Allstate Saddled with 1 Million "excess judgment" Following Motorcycle Accident

The Illinois Appellate Court has ruled in favor of a motorcycle rider who lost a leg in an accident and sought a $1 million judgment against Allstate Insurance Co. This decision might have gone differently for Allstate, but the insurer made several very serious errors in its handling of the case.

This case was reported in the Chicago Daily Law Bulletin.

The accident occurred on June 30, 2006, when the driver, E.H., allegedly drove a truck through a stop sign and smashed into the side of a motorcycle driven by S.K., whose leg later had to be amputated. The truck was owned by a third party, L.S.

Allstate insured the truck under a liability policy that provided up to $100,000 for the accident and the driver. The only other liability coverage for the accident was a $50,000 policy that E.H. purchased from Mercury Insurance Co.

Allstate apparently made several errors in handling this accident and claim. Allstate’s first mistake was using the wrong address when corresponding to E.H., even though the recorded statement given to an Allstate adjuster on July 14, 2006, included his current address. Allstate reportedly failed to discover its error until March 2008.

The second mistake was in negotiating a release that covered only Allstate’s named insured — L.S., who was the truck owner — without notifying E.H., who was the driver.

As recounted by the Illinois Appellate Court, the plaintiff’s attorney threatened to sue the truck owner and go after her personal assets, including restaurants she owned. In November 2006, Allstate offered to settle by paying its policy limit, and it forwarded a release that included E.H. But the plaintiff’s attorney reportedly asked Allstate to exclude E.H. from the release, and Allstate complied.

The victim in the motorcycle accident sued E.H. in February 2007, but Allstate — which knew about the suit — allegedly failed to notify him. Allstate didn’t provide E.H. with defense counsel until February 2009.

The tort case went to trial in November 2009, and the judgment was $1.275 million (after a setoff for the $100,000 settlement). To collect, S.K. negotiated an assignment of E.H.’s rights against Allstate and then sued the insurer for the excess judgment.

As part of its defense, Allstate argued that S.K.’s claim was barred because his attorney “induced” Allstate to negotiate a release that didn’t include E.H. The trial judge agreed and granted a defense request for summary judgment.

Reversing, the Illinois Appellate Court explained that S.K. was suing Allstate as E.H.’s assignee and “the issue of whether S.K. induced the release that omitted E.H. is irrelevant in the instant case. As assignee, S.K. is entitled to all of E.H.’s right, title or interest in the bad faith claim against Allstate.”

Kirk v. Allstate. 2012 IL App (5th) 100573 (May 22, 2012).

Kreisman Law Offices has been handling Illinois motorcycle accident cases for individuals and families for more than 36 years in and around Chicago, Cook County, and surrounding areas, including Grayslake, Dolton, Tinley Park, Chicago’s Bridgeport neighborhood, and Palatine, Ill.