license.

In December, the New Jersey Bar Association asked the state Supreme Court committee that regulates lawyers to make Allstate and Liberty Mutual stop such claimant contacts.

In New York State, following complaints from the New York State Trial Lawyers Association, Attorney General Dennis Vacco forced Allstate to agree to rewrite its "Do I Need an Attorney?" brochure, stop calling victims "customers" and pay $15,000 in administrative fees.

In Connecticut, trial lawyers lobbied the lawyer-filled legislature and got it to pass a bill outlawing insurance firms from doing anything to "discourage" victims from hiring lawyers.

Source: Brigid Menamin, "A Holy War," Forbes, June 16, 1996.

 

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