So…if you own AIG stock now what happens? An initial public offering in the new entity means the current AIG stock won’t be worth diddly, not this it’s worth anything now. Anyone care to weigh in on that?
So they spin off the Insurance operations, does that mean the US Government still has stake in AIU or are we left only with AIG? If we are left with AIG, that means we are left with nothing and they can file bankruptcy and we get nothing as a pay back. I can understand why they want to separate it since it is profitable, but I don’t think the government should allow this until we are paid back in full and have no stake in the company. Otherwise this is no different than a bank robbery. Rob a bank, take the millions and put under a rock, go to jail for a few years and then get out, pick up the cash and live like a millionaire. If AIG gets away with this, I think someone should be looking at jail time, starting with our senators and house of reps.
Actually, Obama & the boys are going to do whatever they want to from now on, so get used to it folks. But I wish IJ would quit using words like “nearly” toppled. It WAS toppled. That reminds me of a song “Is you is or is you aint AIG or AIU?
In fact I think I wish IJ would just quit writing any articles on AIG, etc. It’s all BS anyway.
i agree, if they sell this arm, how much will they still owe? how much has been sold and has any of the revenue been paid back to the government? i think — AIG is fighting a losing battle. it’s not worth much and yes, their insurance side is somewhat profitable. farmers is already asking to purchase AIG stateside insurance. i agree, will there be enough left over to pay for the money given by the feds! i think that this woundup being the worst move. giving money to a company that can not stay afloat. look at the auto industry. they are failing as well. and yet, the FED (OBAMA led), felt it best to bail them out. but AIG upped them by having a trip not once but even twice, then giving bonuses out (or retention $$, as AIG called it. we the taxpayer will not see that paid back. so more in debt our gov’t goes. the more money that uncle sam will want us to give him for their negligence of giving money. reality: AIG is FAILING. but all these companies should be allowed to fail. we don’t help the small ones, why not let the big ones fall.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
Two former in-house attorneys for State Farm contend that they were often called upon by the insurer to represent its’ policy holders and were forced to commit “unlawful and unethical activities, including requiring the two to stay silent about the rights of the policyholders”. State Farm seems to have reckless indifference for the truth for the purpose of corporate and personal economic gain. State Farm should know that continued scrutiny of their claims paying practices
YOUR SEE THE REAL STATE FARM MY DEARFRIEND NO- GOOD- NEIGBER BS – INSURANCE call State Farm’s decision “heartless and others call it plain greedy.” THATS A GOOD NANE OF AIG
The insurance side of AIG (AIU) is pretty darn creative and solid. If i had any money i’d buy part of the IPO.
Also, I have inside information that the name will not be an acronym and will not have an AI or G in the name…. which is to bad. I was thinking, AMPUTEE LIBERTY Insurance would be a good one (no your right… not funny).
-TC
PS I feel State Farm people are good people on the whole and wudchuck, i still enjoy your comments even when others don’t alway find them credible.
wudchuck,
As usual, you are quite verbose for someone who has no idea what he’s talking about. You need to read the Wall Street Journal instead of the N.Y. Post. Your comments are a waste of space.
TC- COMMENT
PS I feel State Farm people are good people on the whole . keep saying it.
Comment:
By Anita Lee
McClatchy Newspapers
Advertisement
BILOXI, Miss. (MCT) — In some cases, State Farm’s top leadership prefers not to share or even keep records that offer insight into how policyholder claims are handled, according to court records.
Chairman and CEO Edward B. Rust Jr. said in sworn testimony earlier this month that no minutes are kept of quarterly meetings held by the company’s top management, the Chairman’s Council, and that policyholders have no right to information about an investigation State Farm Insurance Cos. has ordered of its relationship with Haag Engineering Co.
State Farm spokesman Phil Supple said the company doesn’t “intend to-;try this-;case in the media.”
“State Farm stands by testimony given by President and Vice Chairman Vince Trosino, who said when asked about these allegations, ‘It’s not part of our system. It’s not part of our core values. It’s not what made us the most successful property and casualty insurer, life insurer, in the country.'”
