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Many injured drivers in Washington state were getting shortchanged by their insurance company, resulting in paying medical expenses out of their own pockets when they should have had coverage, according to a class-action suit that Allstate is settling out of court.

The Seattle Post-Intelligencer reports the tentative settlement of the class-action suit will affect Allstate car insurance policy holders who filed personal-injury protection claims or Medpay coverage and their claims were adjusted using “the ADP or Mitchell Medical bill review system.”

The review system is actually a computer software program that figures in reasonable costs for medical bills in a geographic area. However, Allstate’s problem is it used the billing review software and then only paid 85% of the claim, without giving any reason to not cover the other 15%. This left some insured people paying hundreds of dollars out of their own pocket when they thought they had full insurance coverage.

The class action suit will impact anywhere from 30,000 to 40,000 policy holders in Washington state and may have a ripple effect to other states and force other insurance companies to rethink this bill review system.

We’ve blogged previously about the bad practice of applying generic and standardized payments for injuries and medical bills, especially the recent order signed in South Carolina regarding workers’ compensation claims.

We know many insurance companies try to arbitrarily decide a “reasonable” payout rather than considering the full impact of the injury. For example, if a surgeon loses a finger the impact to his livelihood would likely be much greater than to an attorney who suffered the same injury.

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