Allstate Overhead and Profit Litigation
On May 6, 2011, NPR gained final approval of a national class action settlement with Allstate and its affiliated companies that issued homeowner insurance policies. The case, originally brought by NPR and co-counsel in 2004, alleged that Allstate and its affiliated companies failed to properly pay general contractor’s overhead and profit when three or more construction trades were involved in the estimated structural loss repairs. The lawsuit alleged such payments are customary in the insurance industry under those circumstances, but that Allstate began eliminating such payments at the expense of insureds to increase its own profitability.
NPR led the team that aggressively litigated this case for over six years, taking approximately two dozen depositions of Allstate personnel including Allstate’s chief executive officer, reviewing and synthesizing millions of pages of documents and preparing for and arguing in countless court hearings. With the assistance of a nationally renowned expert in sampling and statistics, NPR performed an empirical analysis of Allstate’s claims handling practices regarding contractor’s overhead and profit through a rigorous review of a statistically significant sample of structural loss claim files, proving the widespread nature of the alleged underpayments. NPR continued to advocate for the class through multiple sessions with a nationally renowned mediator prior to reaching a final settlement.
The size of the class finally approved was enormous – an estimated 6,312,244 members – and the benefits to the class were substantial. Class members who submitted an approved claim received 87% or 50% of the alleged underpayment, depending on which estimating software was used in the adjustment of the claim. While not only a significant recovery on a percentage basis per class member, the fund made available to the class had an estimated gross value of almost $1.4 billion. Also, as part of the finally approved settlement, Allstate agreed to certain enhanced claim practices regarding the handling of contractor’s overhead and profit, including the disclosure of the availability of contractor’s overhead and profit for a period of two years following the date of approval.
Based on the enormous size of the recovery and the excellent representation provided by NPR through years of difficult litigation, the court approved an attorney fee of $63,900,000. This case is an excellent example of the level of commitment and resources NPR brings to litigation for its clients. To achieve this level of success against a large, litigation-savvy company like Allstate is extraordinary.