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Allstate Must Pay $1 Million to Insured in Defamation Case

$1 Million Settlement

On July 9, 2002, the home John Johnson purchased from his grandfather was destroyed by fire. Johnson contacted his insurer, Allstate Indemnity Company, to file a claim which ultimately was denied coverage. In a letter to Johnson denying coverage, Allstate made statements alleging Johnson misrepresented facts, committed fraud and concealed material facts. Johnson filed suit against Allstate alleging Allstate defamed his character to the point of making him uninsurable.

The attorneys at Steelman Gaunt Crowley set forward with a plan to make their Mr. Johnson whole.  In 2004, Steelman Gaunt Crowley’s attorneys were successful in obtaining a verdict for Mr. Johnson for damages to his home cause be fire.  U.S. Magistrate Judge Audrey G. Fleissig of the Eastern District of Missouri awarded Johnson $81,000. Next, Mr. Johnson’s attorneys sued Allstate for their defamation of Mr. Johnson’s character in the denial letter.  Thedenial letter provided by Allstate in the course of their investigation stayed in Johnson’s file – and consequently prevented him from obtaining homeowner’s insurance coverage.

While it is common for insurers to mention fraud to deny payment, they must back the statements with thorough investigations and detailed explanations.

David Steelman, Johnson’s attorney, took Johnson’s claim in front of Judge Sweeney arguing that Allstate’s claims of fraud were patently false, that the 2004 judgment did not make him whole and that the claims asserted did, in fact, constitute defamation of character.

In a 2007 decision Judge Edward B Sweeney, of the 22nd Judicial Circuit in Missouri, agreed, ruling in favor of Johnson to the tune of a $1 million verdict.

Disclaimer: Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.