Johnson v. Allstate Insurance Co.: drunk driving for profit

Wayne Davis, Jr., had a .203 blood-alcohol level, when he drove his pickup across the center line of a Camden County, Missouri, highway on March 24, 2000, and crashed head on into the compact car of Edward and Virginia Johnson.

You’ll be happy to hear that the Johnsons didn’t try to blame the beer company or the auto manufacturer, and simply sued Davis. Davis’s insurer, Allstate, contacted the Johnsons’ attorney, David Sexton, in April, and asked for access to the Johnsons’ medical record. Sexton responded by demanding the policy limits. Allstate requested the medical records three more times, and finally got the records on December 20. (A Dan Margolies Kansas City Star article (via Childs) incorrectly says Allstate did not respond, but the court’s opinion says otherwise.) Allstate immediately agreed to pay the settlement limits, but now Sexton refused, saying his April offer had expired, and he now wanted $3 million from Allstate. We’ll let the Missouri Court of Appeals explain what happened next:

The Johnsons’ suit against Davis did not go to trial. Instead, on November 29, 2004, the Johnsons and Davis entered into an agreement that they titled, “Assignment and Settlement Agreement Pursuant to Mo. Rev. Stat. Section 537.065 (1986).” In the agreement, Davis admitted that he negligently had allowed his vehicle to cross the highway center line and to collide with the Johnsons’ car head on, that his blood alcohol content was .203 percent, and that his conduct of driving while intoxicated showed complete indifference to, or conscious disregard for, the safety of others. Davis consented to judgment for the Johnsons for $2.5 million in actual damages, $1.5 million in punitive damages, and more than $1 million in prejudgment interest, plus costs. In return for the Johnsons’ covenant not to execute the judgment against him, Davis assigned to the Johnsons 90 percent of his bad faith refusal to settle claim against Allstate.

Davis and the Johnsons then sued Allstate; a jury was not allowed to hear about the settlement agreement, just that Davis was liable for $5 million. A Jackson County, Missouri, jury awarded $5.8 million in compensatory damages, and $10.5 million in punitive damages, thus rewarding Sexton’s sandbagging of the insurance company. On Tuesday, the Missouri Court of Appeals affirmed. If the Supreme Court of Missouri also signs off, drunk-driver Davis will be a millionaire. Just another case of trial lawyers putting profits ahead of people–and ordinary Missouri citizens will be paying a lot more for insurance when the drunk driving of an insured holding a $50,000 policy can make the insurer liable for $16 million. (Johnson v. Allstate Insurance Co., No. WD68189, Mo. App. Jul. 29, 2008).

For a Utah example of profiting through bad driving, see June 19, 2007.

19 Comments

  • This is clear evidence the goal is not about “holding wrongdoers accountable” but only about money. And for this drunk (and .203 percent BAC–my God!) to get any kind of reward from this accident truly stinks.

    Insurance companies–everyone’s favorite punching bags.

  • Ted

    You become rusty when practicing law at the ivory tower you call MI rather than down in the trenches.

    The equitable principle that one cannot profit from his wrong should prevent drunk-driver Davis from becoming a millionaire. That would have been a good defense for Allstate and saved them 10% off the bat. Whether they brought it up is another matter. If not, shame on them for shoddy lawyering.

    Allstate has a history of not immediately paying legitimate claims and stringing out the litigation to the detriment of those injured. They routinely lowball damages to claimants, and they often won’t pay until forced to by a court. Allstate forces those damaged to actually sue them to get paid. Allstate played the odds this time and lost. This bad faith refusal to settle judgment could not have happened to a nicer company. Maybe more judgments like this would get Allstate to change its M.O. and fairly settle or pay claims in the first instance.

    See e.g. http://www.ripoffreport.com/reports/0/321/RipOff0321613.htm

  • The equitable principle that one cannot profit from his wrong should prevent drunk-driver Davis from becoming a millionaire.

    Regular Overlawyered readers know better. The fact scenario where P & D collude to collect a fortune from D’s insurer is not at all uncommon. Allstate did make the argument, and the court rejected it at trial and on appeal. Allstate wasn’t even allowed to make the argument to the jury.

