Progressive, Allstate Settle Lawsuit Over Patents For Usage-Based Insurance

Copyright:(c) 2011 A.M. Best Company, Inc.
Source:A.M. Best Company, Inc.

Progressive Casualty Insurance Co. and subsidiaries of Allstate Corp. have reached a settlement concerning litigation in which Progressive accused the Allstate units of infringing on its patents for usage-based insurance and online insurance policy-servicing technology, as well as trademark infringement.

Under the settlement, Progressive granted a license to Allstate under its usage-based insurance and policy-servicing patent portfolios, Progressive said. The companies also agreed to a coexistence agreement for Progressive's Drive trademark, and Allstate's DriveWise trademark.

Other details of the settlement between Progressive Casualty and Allstate Insurance Co. and Allstate Fire & Casualty Insurance Co. are confidential, the companies said in separate statements.

"This was about protecting and leveraging Progressive's investment of more than 15 years in usage-based insurance research, development, testing and piloting," Chuck Jarrett, Progressive's chief legal officer, said in a statement "We have always said we are willing to license our intellectual-property rights to others and that we will enforce those rights when necessary."

Allstate said it is "pleased to be able to leverage its patent portfolio in this settlement by providing a license to Progressive and to eliminate the distraction from this litigation."

Spokespersons for both companies declined comment beyond what was contained in the statement.

As part of their usage-based insurance programs, both Progressive and Allstate offer monitoring devices that plug into a port in a vehicle that record a driver's behavior. For instance, Progressive's Snapshot pay-as-you-drive device monitors mileage, braking, acceleration and time of day the car is being driven and sends the data back to the company. After 30 days, customers find out if they are eligible for a discount, based on their driving habits. Progressive's Snapshot program, now available in 40 states, has the larger geographical presence. Allstate's DriveWise device is available only in Illinois, Ohio and Arizona. Both companies say good drivers can save up to 30% on their insurance with the devices.

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Insurers increasingly are turning to usage-based programs. Last last year, Allstate Corp. launched its telematics-based, low-mileage program, DriveWise (Best's News Service, March 14, 2011). A 2008 Brookings Institution study concluded if all drivers paid per mile, driving would decline by 8% nationwide, saving $50 billion to $60 billion each year (Best's News Service, Nov. 17, 2008).

In midday trading on Oct. 4, shares of Allstate (NYSE: ALL) were trading at $22.70, down 0.04% from the previous close, while shares of Progressive (NYSE: PGR) were down 0.81% at $17.14.

The Allstate Insurance Group has a current Best's Financial Strength Rating of A+ (Superior). Rated members of the Progressive Insurance Group also have a current Best's Financial Strength Rating of A+ (Superior).

(By Diana Rosenberg, senior associate editor, BestWeek)


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