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On July 29, a Missouri appeals court held up the verdict of a Jackson County jury of compensatory damages worth $5.8 million and punitive damages worth $10.5 million against Allstate Insurance Co. for their refusal to settle a claim made by one of its insured.


The case arises from a car accident on March 24, 2000 when a drunk driver crossed the center line on a highway in Camden County, Missouri and collided head-on with a couple’s smaller car, causing all involved to sustain personal injuries.


As a result of the crash caused by Wayne Davis, Jr., Edward and Virginia Johnson incurred medical bills of over $300,000. Davis later admitted to have been driving with a blood-alcohol twice the legal limit.


The Johnsons filed a complaint that they had sent demand letters to Allstate, but the insurance company refused to reach a settlement, in bad faith.


The Johnsons filed suit against Davis in 2002, believing him to be 100 percent at fault.


Just prior to the beginning of the trial in 2004, a letter was sent to Davis for the first time by an Allstate official to explain that he could be personally liable for any judgment in excess of policy limits.


After that, the suit the Johnsons filed against Davis never went to trial.


Instead, they settled into an agreement in which Davis admitted to driving under the influence and consented to $2.5 million in compensatory damages and $1.5 million in punitive damages in addition to over $1 million in prejudgment interest.


The agreement’s twist was that the Johnsons would not attempt to recover the judgment; instead they would jointly sue Allstate with Davis as long as they Johnsons receive 90 percent of the award from the Allstate trial, which took place in 2005.


Judges from the Western District Court of Appeals ruled that Allstate failed to recognize the severity of the Johnsons’ injuries and that the claim would exceed Davis’ $50,000 policy limits. They also upheld the finding of Allstate’s failure to advise Davis of the demand and the likelihood of him being hit with an excess judgment.

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