    Whether or not Allstate does things wrong in other cases (such as the weird anonymous report you chose to single out), I fail to see how they did anything wrong in a case where they offered policy limits within four weeks of getting medical records that no one disputes the plaintiffs’ attorney withheld for eight months, much less something wrong meriting punitive damages. I don’t get to sue Mike Tyson on a made-up claim where I haven’t been injured by him and claim he’s injured lots of other people, so he should pay me.

    And I don’t work for MI.

  • […] Warrior Ted Frank has a post up, about a case out of Missouri.  He uses it as parable about plaintiff’s lawyer’s […]

  • If policy limits are 50 thousand and we are talking about a head on collision with a compact car by a driver with a .203 BAL, why would Allstate require medical records before offering policy limits?

  • #5 Because not everyone gets hurt in a head on.

    If this was an offset crash, like the one I was in with a drunk driver 15 years ago, there could still be little or no injuries, just like mine 15 years ago. Only the drunk was injured, all of us in my buddy’s car walked away.

    Even in a full head-on crash, there can be no injuries.

    I couldn’t imagine how bad the fraud would be if every request for policy limits was paid on demand.

    Our premiums would be thru the roof!

  • The Ignorantia blog complains that I “left out” that Allstate doesn’t always require medical records to pay a claim. Even if this is true (and a jury presumably found it was), it demonstrates negligence, rather than bad faith, much less bad faith meriting punitive damages. The Johnsons’ lawyer forbade Allstate from contacting his clients directly, so the idea that Allstate should have “done more” to investigate is 20/20 hindsight. It was not unreasonable for Allstate to request additional information and to rely upon the Johnsons’ lawyer to provide it, and the facts show that they did so repeatedly, both before and after the settlement demand.

  • When I was a young man the New York State’s insurance department used to police Company Claims behavior. I presume they still do.

    “The Missouri Insurance Department investigates complaints submitted by the public alleging unfair or unlawful acts committed by insurance companies.” Juries should have no say in the matter, and punitive damages in this case should be thrown out.

  • According to the article you cited, one Johnson was hospitalized for 40 days while the other was hospitalized for 35. Again I ask, what did Allstate hope to discover from the medical records that might indicate an offer less than policy limits?

  • Commentor,

    How about, “They wanted to know that the Johnsons had been hospitalized at all.”

    The lawyer made a claim of injury – the insurere asked for PROOF of the injury. The lawyer refused to give them proof for 8 months. When given proof, the insurer responded in less than 1 month.

    I fail to see how this is a fault of the insurer.

  • Commentor insurance world:

    1. Accident occurs.
    2. Insurance company hires teams of individuals to…comb through articles looking for info on injuries to other partie(s)??? “Where’s that Readers Digest?” 🙂

    Wouldn’t it just be easier for the Big Insurance Company, Inc. to make a phone call requesting docs?
    Not if you’re trying to set them up for a big payday and the deck is stacked in your favor.

  • Sadly, this kind of claim is becoming more and more common, and they are actively being manufactured by PI lawyers.

    A PI lawyer will make a claim on behalf of his client, set an arbitrary date by which the insurer has to makes policy-limits offer and if the insurer doesn’t abide by the attorney’s timetable, it suddenly finds itself in a bad faith suit.

    It’s despicable, especially in a situation like this – where the tortfeasor colludes with the injured parties before ever being harmed by an excess verdict.

  • As a German attorney who regularly represents plaintiffs and defendants in litigations resulting from traffic accidents, I can only shake my head in disbelief. I am not sure if the jury system in general is a problem or if it’s the fact that punitive damages and the like are possible – anyway, in Germany we have a court and legal system with lots of weaknesses, but I doubt that verdicts like this would be possible; hard to decide whether you should be laughing or crying about cases like this. I do not want to offend the U.S. legal system, I just seem to be completely unable to understand the justice of these cases – as obviously is overlawyered.com, too. Luckily.

  • Wow. You twisted the facts in that post. I took the time to actually read the case. Apparently, the evidence was that Allstate failed to follow its own procedures regarding the demand, and failed to notify its insurder, that a demand was even made.

    You see nothing wrong with an insurance company faced with a drunk insured with a minimum limit policy (25-50) who strikes another car head on, resulting in (Allstate knew) in a helicopter flight to the hospital and a long hospital staty, simply sitting on the file for 8 months and not even responding to the demand for policy limits b/c it was not provided with medical records? really? maybe if you actually practiced law at the trial level, instead of reading cases and then twisting the facts to give them a pro tort reform spin, you would realize that the conduct of Allstate, as stated in the opinion, is textbook evidecne of deny and delay. A competent adjuster would have offered limits within a week of the wreck. this happens all the time in wrecks involving drunks and minimum limits policies.

