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Despite state unfair trade laws and a recent statute specifically crafted to prevent Allstate Insurance Co. from discouraging accident victims from hiring lawyers, the Northbrook, Ill.-based insurer’s anti-lawyer tactics are winning the stamp of approval from Connecticut’s federal courts. U.S. District Judge Christopher Droney ruled Jan. 20 for Allstate on claims it breached an implied contract of good faith and fair dealing, and was engaging in unfair trade practice, unfair insurance practice, recklessness and fraud. In June 1998, Allstate sent plaintiff Donald J. Hipsky a copy of its “Quality Service Pledge” (QSP) after Hipsky had an accident with an Allstate insured. The brochure was a milder version of the “Do You Need An Attorney?” campaign that Allstate launched in many states in the mid-1990s. The pledge stated that “[b]ecause you have been in an accident with an Allstate policyholder, we will provide you with quality service.” It also said Allstate would investigate the accident fairly and quickly, and make “an appropriate offer of compensation” for Hipsky’s injuries if he “qualified.” Furthermore, Hipsky alleged that an Allstate claims representative, Deborah Schwager, discouraged him from seeking legal counsel, telling him an attorney would merely reduce the net amount of his settlement. Allstate offered $3,500 and a “final” offer of $4,000 in June 1999. Hipsky then hired a lawyer, and settled for $25,000 two years later. NOT A PUBLIC STATEMENT Stafford Springs solo Brian S. Newman represented Hipsky, in a case that tracked a similar action brought against Allstate’s QSP by New London plaintiffs’ attorney Robert I. Reardon. In 1996, as president of the Connecticut Trial Lawyers Association, Reardon successfully lobbied for a new law that forbids insurers from discouraging their adversaries from hiring a lawyer. Reardon also sued on behalf of plaintiff Sandra L. White, of Voluntown, and two others, arguing to U.S. District Judge Peter C. Dorsey that Allstate was acting in bad faith and violating the Connecticut Unfair Trade Practices Act (CUTPA) and Connecticut’s Unfair Insurance Practices Act (CUIPA). Dorsey dismissed all counts except for a CUTPA and CUIPA count in January 2003, in a case that has been largely sealed from public view. Later, Dorsey quietly dismissed the lone CUTPA/CUIPA count. Early in the White case, Dorsey allowed Reardon to proceed on a theory that Connecticut might recognize a duty of good faith and fair dealing to third parties, as then Superior Court Judge T. Clark Hull had done in Grand Sheet Metal Products Co. v. Protection Mutual, a 1977 case that followed California’s 1973 case of Gruenberg v. Aetna, holding that insurers owed a duty of fair dealing to all. (California has since reversed that view in case law and through a 2000 popular referendum, aimed at lowering auto insurance premiums.) Dorsey, barraged by briefs from defense lawyer Thomas J. Groark at Hartford’s Day, Berry & Howard, eventually concluded that Connecticut does not recognize a duty of good faith to anyone who is not a policyholder, and that doing so would detract from the insurer’s key obligation. Reardon, after reading Droney’s decision in Hipsky v. Allstate, said that Connecticut’s appellate courts had not definitively ruled on this question, and must be allowed to. “Allstate wants these cases in federal court, because they feel they have an advantage there,” said Reardon. Droney concluded that, when the claims rep was dissuading Hipsky from hiring a lawyer, it was not a public statement amounting to false advertising. “Certainly, the phone calls from Schwager, during which she allegedly attempted to persuade Hipsky not to hire an attorney were private communications discretely targeted at Hipsky and his wife” and were not “before the public” under CUIPA, he said. Droney wrote that he could infer that “the QSP was disseminated on a broader basis — perhaps even nationwide.” But since it was just to individuals who had been in accidents with Allstate policyholders, it wasn’t “before the public,” either, the judge concluded. “That’s outrageous,” responded Reardon. He noted that the American Trial Lawyers Association obtained an Allstate training manual containing scripted pitches and in-house averages reflecting that unrepresented claimants in matters under $15,000 averaged settlements of $3,464, while those with lawyers averaged $7,450. Although individuals don’t have a private right to sue under CUIPA, Droney acknowledged that the state allows citizens to sue for violations of the insurance practices act under CUTPA, the unfair trade practices law. But without clear guidance from a Connecticut appellate court, Droney followed the reasoning of the 1987 Superior Court case of Thompson v. Aetna, which holds that the fundamental relationship between insurers and their insured would be distorted if insurers had a duty to third-party claimants to settle fairly. Reardon said he did not appeal to the 2nd U.S. Circuit Court of Appeals in the White case because Allstate had discontinued its most objectionable “Do You Need An Attorney?” literature in 1998, after Attorney General Richard Blumenthal concluded that C.G.S. Sec 38a-832(a) prohibited Allstate’s campaign of dissuasion. The provision was a response to Allstate’s campaign. In a footnote, Droney noted that he didn’t need to decide whether Hipsky had a private right to sue under the Allstate-inspired statute because Hipsky hadn’t included it in his complaint. Newman, Hipsky’s lawyer, said he would need several days before he could comment on Droney’s ruling.

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