Allstate sued for allegedly underpaying for rental cars

A New Yorker and an Alabamian have filed suit against Allstate in Illinois alleging the insurer didn’t fully pay for the rental cars they promised to cover.

Each plaintiff was in a collision in their home state within the last year and, in both claims, the other drivers were found at fault. The at-fault drivers were Allstate policyholders.

According to the lawsuit, Allstate paid for and arranged the necessary repairs for each plaintiff’s car. The complaint doesn’t include any allegations of underpayment for the repairs listed. While the rental car expense each plaintiff was reimbursed for was allegedly underpaid by less than $100 each, the lawsuit seeks class action status for drivers who have faced similar situations.

The suit alleges the class includes more than 100 people with an aggregate amount in controversy of more than $5 million.

Allstate made reservations for the plaintiffs at its preferred vendor, Enterprise, according to the complaint. Neither plaintiff changed anything about the reservations, accepted the vehicles, and “relied on Allstate’s promise that it would arrange the reservations and pay the plaintiffs’ expenses for the rental cars,” the complaint states.

The plaintiffs allege breach of the implied duty of good faith and fair dealing in the relevant contract and, alternatively, promissory estoppel, on a nationwide basis. They also allege violations of New York and Alabama consumer protection laws on behalf of consumers, New York General Business Law Section 349 and Alabama’s Deceptive Trade Practices Act.

According to the complaint, the New York plaintiff, Jose Arce, received a letter from Allstate that said it would “provide ‘coverage for property damage, including loss of use of the damaged property and any other out-of-pocket expenses reasonably attributable to the accident and our insured’s negligence.'”

Arce says he doesn’t recall receiving any written notification, or otherwise, before renting a car that the rental would be limited to a particular class of rental vehicles, including “intermediate” class vehicles, or to $27.75 plus tax per day.

He had the rental for eight days while Allstate oversaw repairs to his personal car, and Enterprise charged him $352.46 at a rate of $36.60 per day plus applicable taxes, according to the complaint. Arce claims his reimbursement was $85.22 short.

“Mr. Arce wrote to Allstate several times to contest the underpayment,” the complaint states. “He also asked for compensation for other issues, including the additional cost for gas that he incurred using a gas motor car instead of his damaged electric Tesla.

“Allstate eventually reimbursed him for the additional cost of gas but not the remaining $85.22 for the rental car. Mr. Arce subsequently filed a complaint with the New York Attorney General’s Office and the New York Department of Financial Services. Allstate responded to the complaint to the New York Attorney General’s Office on or around October 30, 2025, stating that ‘Allstate agreed to address an intermediate-sized vehicle with a daily rate of $27.75 plus tax.’ Allstate argued that ‘Mr. Arce elected to obtain a larger vehicle.'”

Daniel Jackson, the Alabama plaintiff, says he faced a similar situation earlier this year.

“Allstate sent plaintiff Jackson a letter outlining its ‘rental guidelines.’ Specifically, the letter stated: ‘We’ll consider a daily vehicle rental reimbursement rate up to $[28.31] per day for a(an) [intermediate] vehicle from our preferred vendor, Enterprise Rent-A-Car,'” the complaint states. “‘If you rent from another rental vendor, we will pay for the same car class listed above at the prevailing market rate.’

“A reasonable consumer would understand that Allstate would reimburse a driver at least $28.31 or a prevailing market rate. This language steers drivers such as plaintiff Jackson to rent a car from the preferred vendor, Enterprise, instead of a different car rental company where Allstate might be responsible for a higher daily rate.”

Jackson rented the car for 24 days while Allstate oversaw repairs to his personal car, and Enterprise charged him $824.73, at a rate of $32.04 per day plus applicable taxes and fees, according to the complaint.

“Allstate informed Mr. Jackson that it would only reimburse him $732.35 for the cost of renting the car and would not compensate him for the total cost incurred,” the complaint states. “The letter said: ‘We’ve provided compensation at a rate of $28.31 per day. After reviewing the cost of the vehicle you rented, we’ve determined that it exceeds the reasonable amount we would typically pay for the loss of use of the damaged vehicle.'”

The complaint adds that the letter also stated: “‘If you believe the compensation for the loss of use of the damaged vehicle is insufficient, please share any information that supports your request for additional compensation. We’ll review it and get back to you promptly to discuss it further.'”

Shortly after receiving this notice, Jackson says he contacted Allstate by phone and email to contest the amount that Allstate reimbursed him. He alleges he didn’t think Allstate might make the reservation on his behalf at any rate other than what he agreed to.

The suit seeks:

• • “Compensatory, actual, statutory, and/or treble damages;
  • “Restitution and/or disgorgement to the extent legal remedies are unavailable or insufficient;
  • “Equitable relief against defendant to prevent it from continuing its ongoing unfair, unconscionable, and/or deceptive acts and practices; and
  • “Pre-judgment and post-judgment interest.”

The lawsuit was filed Aug. 21 in the U.S. District Court for the Northern District of Illinois. Allstate hadn’t filed a response as of Thursday afternoon.

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