Allstate 2015 Annual Report Download - page 245

The Allstate Corporation 2015 Annual Report 239
Legal and regulatory proceedings and inquiries
The Company and certain subsidiaries are involved in a number of lawsuits, regulatory inquiries, and other legal
proceedings arising out of various aspects of its business.
Background
These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and
complexities, including the underlying facts of each matter; novel legal issues; variations between jurisdictions in which
matters are being litigated, heard, or investigated; changes in assigned judges; differences or developments in applicable
laws and judicial interpretations; judges reconsidering prior rulings; the length of time before many of these matters
might be resolved by settlement, through litigation, or otherwise; adjustments with respect to anticipated trial schedules
and other proceedings; developments in similar actions against other companies; the fact that some of the lawsuits are
putative class actions in which a class has not been certified and in which the purported class may not be clearly defined;
the fact that some of the lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue
is in dispute and therefore unclear; and the current challenging legal environment faced by corporations and insurance
companies.
The outcome of these matters may be affected by decisions, verdicts, and settlements, and the timing of such
decisions, verdicts, and settlements, in other individual and class action lawsuits that involve the Company, other insurers,
or other entities and by other legal, governmental, and regulatory actions that involve the Company, other insurers, or
other entities. The outcome may also be affected by future state or federal legislation, the timing or substance of which
cannot be predicted.
In the lawsuits, plaintiffs seek a variety of remedies which may include equitable relief in the form of injunctive
and other remedies and monetary relief in the form of contractual and extra-contractual damages. In some cases, the
monetary damages sought may include punitive or treble damages. Often specific information about the relief sought,
such as the amount of damages, is not available because plaintiffs have not requested specific relief in their pleadings.
When specific monetary demands are made, they are often set just below a state court jurisdictional limit in order to
seek the maximum amount available in state court, regardless of the specifics of the case, while still avoiding the risk of
removal to federal court. In Allstate’s experience, monetary demands in pleadings bear little relation to the ultimate loss,
if any, to the Company.
In connection with regulatory examinations and proceedings, government authorities may seek various forms of
relief, including penalties, restitution, and changes in business practices. The Company may not be advised of the nature
and extent of relief sought until the final stages of the examination or proceeding.
Accrual and disclosure policy
The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis and follows
appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals
for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been
incurred and the amount of the loss can be reasonably estimated. The Company does not establish accruals for such
matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of
the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable
is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include
potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.
The Company continues to monitor its lawsuits, regulatory inquiries, and other legal proceedings for further
developments that would make the loss contingency both probable and estimable, and accordingly accruable, or that
could affect the amount of accruals that have been previously established. There may continue to be exposure to loss
in excess of any amount accrued. Disclosure of the nature and amount of an accrual is made when there have been
sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by
the disclosure of the amount of accrual.
When the Company assesses it is reasonably possible or probable that a loss has been incurred, it discloses the
matter. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued, if any,
for the matters disclosed, that estimate is aggregated and disclosed. Disclosure is not required when an estimate of the
reasonably possible loss or range of loss cannot be made.