What an Expensive Mistake: Allstate Insurance to Pay $600,000 to California Over False Advertising

digital marketingAlthough print advertising is 59% more engaging for users than online articles, more and more companies are putting their efforts in digital marketing. However, for Allstate Insurance, these efforts are costing them thousands.

In a recent lawsuit settlement concerning false advertising, Allstate Insurance Co. has agreed to pay $600,000 to three California counties. These three counties — San Diego, Riverside, and Los Angeles — filed a claim against the insurance giant over a recent television ad that was promoted nationwide.

The ad in question boasted about a unique auto insurance benefit, accident forgiveness, which Allstate uses to entice customers to switch over to their company. This commercial was launched in June 2012 and is estimated to have reached over 90% of California households.

However, accident forgiveness is not available to customers in California.

Why? State voters passed Proposition 103 in 1988 prohibiting insurance companies from offering auto accident forgiveness insurance policies.

While Allstate’s commercial did have a small disclaimer on the bottom of the screen, the lawsuit claimed it was insufficient. As reported on the <em, California law demands that any and all advertising must “clearly and conspicuously disclose any material facts that viewers need to avoid being misled.”

With that in mind, prosecutors claimed the commercials were in direct violation of California’s false advertising law and Unfair Competition Law.

In addition to paying restitution to the three counties, Allstate will be subject to a decree that requires full compliance with all of California’s advertising laws, especially advertisements for accident forgiveness. For all their ads, both print and digital, the company must give clear and conspicuous disclosure that these programs are not available in every state.

The final judgement will be entered without admission of liability. In other words, Allstate and the State of California agree that the restitution payment will constitute an admission of wrongdoing.

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