  • “Allstate failing to follow its own procedures” at best shows good-faith error, not bad-faith; so it hardly twists the facts to leave it out. It’s also entirely irrelevant to the collusion I was criticizing. If I was trying to “twist the facts,” why would I seek out the opinion and link to it?

    I have no idea what it means for the insurer to “fail to notify its insurder.” And you affirmatively misrepresent the facts when you falsely claim that Allstate “simply [sat] on the file for 8 months.” Even if it were true (and the facts show otherwise), the harm in an 8-month delay of $50,000 policy limits is (1) the interest on $50,000 (which we’ll be generous and call $10,000 for a 30% annual return) and (2) any additional time spent by the attorney working up the case–but even that falls by the wayside, given that the attorney didn’t even respond to a simple request for documents by Allstate until eight months later, in a successful effort to sandbag that was rewarded by the court.

  • How much of that settlement will Davis and the Johnsons get after the lawyers have gobbled the lion’s share?

  • I have worked in the insurance industry for over 20 years. I have a BBA and a MBA in Risk Management and Insurance. I used to be a commercial p & C underwriter and now how my own agency. The majority of my dealings with Allstate ( for my customers, friends etc) have been hostile. They try to low ball, delay, not return phone calls, rude etc. I eventually win by wearing them down. I now am dealing with two claims agents at Allstate that I dealt with two years ago. They finally remember me and now have a different attitude. The way that Allstate values 3rd party claimants cars is a good example of thier abusive tatics. In the end I end up making them pay for the gas in tank as well as the true value of the car. And I am not an attorney nor do I charge a fee – I do it for fun.

  • Almost 9 years after the accident. They finally received a settlement. These aren’t just people, they are my parents. They weren’t out to screw anybody. I was 16 years old. I watched everyday as they fought for their lives. Yes, Mr. Davis caused the accident, but Allstate chose to insure a person with 2 prior DWI. My parents worked hard everyday to care for us kids. Allstate didn’t lose much for one, and two what price do you put on (Dad) fractures sternum, punctured lungs, broken femur, shattered pelvis, dislocated hip, ruptured bladder, broken arm, severed thumb; (Mom) cut eye, deep laceration in the pelvis / leg joining area, two compound fractured ankles, shattered knee, broken femur both had to learn to walk all over again @ 44 and 46 years old. All the many surgeries that have followed, and many still to come. Not to mention, never being able to work. If you haven’t lived through this, you have no right to comment negatively. Allstate didn’t do their job, and so you think my parents won. Well, money can’t give them back what’s been taken away from them. They deserve what they have fought for, which will only get them through the rest of the years of hellacious pain they have to go through. I personally Thank God I still have them.

  • I think many of the comments miss a couple of the observations to be made in this case. With all due respect to Amanda, the legal maneuvering that led to the award had very little to do with the injuries her parents sustained at the hands of Mr. Davis. One observation to be made is that but for Allstate’s alleged “bad faith” he parents would likely have only been able to recover the limits of $50,000. Assuming Allstate did act in bad faith in doing what it did, it was the best thing (financially) that it could have done for the plaintiffs. The fact is that in Missouri, a bad faith claim only belongs to the insured tortfeasor (although the law is a little fuzzy on whether such a claim can be assigned). The insured (Davis) is the one who actually made the recovery. The second observation is that you learn when reading the case that Davis agreed to a big punitive damage award being entered in the underlying “trial.” That pune award became part of his bad faith claim, for which he recovered. As part of the settlement agreement with the plaintiffs, he got to KEEP part of the punes, which means that he profited by being able to cash a check for the portion of the underlying verdict, that by definition was designed to punish him for driving drunk. THAT’S where the travesty is. I’m sure even Amanda would agree that something is terribly wrong with a system that allows a drunk driver to profit as a result of causing injury to another. The irony is that if Davis had been sober, there likely wouldn’t have been a punitive damage award in the underlying case and there would not have been a windfall above and beyond the plaintiffs’ actual damages for him to collect.