Juries in two states, Texas and Oklahoma, have found Haag provided biased reports to State Farm to minimize or deny policyholder claims. Mississippi’s attorney general currently is conducting a grand jury investigation to determine whether State Farm and other insurers denied Hurricane Katrina claims through the use of fraudulent engineering reports.
Haag denies bias, but State Farm suspended business with the company in June and ordered an independent investigation after an Oklahoma jury awarded a total of $13 million to a policyholder over tornado damages. Subsequent trials are set to determine damages for 70 other policyholders, all of whom had claims investigated by Haag.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases.
In the Oklahoma case, after State Farm finally turned over to the court a “claims legal research” DVD and other records, Judge Richard G. Van Dyck told company attorneys
“As I was watching these tapes I just want to say this for the record, the hair on the back of my neck did — did stand up because I was seeing things there that early on in this case I was told by (State Farm) defense counsel didn’t exist and couldn’t be produced. So I’m not real happy with that and I want to remind all counsel that their ethical responsibilities as attorneys outweigh the wishes of their clients.”
Gary T. Fye, an expert in the analysis of disputed insurance claims who lives in Nevada, often testifies in insurance cases. Fye, who said he has testified on behalf of policyholders and insurance companies, has provided the courts information on State Farm’s history of destroying and withholding records.
In 1998, Fye wrote in a Florida case
“I have been witnessing document destruction, concealment, and obstruction of discovery by State Farm for many years in connection with my review of internal claim practices documents of the insurer. I have accumulated certain Exhibits which show the company’s goals and objectives for document handling by its employees. The documents show close to 28 years of intentional destruction, concealment and distortion of claim practices records.”
In some cases, company executives did not keep records.
Jeff Marr, the attorney suing State Farm in Oklahoma, took sworn testimony Sept. 6 from Rust. Topics included Rust’s Chairman’s Council, made up of top State Farm executives. The group, which includes the company’s general counsel, meets quarterly.
Marr was fishing for records of those meetings that he could subpoena for his lawsuit.
“Certainly,” Marr asked Rust, “you keep records of the quarterly meetings where the entire Chairman’s Council is present?”
“We have an agenda,” Rust said, “but minutes in that, no.”
“Why not?” Marr asked.
Rust replied, “Never felt a need to.”
Marr later asked, “Are there any written agendas that are available should I choose to request them in the lawsuit?”
“I’m not sure what might be available,” Rust said.
Rust also said policyholders, who essentially own the private mutual company, are not entitled to know what the Chairman’s Council discusses or decides about litigation against State Farm, citing attorney-client privilege.
Marr questioned why the company would withhold information from policyholders, who own State Farm.
“Well, again,” said Rust (who has a law degree), “I’m not an expert in the area, but I think as you find — even if I’m a shareholder in a publicly traded company, there are things that are not — you know, I do not have access to.”
Marr later asked if policyholders have a right to see documents from State Farm’s investigation of Haag.
“No,” Rust said.
“Why not?” Marr asked. “Is it privileged?”
Rust said, “I believe so.”
close to 28 years of intentional destruction, concealment and distortion of claim practices records
KNOW MORE…. These whistle-blower like terminations came on the same day a group of active and former agents
delivered a letter to insurance commissioners across the country informing them of State Farm’s
violations of state insurance regulations, discriminatory policyholder selection criteria, and attempts to
fight the release of zip code data commonly used to determine redlining (see letter below).
A group of active and former State Farm agents earlier presented a letter to the United States Senate
Commerce Committee discussing State Farm’s fraudulent use of medical utilization review companies
designed to lower payments to victims in auto accidents, fraudulent use of after-market auto parts, history
of misrepresenting life insurance policies as investment vehicles, overcharging on homeowner’s
insurance and de facto redlining. A press conference took place in Washington DC on October 29, 1999 ” LOTS OF HISTORY”
where terminated agents Mike Morgan, along with others, made presentations. The letter to the
Commerce Committee was made public at the press conference, which was signed by the other three
terminated agents.
Termination is the standard practice anytime an agent or employee questions deceptive or
anti-competitive behavior at State Farm,” agent spokesman Patrick Woodson said. “The only people who
have breached any duty are the thugs at State Farm management. It is clear they will stop at nothing to
quiet any principled agents.
