Class action vs Allstate over rates can continue; Company, not state, set rates, appeals court says

By Dan Churney | Jan 31, 2019

In a split decision, an Illinois appeals panel has stripped Allstate Insurance of its defenses against a class action, which alleged the company unfairly billed long-term auto policyholders more than it charged new ones, saying Illinois insurers can’t protect their rates from lawsuits, because their rates are not controlled by the Illinois Department of Insurance.

The Jan. 29 ruling was delivered by Justice Judy Cates with concurrence from Justice Melissa Chapman of Illinois Fifth District Appellate Court in Mt. Vernon. Justice James Moore dissented. 

The ruling favored Illinois residents Jeffrey A. Corbin, Margaret A. Corbin and Anna Tryfonas in their class action complaint against Allstate. They brought the suit in 2016 in downstate Madison County Circuit Court, which is known as a venue favorable for plaintiffs.

Allstate, which is one of the country’s largest insurers, is headquartered in the Chicago suburb of Northbrook. Each plaintiff said their vehicles were covered by Allstate for 20 years.

Plaintiffs alleged Allstate had violated the Illinois Consumer Fraud and Deceptive Business Practices Act since at least 2012 by charging its longtime customers higher auto insurance premiums than it charged newer customers. Allstate figured out loyal policyholders would tolerate higher premiums than would new customers, plaintiffs alleged.

Further, Allstate allegedly told neither the Illinois Department of Insurance nor existing customers of this practice. 

Allstate moved to dismiss the suit, citing the so-called filed rate and primary jurisdiction doctrines. Madison County Judge Barbara Crowder refused to dismiss, prompting Allstate to ask the appellate panel to address whether the doctrines served as defenses to the suit.

By a 2-1 margin, the appellate court ruled the doctrines were not applicable.

The filed rate doctrine protects public utilities and other regulated entities from lawsuits involving rates, if the rates must first be filed and pass muster with a regulatory agency.

Justice Cates found the legislature has decided to leave insurers free to fix rates according to market conditions, without approval from the Department of Insurance. As a consequence, the filed rate doctrine is useless for Allstate.

“Illinois has embraced open competition in regard to rate setting for auto insurance,” Cates observed.

Under the primary jurisdiction doctrine, a judge can halt court proceedings and let an administrative agency, which has the appropriate expertise, decide the issue in dispute.

In the Allstate matter, the company said the director of the Department of Insurance is empowered to determine if an insurer is engaging in unfair or deceptive conduct. 

However, Cates concluded the suit doesn’t allege wrongdoing unique to the insurance industry, saying the Department of Insurance doesn’t have any specialized knowledge or technical expertise with regard to Allstate’s alleged conduct.

“The allegations of unfair and deceptive business practices and unjust enrichment come within the experience and conventional competence of the Illinois courts,” Cates said.

Justice Moore disagreed, finding the Department of Insurance does have authority to weigh whether a rate is improper.

“While, under Illinois law, the director and Department of Insurance do not have the power to set insurance rates or pre-approve filed rates, there is a comprehensive statutory scheme whereby the legislature has given the Department of Insurance the power to disapprove rates based on unfair or deceptive acts or practices by those engaged in the business of insurance,” Moore said.

Plaintiffs have been represented by the following firms: Mehri & Skalet, and Tycko & Zavareei, both of Washington, D.C.; Law Offices of Thomas E. Kennedy, III, of St. Louis; and Berger & Montague, of Philadelphia. 

Allstate has been defended by the firms of HeplerBroom firm, of Edwardsville, and DLA Piper, of Baltimore.

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Organizations in this Story

Berger & Montague PC DLA Piper HeplerBroom Illinois Department of Insurance Illinois Fifth District Appellate Court Law Offices of Thomas E. Kennedy, III, L.C. Madison County Circuit Court Mehri & Skalet Tycko & Zavareei

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