An Eyewitness News investigation into allegations that some insurance companies boost profits by reducing claims took us to the Santa Fe office of a trial lawyer named David Berardinelli.

He claims that if Allstate and other insurance companies were paying claims promptly and fairly the New Orleans area would be much further on the road to recovery from the devastation of Hurricane Katrina.

Berardinelli has written a book for attorneys who sue insurance companies.    

He said that it is based on slides the McKinsey Company consulting firm used in the early 90s to show Allstate how to improve profits.

His book’s title is a play on the company’s advertising slogan that “You’re in Good Hands with Allstate.” His title is “From Good Hands to Boxing Gloves.”

“I didn’t make it up,” he said of the title. “That actually is one of the slides.”

Berardinelli said he acquired documents based on the slides from Allstate in a lawsuit against the company. Allstate is still in court trying to stop him from revealing his findings in those McKinsey slides, arguing they are trade secrets.

“In one slide it actually says, ‘improving Allstate's casualty economics will have a negative economic impact on some medical providers, lawyers and claimants,’” he said.     

Berardinelli said he took detailed notes of more than 12,000 McKinsey papers.

He said the findings he documented remind him of the film ‘Wall Street,’ which starred Michael Douglass. He refers to the moment in the film when Douglass' characters said:

"The point is ladies and gentlemen is that greed for lack of a better word, is good. Greed is right. Greed works." 

Berardinellis said “That motto, that credo that greed is good, that greed produces good things is the virus as I call it that McKenzie brought into an insurance industry that was based on trust.” 

Berardinelli said the first insurance company was formed more than 300 years ago to protect ship owners. 

“Insurance was thought of as a pool of money put together by people at risk for a certain event,” he said.

He cited the ruling from the court case "Egan versus Mutual of Omaha" in 1979 as evidence that the law considered insurance a public trust. 

“Insurers must place the public's interest before their interest in maximizing gains and limiting disbursements,” said Berardinelli.

Berardinelli said insurance companies are supposed to pay claims promptly and fairly.

“It does no good really if you don't get paid until essentially the financial loss that you've incurred has caused the very harm you bought insurance to prevent in the first place,” he said.

But Berardinelli said the internal documents he obtained reveal McKinsey told the company in the early 90s that if Allstate is to win, others - including policyholders - must lose.

He said Mckinsey advised allstate to adopt a get-tough approach that required policyholders to fight for their claims in court, if they didn't accept the company's first offer.

The bottom line, said Berardinelli:

“We’re going to make an offer within 180 days that meets our profit goal.  And, it will be non-negotiable. People that accept that offer will get good hands. People who want the full benefit of what they paid for will get boxing gloves.”

Berardinelli said that Allstate’s own records revealed 90 percent of the policyholders who file claims take the first offer.

He said the ones that want full benefits won’t get paid for four or five years. And that, he says, will be four or five years of hard fought, expensive, no compromise litigation.

Berardinelli also said policyholders with lawyers who are not as well funded are at a big disadvantage against the insurance companies in court.

"It's an intentional use or abuse of the civil justice system as a punitive weapon against policyholders," Beradinelli said.

David Berardinelli believes Allstate unfairly reduced claims.

He calls that “an atrocious betrayal of public trust” which has delayed recovery from Katrina.

And he compares that to what the Enron company did.

“The Enron business model used by McKinsey and installed at Allstate in the 90s has retarded the recovery of Louisiana and the city of New Orleans, in my opinion, by at least 20 years,” Berardinelli said.

Rich Halberg, a director for Allstate disagrees with Berardinelli’s assessment.

“It's difficult to respond to a trial lawyer from New Mexico who really knows nothing about the way claims for Katrina and Rita were handled and has no direct information about that,” Halberg said. 

Halberg said Allstate is proud of the way it handled claims from Louisiana’s storms. 

“Between two storms, in Louisiana we paid more than $3 billion in claims following the two storms."

Halberg said that of the 300,000 claims filed after the two hurricanes, 98 percent were settled within 12 months.

He said Allstate ran ads after the hurricanes telling customers to go back to their adjustors if they found additional damage. He said Allstate's claims process is transparent.

Yet, in several courts around the country Allstate is fighting to prevent the public from seeing the recommendations that Berardinelli said Allstate has adopted as a business model - the McKinsey documents.

“The reality is this is a fishing expedition for trial lawyers out to generate additional frivolous lawsuits and we are not going to play in that game,”  Halberg said. 

The Consumer Federation of America said a review it conducted of the company's own financial records reveals Allstate paid out significantly less than the industry average for claims and made significantly more than in the industry average in profits.

Halberg said the jump in profits came not by cutting claims, but by adding millions of paying customers.

Allstate won a unanimous verdict in a court case last month in Kentucky in which a woman claimed the McKinsey documents were evidence that Allstate used a systematic scheme to bully car accident victims into accepting lowball offers.

Allstate spokesman Mike Siemienas said, “(This case) shows our claims adjusters work very hard to settle each claim fairly and appropriately based on the individual circumstances of the claim.”

****Wednesday night Eyewitness News will take a closer look at Allstate’s profits and payments for claims.