Allstate Ordered to Reveal “Bonus Plan” System that Led to Roof Claim Denial

A federal court has ordered Allstate to reveal details of a “bonus plan” system in Louisiana.

The bonus system may have caused Allstate to deny a legitimate insurance claim from a local homeowner. The homeowner then sued Allstate under Louisiana’s bad faith insurance laws.

Allstate has resisted providing details of the bonus plan system up to this point. However, a federal judge appears to have sided with the homeowner, and Allstate now needs to hand over internal insurance documentation.

Homeowner Sues Allstate After Roof Damage

In October 2024, Louisiana homeowner Reed Chenevert observed roof damage on his home after a storm.

Chenevert filed a claim with his homeowners insurance company, Allstate.

While processing the claim, Allstate allegedly acted in bad faith. Chenevert later filed a lawsuit against Allstate seeking penalties under Louisiana’s bad faith laws.

Louisiana, like other states, has bad faith insurance laws that require insurers to meet certain standards when handling claims. Chenevert alleges Allstate acted arbitrarily or capriciously when denying or underpaying his claim. As Insurance Business explains, this would be a violation of La. R.S. 22:1973 and La. R.S. 22:1892 under Louisiana’s bad faith insurance system.

So far, nothing is out of the ordinary: homeowners regularly sue insurers for bad faith (sometimes, insurers even sue policyholders).

What is unusual, however, is the “bonus plan” system Allstate may need to reveal as part of the lawsuit.

What is Allstate’s Alleged “Bonus Plan” System?

Chenevert’s lawsuit is based on the idea that Allstate has a “bonus plan” system.

The idea behind the bonus system is simple:

• Chenevert and his legal team allege Allstate rewards adjusters with bonuses or better evaluation scores for producing certain outcomes on claims – say, for denying a claim or limiting the payout for that claim.
• Chenevert is arguing that this system could indicate a profit-driven incentive for adjusters and managers who deny or underpay claims.
• In other words, adjusters or managers who deny a legitimate claim could receive a bonus from Allstate. It’s unclear what that bonus may be, although Chenevert appears to be alleging a monetary bonus or better employee evaluation scores.

Overall, Chenevert and his legal team argue Allstate’s incentive system motivated the company to deny or underpay his roof damage insurance claim. Because adjusters or managers may have had a profit-driven motive to deny his claim, Chenevert argues Allstate acted in bad faith.

Insurers Adopted Profit-Driven Claims Handling Processes in the 1990s

Allstate isn’t the first insurer accused of mishandling claims for profit. In fact, consumer advocates have argued against this system since the 1990s.

As explained by Live Insurance News, consulting firm McKinsey & Company worked with multiple insurers in the early 1990s to advocate a “profit-first” insurance model.

Under the profit-first insurance model, insurers were allegedly instructed to disrupt claims as much as legally possible to protect company profits – say, by offering lowball settlements or creating a burdensome appeals process, reducing the chance of policyholders challenging a claim.

The Average Insurer Denies 37% of All Claims

Today, insurers are denying more claims than ever, suggesting this system is alive and well in the insurance industry.

One report found Citizens, the insurer of last resort in Florida, denied 77% of Hurricane Debby insurance claims, for example.

A study by Weiss Ratings, meanwhile, found the average insurance company in the United States denies 37% of all claims – up from 25% just two decades ago. That’s an increase of around 50%.

Some insurers deny half of all insurance claims. Farmers and two USAA affiliates were found to deny 50% of all insurance claims in that report, for example, while Allstate – the company involved in the Chenevert case – denies 46% of all insurance claims.

Allstate Must Reveal Documents Related to Bonus System

As part of the lawsuit, Chenevert is seeking internal documents from Allstate regarding the bonus plan system.

Allstate has resisted providing this information. In March 2025, however, a federal judge ruled that Allstate must provide documentation relevant to Chenevert’s bad faith insurance claim.

Specifically, the federal judge ruled that Allstate must provide the following details about its bonus system:

Managerial Bonus / Incentive Plans for Adjusters

Allstate has been ordered to provide “documents pertaining to managerial bonus or incentive plans and procedures for adjuster evaluations.”

This includes bonuses for any managers or adjusters who specifically handled Chenevert’s claim.

Did any of Allstate’s managers or adjusters receive bonuses for a specific way in which they handled the Chenevert claim? Chenevert’s legal team may find out.

Chenevert alleges the adjusters or managers involved in his roof damage insurance claim received an incentive of some type – whether in the form of a monetary bonus or a better employee evaluation score – as motivation to deny or reduce his claim.

Contractor Price Estimates

In the initial lawsuit, Chenevert requested “documents pertaining to price estimates of contractors.” Chenevert wanted two years of price estimates across Louisiana.

The federal judge sided with Allstate, denying the request for being too vague.

Sanctions

Chenevert is also seeking sanctions to cover attorneys’ fees and costs. The federal judge declined to impose sanctions because there was no clear evidence of bad faith revealed during the discovery process.

The Chenevert case could have broader implications for Allstate customers across Louisiana – and for policyholders across the United States.

If Allstate is found to have a specific compensation system motivating adjusters to deny or reduce claims, it could lead to more lawsuits, allowing policyholders to receive compensation under bad faith insurance laws.