What the State Farm Claims Scandal Means for Insurance Policyholders

When you’re hurt in an accident, you expect the insurance company to pay what you’re owed. But what if the company is looking at your claim through a very different lens?

Newly released internal State Farm documents have brought those concerns into sharper focus. The records, which involve allegations about the company’s handling of wind and hail claims, describe efforts to reduce payments on certain claims.

An insurance company has a financial reason to pay as little as it can. When you are dealing with an injury claim, that can mean an adjuster questions your treatment, minimizes your losses, or pushes you toward a settlement before you know what your claim is really worth.

You paid for insurance. That does not mean the insurer is going to fight for every dollar you deserve. Sometimes, you have to do that yourself.

The State Farm Claims Practices Drawing Scrutiny

The documents were unsealed in litigation in Oklahoma involving homeowners who allege that State Farm improperly handled wind and hail claims, particularly claims involving roof damage.

A judge ordered 31 documents that had previously been protected from public view to be released. The records include internal communications involving State Farm executives and employees discussing how the company was handling these claims.

According to reporting on the documents, attorneys representing homeowners say State Farm’s program was designed to reduce claim payments and generated approximately $1.4 billion in reduced indemnity payments during its first year.

Another internal communication referenced a 39% “closed without payment” ratio. Put simply, that means the communication reportedly described nearly four out of every 10 claims in question being closed without State Farm paying anything.

There are also references to savings of roughly $15,000 for each claim that was denied or underpaid, according to attorneys involved in the litigation.

The Alleged Strategy Behind the Claims Decisions

The reporting describes internal efforts to get managers, agents, and claims handlers on board with a system designed to reduce payouts. In a 2020 internal message, one State Farm executive wrote that “expanding/broadening management review on higher hail/wind severity threshold nets us the most gain.” 

This means that higher-value claims would face additional management review before a larger payment could be approved.

What Does This Have to Do With Your Accident?

The Oklahoma dispute is about homeowners’ wind and hail claims. It is important not to blur that distinction.

The documents do not establish that State Farm, or every insurance company, automatically handles every car accident or personal injury claim unfairly. State Farm disputes the allegations and says its claims practices have been mischaracterized.

But the situation does offer an important reminder if you are dealing with an insurance company after an accident:

The insurance company has its own financial interests.

That doesn’t make every adjuster dishonest. It doesn’t mean every settlement offer is unreasonable. And it certainly doesn’t mean every claim will become a fight.

It does mean you should not assume that the company evaluating your claim is also the person looking out for what is best for you after an accident.

Insurance Companies Have a Business to Run. You Have a Life to Put Back Together.

Insurance companies are businesses. They collect premiums, pay claims, manage expenses, and try to remain profitable. There is nothing inherently wrong with that. But it means an insurance company’s financial interests are not automatically the same as yours.

The newly released State Farm documents have raised questions about what can happen when reducing claim payments becomes an important business objective.

They also show why it can be dangerous for an injured person to simply accept the first explanation, valuation, or settlement offer they receive.

At Meshbesher & Spence, we have represented injured people and families for more than 65 years in various personal injury claims, from car and motorcycle accidents to medical malpractice and beyond.

If an insurance company is minimizing your injuries, questioning your claim, or offering less than you believe your losses are worth, talk to a lawyer before you make a decision that could affect your future.

Call Meshbesher & Spence at (612) 339-9121 or fill out our online form to request a free consultation.