“Millions of Americans are being abused by State Farm and these agents were trying to make this
company do the right thing,” Woodson said. “These agents have gone to court to stop these practices.
Now, they have gone public to stop continuing policyholder abuses. State Farm management should be
held personally accountable for their actions today and for years of disservice they’ve done State Farm’s
policyholders.”
STATE FARM
CEO: Edward B. Rust Jr. 2007 compensation $11.7 million
HQ: Bloomington, IL
Profits: $5.5 billion (2007)
Assets: $181.4 billion70
As the biggest property casualty insurance company in America, State Farm has become notorious for its deny and delay tactics. In many cases, the company has gone to extreme lengths to avoid paying claims, including forging signatures on earthquake waivers after the deadly Northridge earthquake, and altering engineering reports regarding damage after Hurricane Katrina.
Hurricane Katrina showed State Farm at its worst. One of the deadliest natural disasters in U.S. history, Hurricane Katrina made landfall on August 29, 2005, near Buras, Louisiana. The storm killed nearly 1,600 people and caused $135 billion in damages.71
One of the legacies of the storm was the widespread dissatisfaction with the response of State Farm and other insurance companies. State Farm would later claim it had settled 99 percent of its cases, but regulators criticized the company for using misleading statistics.72 The company claimed that any house that had what they considered water damage did not constitute a claim in the first place.73 In fact, the Louisiana Department of Insurance reported that it was contacted by 9,000 consumers seeking help resolving disputes with their insurance companies.74
State Farm denied the claims of the Nguyen family of Mississippi, who lost their home in Hurricane Katrina. State Farm’s own engineers concluded that the damage was caused by wind and even cited eyewitnesses who saw another house picked up by the wind and thrown into the Nguyens’ home. State Farm, however, hired another engineering firm to come to a different conclusion and then denied the claim, saying the damage was caused by flooding. 75 State Farm also denied the claims of Dean Barras in Louisiana. Barras’s home was exposed to the elements for two weeks, but State Farm’s response was “the chimney was not built properly.”76
Bob Kochran, CEO of an engineering firm assessing Katrina damage for State Farm, said that he was asked to alter reports with which the company did not agree. In order to keep the State Farm contract, Kochran agreed to tell his engineers to “re-evaluate each of our assignments.” One of the engineers, Randy Down, responded in an email, “I have a serious concern about the ethics of this whole matter. I really question the ethics of someone who wants to fire us simply because our conclusions don’t match theirs.” State Farm’s attempt to unduly influence the engineers was exposed during litigation in Jackson, Mississippi.77
One such angry policyholder was United States Senator Trent Lott. Lott, who had long counted on insurance companies for support, became an industry critic after his beachfront house was destroyed by Hurricane Katrina and his subsequent claim was denied by State Farm. Lott eventually settled with State Farm, but went on to sponsor legislation requiring insurers to provide “plain English” summaries of what their policies did and did not cover. Hurricane Katrina had highlighted insurance company use of such things as anti-concurrent clauses, which led policyholders into believing they were covered from the risks of hurricanes, when in fact subsequent flooding might wipe out any chance of a claim being paid. “They don’t want you to know what you really have covered,” said Lott.78
In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims, and within a few months had paid nearly $30 million in additional settlements. 79When a grand jury later issued subpoenas probing new claims against State Farm, the company sued Mississippi Attorney General Jim Hood. Hood decried the lawsuit, saying the company’s agreement to reopen claims had never been intended as “blanket immunity” from future probes.80
Like Allstate, State Farm used consulting giant McKinsey & Co. The McKinsey concept involves cutting spending on claims payments to boost profits. Agents steeped in the McKinsey way speak of the “three D’s”- deny the claim, delay the payment, and then do anything to defend against a lawsuit.
