The case had its origins in 1998, when an African-American nurse with 10 children was involved in a car accident where 3 pedestrians were struck down. At the time, Quinlock Shobe was driving a car that she did not yet own, but was in the process of purchasing from a dealer.
In spite of having coverage under her Allstate policy for vehicles which she was driving but did not own, Shobe's claim was denied by Allstate, and subsequently rejected a $50,000 settlement offer, which represented the limit in Shobe's policy for such an occurrence.
Subsequent to that blow, Shobe was hit with a judgment by the injured family in the amount of $138,000 in 2000.
Shobe would go on to appeal her Allstate claim denial in the courts of law and in 2004 a court decision required Allstate to pay the $50,000 given that it was her due according to the terms of her policy for non-owned vehicles.
However, the hard-working mother of 10 still had $125,000 in debt remaining from the judgment from the other family, together with accrued interest. She decided to sue Allstate for bad faith insurance practice, and in 2007 was awarded $1 million by a jury, who gave her $500,000 in actual damages and another $500,000 in punitive damages from Allstate.
The insurer appealed, but the Missouri Court of Appeals Western District upheld the original verdict earlier this month. At the trial, the insurance adjuster assigned to the case was taken to task for denying Shobe's claim before fully investigating the claims, or consulting legal counsel. The appellate court ruled this month that the adjuster could not be held personally liable for that failure.
It was reported that during closing arguments in the trial Shobe's attorney made reference to a letter to Allstate from an unnamed outside attorney, who described the 53-year-old Shobe as an African-American woman with 10 children who worked as a nurse.
The plaintiff's attorney referenced the contents of the letter to "Allstate code for she won't have the resources to fight the denial." The appellate court is said to have referenced that statement in its decision, indicating that Shobe had shown sufficient evidence to infer "reckless indifference" towards the plaintiff's interests.
The actual and punitive damages to be awarded were left at $500,000 each, respectively.
"If an insurer wrongly denies coverage, denies even a defense under a reservation of rights, and then completely refuses to engage in settlement negotiations, it cannot avoid liability by its wrongful refusal to assume control of the proceedings," Chief Judge Thomas Newton wrote for the court.
"Similarly, if an insurer wrongly denies any responsibility for a claim, it cannot avoid liability because the insured fails to make a futile demand that the insurer provide funds for a settlement offer of which it is already aware."
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At the end of the day insurance is a necessary evil. You need it in case the unthinkable happens. And you pay your premiums faithfully. However, such consistent payment of fees do not guarantee the consumer will be spared bad faith insurance practices when it comes time to pay a claim the insurer would rather not pay. Thus, a deserving insurance claim becomes a bad faith insurance claim in short order. More often than not, an insurance bad faith attorney can lead you through the minefield.
And a minefield it can be. However, the difference between a mother of 10 owing $125,000—and being on the receiving end of $1 million—is often simply having a good lawyer, fighting on your behalf.