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The 4th U.S. Circuit Court of Appeals left standing a West Virginia finding that Allstate Insurance Co. engaged in unauthorized practice of law by telling claimants that they didn’t need lawyers. The Nov. 30 action in Richmond, Va., was the first ruling by an appellate court regarding a practice widely attacked by the civil plaintiffs’ bar. Allstate Insurance Co. v. The West Virginia State Bar, No. CA-97-1056-2. The panel is the highest court so far to review Allstate’s “Claim Core Process Redesign,” whereby adjusters contact and negotiate directly with people who have been injured in accidents. They try to persuade the claimants to deal with Allstate, not through lawyers. ‘DO I NEED AN ATTORNEY?’ The 4th Circuit refused to address the merits of Allstate’s claim that commercial free speech rights protect the company’s “Do I Need an Attorney?” brochures and “Customer Service Pledge” letters. The opinion by Judge H. Emory Widener Jr. left in place a decision by the West Virginia State Bar Committee on Unlawful Practice that the letters and policies were illegal. The attorney who filed the original complaint with the State Bar in 1995, said that the opinion is strong enough to prompt him to file a nationwide class action against Allstate. James C. Peterson, a name partner at Hill, Peterson, Carper, Bee & Deitzler of Charleston, W.Va., said he intends to sue to seek damages for the millions of claimants who say Allstate misled them into accepting less than they were owed or cost them their chance to sue by persuading them that they didn’t need attorneys. The court said that Allstate had sought a sympathetic venue in federal court, where the company has appealed at least six similar state bar decisions. “In short, Allstate attempted to preempt the West Virginia procedure by filing this federal suit in district court,” wrote Judge Widener, who was joined by Senior Judge Clyde H. Hamilton of Columbia, S.C. (The third panel member, Francis D. Murnaghan of Baltimore, died after oral arguments last year.) “It is difficult to conceive a matter closer or more important to the State of West Virginia, not to mention her people, than the question of who is to practice law in that state,” Judge Widener wrote. Bar committees and insurance commissioners in 26 states have filed similar efforts to halt the spread of the company’s brochures and letters, according to the Association of Trial Lawyers of America. Individual plaintiffs in 22 states have filed 47 challenges to the anti-attorney policy, according to an Allstate report turned over in discovery during one of those suits. Trial lawyer groups in at least 12 states have held seminars — offering CLE credit — that focus on strategies to beat Allstate. Allstate has had mixed success batting back the attacks. In January, the Washington State Bar Association found it guilty of the unauthorized practice of law. That case was appealed to federal court in Seattle. In March, an Illinois federal judge turned away a proposed class action against the practice. S. Benjamin Bryant, a partner at Allen Guthrie & McHugh in Charleston, represented the West Virginia bar before the 4th Circuit. Bailey and Glasser name partner Benjamin Lee Bailey of Charleston represented Allstate. Neither Mr. Bailey nor Robert Pike of Northbrook, Ill., who heads Allstate’s corporate legal office, responded to queries over a three-day period. In documents, Allstate disputed trial lawyer characterizations that the company’s intent is to exclude lawyers from the process. It said that its actions grew from a January 1995 analysis showing that when attorneys were involved, injury claims had inflated medical expenses, leading to unreasonable general-damages demands. The company determined that the excess money was going to attorneys as fees, it said. THE ADJUSTERS’ MANUAL Allstate’s strategy was presented in a 500-page adjusters’ manual with a goal of settling claims early, before a lawyer is involved. The manual was replaced in August 1999 by a 1,000-page text titled “The Unrepresented Unit of the Future.” Both books give adjusters tips on how to conduct conversations that establish “immediate rapport” and “show empathy.” They are to visit claimants, in the hospital if necessary, and to bring checks to most meetings. A follow-up letter includes a promise of quick and fair handling of their claim, just as if they too were insured by the company. Also enclosed is a brochure called “Do I Need An Attorney?” that includes statistics from an insurance-industry group that found claimants without lawyers receive more money than those with counsel. It asks, “Am I required to hire an attorney to handle my claim?” Allstate answers, “No. In fact, each year Allstate settles claims directly with many collision victims with no attorneys involved in the claim settlement process.” Trial lawyers insist that the letter and brochure leave the impression that the Allstate adjuster works independently for the claimant. Like other bar groups, the West Virginia Bar argued that Allstate does not clearly disclose its adversarial position. West Virginia argued that Allstate essentially acted as counsel because adjusters valued cases, assessed strategies and predicted outcomes for claimants unsophisticated in the law — without mentioning that a quick and cheap settlement was best for the company. In 1997, the state bar made its finding and ordered Allstate to stop distributing the letter and brochure. Allstate sued in federal court, but lost when U.S. District Judge Charles H. Haden II ruled that the issue should be addressed by state courts.

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