In 1994, the Northridge earthquake in California killed 57 people, injured 9,000, and caused an estimated $33.8 billion in damage. It was the costliest earthquake in U.S. history, and insurance companies such as State Farm did everything they could to avoid having to pay for it. After it hit, a State Farm employee testified that company officials forged signatures on earthquake waivers to avoid paying quake-related claims and then withheld evidence when the company was sued. State Farm and other insurers accused of mishandling Northridge claims were fined over $3 billion in penalties; however, State Farm never actually paid the fines. Instead, an insurance department whistleblower would eventually reveal that the insurers donated $12 million to two non-profit foundations created by insurance commissioner Chuck Quackenbush in what amounted to little more than a bribe.81
In 1999, a series of powerful tornadoes killed 44 people in Oklahoma and caused $1.8 billion in damages. Homeowners brought a class-action suit against State Farm, alleging the company had tried to undervalue damage to homes or claim damage was caused by other factors such as faulty construction. A jury eventually ruled that State Farm acted “recklessly” and “with malice” and disregarded its duty to policyholders. The firm that State Farm used to allegedly undervalue damage was Haag Engineering-the same firm that would be accused of mishandling Katrina claims six years later.82
In 1999, despite Oklahoma tornado claims, State Farm earned $1.03 billion in profits after taxes.83 In 2005, despite Hurricane Katrina, State Farm turned a $3.24 billion profit. The following year, without a major catastrophe, profits increased to $5.32 billion, for which CEO Ed Rust received an 82 percent pay raise.84 In fact, since State Farm hired McKinsey, the company has seen profits more than double from its 1990s level to the $5.4 billion it made in 2007.
Following the same tactic as Allstate, State Farm has embarked upon a campaign of market withdrawals and non-renewals in the aftermath of Katrina. State Farm has stopped writing new homeowners policies in Mississippi and Florida, and in the latter state non-renewed a further 75,000 policyholders.85 Just as they did in the aftermath of Katrina, State Farm stopped writing new homeowner policies.86
While State Farm will do anything to fight a claim once it has been taken to court, the company has never been shy about using the courts to its own advantage, even when it has to first stack the deck. In the 2004 Illinois Supreme Court election, one justice-Lloyd Karmeier- received huge amounts from State Farm employees, lawyers, and groups to which the insurer belonged. Karmeier won the election and soon after cast a crucial vote reversing a $9 billion judgment against State Farm.87
One example is Ethel Adams, a 60-year-old woman left in a coma and seriously injured after a multi-vehicle crash in Washington State. Her insurance company, Farmers, decided the other driver had acted intentionally and denied her claim, contending that an intentional act is not an accident. Another example is Debra Potter, who for years sold Unum’s disability policies until she herself became disabled and had to stop working. All along, Potter thought she was helping people protect their future, but when her own time of need came, she was told her multiple sclerosis was “self reported” and her claim denied-by Unum, the very company whose policies she had sold.
In cases like these, and countless others, the name of the game is deny, delay, defend-do anything, in fact, to avoid paying claims. For companies like Allstate, there are corporate training manuals explaining how to avoid payments, portable fridges awarded to adjusters who deny the most claims, and pizza for parties to shred documents.
That’s some serious research there guys! I guess 1st off is that the AIG subsidiaries have already bankrupted the American taxpayer, along with whomever else we gave a boat load of money to. Yes I’m pissed off! but I’m sick of talking about it.
An insurance company denied a claim!?!!! that’s weird? you have a thousand articles about this? You don’t think there are thousands of other articles showing carriers you broker through that have denied their claims? My statement is that I think the majority of State Farm people are good people. I’ll change that. Of all the State Farm people I’ve meet over the years the majority of them were genuine good folks. Do they drink the cool aid? Yes with out a doubt.
Thanks for the articles, you made your point. Yes big insurers are going to be suspect, fraudulent and under heavy scrutiny. It’s a good thing we have so many people like yourselves out there to keep the public suspicious.
CALL YOURSELF STATE FARM
Comment:
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
The assets of the insurance companies are protected by the insurance departments anyway. The assets are there to pay claims to the policyholders. I don’t think that they could be touched even if AIU Holdings stayed with AIG. But I do think that the pipeline from our treasury to the counterparties should be cut off. AIG may owe them money but our government doesn’t.
I thought we were gonna call it Ironshore
So…if you own AIG stock now what happens? An initial public offering in the new entity means the current AIG stock won’t be worth diddly, not this it’s worth anything now. Anyone care to weigh in on that?
