Allstate Insurance Co. on Tuesday claimed it paid out more than $10 million from inflated Northridge earthquake damage claims because of fraudulent kickbacks pocketed by outside contractors, claims adjusters and engineering firms.
Consumer advocates and attorneys for homeowners quickly dismissed Allstate's report as an effort to deflect attention from an ongoing federal probe into allegations that the company systematically falsified engineering reports to hold down its payments for quake repairs.
In the last two weeks, FBI agents with search warrants gathered documents at Allstate offices in three states as part of its probe. Allstate, based in Northbrook, Ill., has denied any wrongdoing.
Robert Pike, Allstate's general counsel, said Tuesday that outside vendors schemed to defraud Allstate and pocket the difference in repairs paid for by the company.
"These individuals deliberately inflated their estimates of the damage . . . and were involved in a scheme to ensure that we paid more to cover the cost of the repairs than was actually required," he said.
Allstate has talked with the U.S. attorney's office about its allegations, and has provided names of those it suspects of defrauding the company to the state Department of Insurance.
Allstate's claims got a skeptical response from those who feel the company engaged in wrongdoing involving quake claims.
"Allstate isn't the victim but the predator. They have utilized falsified engineering reports to low-ball payments to homeowners," said David Prestholt, an attorney who has sued Allstate and 20th Century Insurance on behalf of homeowners.
Consumer advocate Harvey Rosenfield, whose Proposition 103 Enforcement Project sued Allstate last year for allegedly altering engineers' reports to cut damage claims, also belittled the company's assertions.
"If what Allstate said is true, they should have gone to the U.S. attorney. Why would the U.S. attorney go after Allstate?" he said.
Even if Allstate's revelations prove true, he said, "it does nothing to answer the allegations against Allstate, which are that it broke the law in how it handled Northridge earthquake claims."
Last year The Times reported that a 25-year Allstate employee, Jo Ann Lowe, said in a court declaration that she was aware of fraudulent conduct by the insurer because its claims adjusters required engineers to provide preliminary quake damage reports, and the engineers were repeatedly instructed to change their reports to minimize potential damage payments.
All told Allstate received 46,000 claims stemming from the 1994 Northridge temblor, and it has paid out $1.7 billion in damage claims.