Bad Faith Insurance Lawsuit Results in $22 Million Settlement

Philadelphia, PAA denied disability claim has resulted in a $22 million settlement in a bad faith insurance lawsuit filed against Allstate Insurance. The settlement is reported to be the largest ever in Pennsylvania.

According to The Times-Tribune (9/30/14), the original lawsuit was filed by Patrick Hennessy, who suffered severe injuries in a car accident. Court documents note that Hennessy had originally been in a car driven by Ryan Caruso when Caruso’s car rear-ended a car at a traffic light driven by Bruce Reikow. Caruso’s car stalled and Hennessy moved to push it out of traffic when a car driven by Shawn Robertson struck them.

Hennessy required a leg amputation and filed a claim against Allstate, the company that insured Caruso’s car. Shawn Robertson, the driver of the vehicle that hit Hennessy, was not insured.

Hennessy filed suit in state court but offered to settle with Allstate for the policy limit of $250,000. Allstate refused the offer, so Hennessy went to trial against Caruso and Robertson. The jury awarded Hennessy more than $19 million, finding Caruso 40 percent responsible and Robertson 55 percent. Caruso assigned his rights against Allstate to Hennessy.

According to court documents, Allstate refused to pay the judgment, so Hennessy filed another suit. The suit named Allstate employees and agents Kevin Broadhead, Paul Fraver, John Russell and Henry Ricci, III. Allstate argued that Hennessy fraudulently joined the company’s Pennsylvania employees in the case, to defeat diversity of citizenship, but the judge ruled that the claims against the company’s Pennsylvania employees were neither insubstantial nor frivolous, noting that joinder is fraudulent when there is no reasonable basis supporting the claim against joint defendants.

Specifically, Judge Stengel wrote that the lawsuit alleged Mr. Ricci fraudulently represented to the Caruso family that Allstate’s internal policies were consistent with its “Good Hands” advertising campaign, leading the Caruso family to purchase the policy.

“Mr. Broadhead, Mr. Russell, and Mr. Fraver are alleged to have sent several misleading letters to the plaintiff’s attorneys insisting that Allstate was continuing to conduct an investigation of the claims, when, in fact, the letters were actively concealing that Allstate was not investigating the claims at all,” Judge Stengel wrote. “Further, Mr. Broadhead had also not informed the Caruso family that the plaintiff would have accepted the policy limit of $250,000 as settlement of the entire case on the eve of trial.” That failure to notify Caruso was deemed unfair because Caruso was later found liable for damages greater than the $250,000 initially offered as a settlement amount.

The second suit was settled for $22 million. The Times-Tribune notes that the $22 million is 88 times what Allstate would have paid if it had initially approved Hennessy’s claim.

The lawsuit is Patrick Hennessy vs. Allstate Insurance Co., et al., case number 13-6549.