So they spin off the Insurance operations, does that mean the US Government still has stake in AIU or are we left only with AIG? If we are left with AIG, that means we are left with nothing and they can file bankruptcy and we get nothing as a pay back. I can understand why they want to separate it since it is profitable, but I don’t think the government should allow this until we are paid back in full and have no stake in the company. Otherwise this is no different than a bank robbery. Rob a bank, take the millions and put under a rock, go to jail for a few years and then get out, pick up the cash and live like a millionaire. If AIG gets away with this, I think someone should be looking at jail time, starting with our senators and house of reps.
Actually, Obama & the boys are going to do whatever they want to from now on, so get used to it folks. But I wish IJ would quit using words like “nearly” toppled. It WAS toppled. That reminds me of a song “Is you is or is you aint AIG or AIU?
In fact I think I wish IJ would just quit writing any articles on AIG, etc. It’s all BS anyway.
i agree, if they sell this arm, how much will they still owe? how much has been sold and has any of the revenue been paid back to the government? i think — AIG is fighting a losing battle. it’s not worth much and yes, their insurance side is somewhat profitable. farmers is already asking to purchase AIG stateside insurance. i agree, will there be enough left over to pay for the money given by the feds! i think that this woundup being the worst move. giving money to a company that can not stay afloat. look at the auto industry. they are failing as well. and yet, the FED (OBAMA led), felt it best to bail them out. but AIG upped them by having a trip not once but even twice, then giving bonuses out (or retention $$, as AIG called it. we the taxpayer will not see that paid back. so more in debt our gov’t goes. the more money that uncle sam will want us to give him for their negligence of giving money. reality: AIG is FAILING. but all these companies should be allowed to fail. we don’t help the small ones, why not let the big ones fall.
Mike:
You are spot on. wudchuck is constantly posting about things of which he has no understanding.
wudchuck, lastbat, and dread must all post with the same brain, because they are three peas in a pod.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
Two former in-house attorneys for State Farm contend that they were often called upon by the insurer to represent its’ policy holders and were forced to commit “unlawful and unethical activities, including requiring the two to stay silent about the rights of the policyholders”. State Farm seems to have reckless indifference for the truth for the purpose of corporate and personal economic gain. State Farm should know that continued scrutiny of their claims paying practices
Why am I totally not surprised to see State Farm-hating in a COMPLETELY unrelated news article??
YOUR SEE THE REAL STATE FARM MY DEARFRIEND NO- GOOD- NEIGBER BS – INSURANCE call State Farm’s decision “heartless and others call it plain greedy.” THATS A GOOD NANE OF AIG
What?
I see happy hour started early today
The insurance side of AIG (AIU) is pretty darn creative and solid. If i had any money i’d buy part of the IPO.
Also, I have inside information that the name will not be an acronym and will not have an AI or G in the name…. which is to bad. I was thinking, AMPUTEE LIBERTY Insurance would be a good one (no your right… not funny).
-TC
PS I feel State Farm people are good people on the whole and wudchuck, i still enjoy your comments even when others don’t alway find them credible.
wudchuck,
As usual, you are quite verbose for someone who has no idea what he’s talking about. You need to read the Wall Street Journal instead of the N.Y. Post. Your comments are a waste of space.
NO MATTER HOW STRONG AIG LIFE IS,ITS SICK SUBSIDIARES ARE SUCKING THE LIFE OUT OF THE AMERICAN TAX PAYER!!!!!!!!!!!!
TC- COMMENT
PS I feel State Farm people are good people on the whole . keep saying it.
Comment:
By Anita Lee
McClatchy Newspapers
Advertisement
BILOXI, Miss. (MCT) — In some cases, State Farm’s top leadership prefers not to share or even keep records that offer insight into how policyholder claims are handled, according to court records.
Chairman and CEO Edward B. Rust Jr. said in sworn testimony earlier this month that no minutes are kept of quarterly meetings held by the company’s top management, the Chairman’s Council, and that policyholders have no right to information about an investigation State Farm Insurance Cos. has ordered of its relationship with Haag Engineering Co.
State Farm spokesman Phil Supple said the company doesn’t “intend to-;try this-;case in the media.”
“State Farm stands by testimony given by President and Vice Chairman Vince Trosino, who said when asked about these allegations, ‘It’s not part of our system. It’s not part of our core values. It’s not what made us the most successful property and casualty insurer, life insurer, in the country.'”
Juries in two states, Texas and Oklahoma, have found Haag provided biased reports to State Farm to minimize or deny policyholder claims. Mississippi’s attorney general currently is conducting a grand jury investigation to determine whether State Farm and other insurers denied Hurricane Katrina claims through the use of fraudulent engineering reports.
Haag denies bias, but State Farm suspended business with the company in June and ordered an independent investigation after an Oklahoma jury awarded a total of $13 million to a policyholder over tornado damages. Subsequent trials are set to determine damages for 70 other policyholders, all of whom had claims investigated by Haag.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases.
In the Oklahoma case, after State Farm finally turned over to the court a “claims legal research” DVD and other records, Judge Richard G. Van Dyck told company attorneys
“As I was watching these tapes I just want to say this for the record, the hair on the back of my neck did — did stand up because I was seeing things there that early on in this case I was told by (State Farm) defense counsel didn’t exist and couldn’t be produced. So I’m not real happy with that and I want to remind all counsel that their ethical responsibilities as attorneys outweigh the wishes of their clients.”
Gary T. Fye, an expert in the analysis of disputed insurance claims who lives in Nevada, often testifies in insurance cases. Fye, who said he has testified on behalf of policyholders and insurance companies, has provided the courts information on State Farm’s history of destroying and withholding records.
In 1998, Fye wrote in a Florida case
“I have been witnessing document destruction, concealment, and obstruction of discovery by State Farm for many years in connection with my review of internal claim practices documents of the insurer. I have accumulated certain Exhibits which show the company’s goals and objectives for document handling by its employees. The documents show close to 28 years of intentional destruction, concealment and distortion of claim practices records.”
In some cases, company executives did not keep records.
Jeff Marr, the attorney suing State Farm in Oklahoma, took sworn testimony Sept. 6 from Rust. Topics included Rust’s Chairman’s Council, made up of top State Farm executives. The group, which includes the company’s general counsel, meets quarterly.
Marr was fishing for records of those meetings that he could subpoena for his lawsuit.
“Certainly,” Marr asked Rust, “you keep records of the quarterly meetings where the entire Chairman’s Council is present?”
“We have an agenda,” Rust said, “but minutes in that, no.”
“Why not?” Marr asked.
Rust replied, “Never felt a need to.”
Marr later asked, “Are there any written agendas that are available should I choose to request them in the lawsuit?”
“I’m not sure what might be available,” Rust said.
Rust also said policyholders, who essentially own the private mutual company, are not entitled to know what the Chairman’s Council discusses or decides about litigation against State Farm, citing attorney-client privilege.
Marr questioned why the company would withhold information from policyholders, who own State Farm.
“Well, again,” said Rust (who has a law degree), “I’m not an expert in the area, but I think as you find — even if I’m a shareholder in a publicly traded company, there are things that are not — you know, I do not have access to.”
Marr later asked if policyholders have a right to see documents from State Farm’s investigation of Haag.
“No,” Rust said.
“Why not?” Marr asked. “Is it privileged?”
Rust said, “I believe so.”
close to 28 years of intentional destruction, concealment and distortion of claim practices records
KNOW MORE…. These whistle-blower like terminations came on the same day a group of active and former agents
delivered a letter to insurance commissioners across the country informing them of State Farm’s
violations of state insurance regulations, discriminatory policyholder selection criteria, and attempts to
fight the release of zip code data commonly used to determine redlining (see letter below).
A group of active and former State Farm agents earlier presented a letter to the United States Senate
Commerce Committee discussing State Farm’s fraudulent use of medical utilization review companies
designed to lower payments to victims in auto accidents, fraudulent use of after-market auto parts, history
of misrepresenting life insurance policies as investment vehicles, overcharging on homeowner’s
insurance and de facto redlining. A press conference took place in Washington DC on October 29, 1999 ” LOTS OF HISTORY”
where terminated agents Mike Morgan, along with others, made presentations. The letter to the
Commerce Committee was made public at the press conference, which was signed by the other three
terminated agents.
Termination is the standard practice anytime an agent or employee questions deceptive or
anti-competitive behavior at State Farm,” agent spokesman Patrick Woodson said. “The only people who
have breached any duty are the thugs at State Farm management. It is clear they will stop at nothing to
quiet any principled agents.
“Millions of Americans are being abused by State Farm and these agents were trying to make this
company do the right thing,” Woodson said. “These agents have gone to court to stop these practices.
Now, they have gone public to stop continuing policyholder abuses. State Farm management should be
held personally accountable for their actions today and for years of disservice they’ve done State Farm’s
policyholders.”
STATE FARM
CEO: Edward B. Rust Jr. 2007 compensation $11.7 million
HQ: Bloomington, IL
Profits: $5.5 billion (2007)
Assets: $181.4 billion70
As the biggest property casualty insurance company in America, State Farm has become notorious for its deny and delay tactics. In many cases, the company has gone to extreme lengths to avoid paying claims, including forging signatures on earthquake waivers after the deadly Northridge earthquake, and altering engineering reports regarding damage after Hurricane Katrina.
Hurricane Katrina showed State Farm at its worst. One of the deadliest natural disasters in U.S. history, Hurricane Katrina made landfall on August 29, 2005, near Buras, Louisiana. The storm killed nearly 1,600 people and caused $135 billion in damages.71
One of the legacies of the storm was the widespread dissatisfaction with the response of State Farm and other insurance companies. State Farm would later claim it had settled 99 percent of its cases, but regulators criticized the company for using misleading statistics.72 The company claimed that any house that had what they considered water damage did not constitute a claim in the first place.73 In fact, the Louisiana Department of Insurance reported that it was contacted by 9,000 consumers seeking help resolving disputes with their insurance companies.74
State Farm denied the claims of the Nguyen family of Mississippi, who lost their home in Hurricane Katrina. State Farm’s own engineers concluded that the damage was caused by wind and even cited eyewitnesses who saw another house picked up by the wind and thrown into the Nguyens’ home. State Farm, however, hired another engineering firm to come to a different conclusion and then denied the claim, saying the damage was caused by flooding. 75 State Farm also denied the claims of Dean Barras in Louisiana. Barras’s home was exposed to the elements for two weeks, but State Farm’s response was “the chimney was not built properly.”76
Bob Kochran, CEO of an engineering firm assessing Katrina damage for State Farm, said that he was asked to alter reports with which the company did not agree. In order to keep the State Farm contract, Kochran agreed to tell his engineers to “re-evaluate each of our assignments.” One of the engineers, Randy Down, responded in an email, “I have a serious concern about the ethics of this whole matter. I really question the ethics of someone who wants to fire us simply because our conclusions don’t match theirs.” State Farm’s attempt to unduly influence the engineers was exposed during litigation in Jackson, Mississippi.77
One such angry policyholder was United States Senator Trent Lott. Lott, who had long counted on insurance companies for support, became an industry critic after his beachfront house was destroyed by Hurricane Katrina and his subsequent claim was denied by State Farm. Lott eventually settled with State Farm, but went on to sponsor legislation requiring insurers to provide “plain English” summaries of what their policies did and did not cover. Hurricane Katrina had highlighted insurance company use of such things as anti-concurrent clauses, which led policyholders into believing they were covered from the risks of hurricanes, when in fact subsequent flooding might wipe out any chance of a claim being paid. “They don’t want you to know what you really have covered,” said Lott.78
In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims, and within a few months had paid nearly $30 million in additional settlements. 79When a grand jury later issued subpoenas probing new claims against State Farm, the company sued Mississippi Attorney General Jim Hood. Hood decried the lawsuit, saying the company’s agreement to reopen claims had never been intended as “blanket immunity” from future probes.80
Like Allstate, State Farm used consulting giant McKinsey & Co. The McKinsey concept involves cutting spending on claims payments to boost profits. Agents steeped in the McKinsey way speak of the “three D’s”- deny the claim, delay the payment, and then do anything to defend against a lawsuit.
In 1994, the Northridge earthquake in California killed 57 people, injured 9,000, and caused an estimated $33.8 billion in damage. It was the costliest earthquake in U.S. history, and insurance companies such as State Farm did everything they could to avoid having to pay for it. After it hit, a State Farm employee testified that company officials forged signatures on earthquake waivers to avoid paying quake-related claims and then withheld evidence when the company was sued. State Farm and other insurers accused of mishandling Northridge claims were fined over $3 billion in penalties; however, State Farm never actually paid the fines. Instead, an insurance department whistleblower would eventually reveal that the insurers donated $12 million to two non-profit foundations created by insurance commissioner Chuck Quackenbush in what amounted to little more than a bribe.81
In 1999, a series of powerful tornadoes killed 44 people in Oklahoma and caused $1.8 billion in damages. Homeowners brought a class-action suit against State Farm, alleging the company had tried to undervalue damage to homes or claim damage was caused by other factors such as faulty construction. A jury eventually ruled that State Farm acted “recklessly” and “with malice” and disregarded its duty to policyholders. The firm that State Farm used to allegedly undervalue damage was Haag Engineering-the same firm that would be accused of mishandling Katrina claims six years later.82
In 1999, despite Oklahoma tornado claims, State Farm earned $1.03 billion in profits after taxes.83 In 2005, despite Hurricane Katrina, State Farm turned a $3.24 billion profit. The following year, without a major catastrophe, profits increased to $5.32 billion, for which CEO Ed Rust received an 82 percent pay raise.84 In fact, since State Farm hired McKinsey, the company has seen profits more than double from its 1990s level to the $5.4 billion it made in 2007.
Following the same tactic as Allstate, State Farm has embarked upon a campaign of market withdrawals and non-renewals in the aftermath of Katrina. State Farm has stopped writing new homeowners policies in Mississippi and Florida, and in the latter state non-renewed a further 75,000 policyholders.85 Just as they did in the aftermath of Katrina, State Farm stopped writing new homeowner policies.86
While State Farm will do anything to fight a claim once it has been taken to court, the company has never been shy about using the courts to its own advantage, even when it has to first stack the deck. In the 2004 Illinois Supreme Court election, one justice-Lloyd Karmeier- received huge amounts from State Farm employees, lawyers, and groups to which the insurer belonged. Karmeier won the election and soon after cast a crucial vote reversing a $9 billion judgment against State Farm.87
One example is Ethel Adams, a 60-year-old woman left in a coma and seriously injured after a multi-vehicle crash in Washington State. Her insurance company, Farmers, decided the other driver had acted intentionally and denied her claim, contending that an intentional act is not an accident. Another example is Debra Potter, who for years sold Unum’s disability policies until she herself became disabled and had to stop working. All along, Potter thought she was helping people protect their future, but when her own time of need came, she was told her multiple sclerosis was “self reported” and her claim denied-by Unum, the very company whose policies she had sold.
In cases like these, and countless others, the name of the game is deny, delay, defend-do anything, in fact, to avoid paying claims. For companies like Allstate, there are corporate training manuals explaining how to avoid payments, portable fridges awarded to adjusters who deny the most claims, and pizza for parties to shred documents.
That’s some serious research there guys! I guess 1st off is that the AIG subsidiaries have already bankrupted the American taxpayer, along with whomever else we gave a boat load of money to. Yes I’m pissed off! but I’m sick of talking about it.
An insurance company denied a claim!?!!! that’s weird? you have a thousand articles about this? You don’t think there are thousands of other articles showing carriers you broker through that have denied their claims? My statement is that I think the majority of State Farm people are good people. I’ll change that. Of all the State Farm people I’ve meet over the years the majority of them were genuine good folks. Do they drink the cool aid? Yes with out a doubt.
Thanks for the articles, you made your point. Yes big insurers are going to be suspect, fraudulent and under heavy scrutiny. It’s a good thing we have so many people like yourselves out there to keep the public suspicious.
REALY DO NOT CARE WHAT THE STORY IS ABOUT ..
CALL YOURSELF STATE FARM
Comment:
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
Was this about State Farm or AIG? How is Sate FArm Connected to this article? Are they positioned to buy part of AIG?
Or did someone wander off point?
The assets of the insurance companies are protected by the insurance departments anyway. The assets are there to pay claims to the policyholders. I don’t think that they could be touched even if AIU Holdings stayed with AIG. But I do think that the pipeline from our treasury to the counterparties should be cut off. AIG may owe them money but our government doesn’t.