From Jim Mooney's Insurance Crime Outline
From kana@fcol.com Thu Oct 12 23:43:27 2000
Date: Wed, 11 Oct 2000 13:30:06 -0400
From: The Insurer Crime Outline
To: bhammel@graham.main.nc.us
Subject: The Insurer Crime Outline
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We Urge You to Forward This Newsletter to Anyone Who Might Benefit
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The Insurer Crime Outline
eXposing America's Bandit Industry
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Please visit our site at http://www.insurancejustice.com/
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"Defiance to Tyrants is Obedience to God."
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[From James Mathis]
STATE FARM CLAIM SUPERINTENDENT TESTIFIES TO THEIR CORRUPTION
To whom it may concern:
That I am a former employee of State Farm Insurance, having been
an employee from January 1987 through November 30, 1994. During
the course of my tenure with State Farm Insurance I rose through
the ranks from my initial position as Claims Representative, to eventually
management positions including Superintendent of Claims having responsibility
for claims supervisors, representatives, estimators, expeditors and
support staff who handled all the claims for specific geographic
areas, including but not limited to the States of Washington, Idaho,
Montana, Oregon, California and Alaska. In my position as Claims
Superintendent, I had responsibility to interview new employee candidates,
hire and train new candidates as well as employees already working
for State Farm and supervise their workload throughout the workday.
As a Claims Superintendent, I was also responsible for making decisions
on coverage, liability, value, procedures and processes. I was also
responsible for supervision of the defense of lawsuits against the
company involving bad faith in the handling of claims. UIM is an
acronym for uninsured and underinsured coverage, PIP is the acronym
for personal injury protection and MPC is the acronym for medical
pay coverage. All involve first party benefits owed to the insured
for injuries under the State Farm Policies.
As a Claims Superintendent, I had responsibility for the training
of State Farm personnel in the handling of UIM claims. This training
followed the specific format as outlined in the "Education and Training
Guideline" provided by State Farm Corporate. I adhered to the practices
and processes for handling all claims as found in the "General Claims
Memo" manual, "Superintendent's Manual" and "Claims Procedural Guide".
Each of these manuals were provided to me from State Farm Corporate.
I was trained in the use and application of "PP&R" as a means of
evaluation of performance for State Farm Personnel. I am familiar
with the use of "Quarterly Reports" as a substitute for "PP&R"s where
State Farm Management are concerned.
Throughout the course of my tenure with State Farm, I had the opportunity
to travel to different states and review claim operations in those
states. Ultimately, I was asked to create and head up a centralized
unit for the PIP and MPC claims in the State of Washington consolidating
all the PIP and MPC claims handled throughout the State of Washington
into one area. This included the out of state policies being serviced
in Washington. As part of my duties I also had occasion to research
how State Farm conducted claims handling procedures and practices
uniformly all across the country.
I received considerable training during my tenure at State Farm.
When I first started as a Claims Representative I went to several
workshops before I had the opportunity to go back to a formalized
claims school at the State Farm home office in Bloomington, Illinois.
I attended a three-week claims school at the home office. I continually
participated in other training workshops and seminars through the
formal training program outlined in the State Farm education and
training manuals. I later attended State Farm Claims Management
school, also at the home office in Bloomington, Illinois, where I
was taught the State Farm philosophy and State Farm management tools.
After attending the home office management school, I then went through
a regional office management program for State Farm. Throughout
my tenure, I also participated in workshops and seminars to supplement
my training. I was also responsible for training other employees
through similar workshops and seminars. I am aware that State Farm's
policies and procedures for adjustment and handling of claims are
implemented on a national, regional and local level. All policies
and procedures originate from the State Farm home office. During
the course of my tenure with State Farm, especially as a Superintendent,
I would receive through general claims memoranda, supervisor's manual,
claims procedures guide, and through other publications such as "Obiter
Dictum", information concerning the procedures and practices for
the handling of claims from the corporate home office.
At the regional level, different workshops and programs would be
conducted for State Farm Management. There were managers' workshops
and managers' meetings we would attend regularly. There were formalized
programs and newly hired employee orientation required through regional
office. Local claims offices were not permitted to adopt policies
or procedures for the handling of claims that were contrary to national
or regional policies. There was a precise program for training that
was disseminated from State Farm Corporate Headquarters to local
management which we were strictly required to follow.
As a Claims Superintendent, I had responsibility for the training
of State Farm personnel in the handling of UIM claims. This training
followed the specific format as outlined in the "Education and Training
Guide" provided by State Farm Corporate. I adhered to the practices
and processes for handling all claims as found in the "General Claims
Memo" manual, "Superintendent 's Manual" and "Claims Procedural Guide".
Each of these were provided to me from State Farm Corporate. I
am aware there was a 13-week pre-claims school program as well as
a 13-week post-claims school program. Adjusters were required to
complete of these programs and obtain verification of completion
from the immediate superintendent, divisional superintendent and
the divisional manager. New employees were required to complete
the Basic Claims Course. I was also requested to provide and train
all employees in Washington in the State Farm Corporate Program,
"Negotiation Skills for the Claims Professional". This was a formatted
course in the instruction of negotiating claims for first and third
parties. It emphasized the philosophy of negotiating from a position
of strength. It utilized the fact that, as claims people we hold
the power in our ability to write the check. This is even more evident
in the handling of UIM claims. The philosophy was premised on the
understanding that insureds naturally have a reluctance to engage
as an adversary with their own insurance company. The implication
that the more paid on this particular claim results in the higher
the cost of insurance for all policyholders is more significant in
UIM claims. Insureds have a natural trust in their own insurance
company to deal with them with the highest good faith actions.
State Farm adjusters and management personnel regularly rely on and
refer to the claims manuals provided by home office. There were
also additional training tools available at Home Office and listed
in the "Claims Video Library". I am aware that a "Claims Supervision
Manual" was used for instruction and reference of all employees.
These materials would refer to the handling of claims, coverages
(including UIM), liability and injuries. The manuals were not unique
to either Washington or the Northwest Region, but to my knowledge
were used throughout the nation. Other publications such as "Obiter
Dictum" and "MediClaims" were also suggested reading for all employees
involved in the handling of automobile accidents, injuries, treatment,
treatment modalities, reviewing processes, and anything that had
to do with injury claims. Independent Medical Examinations and Paper
Reviews were two additional tools expressly encouraged to be used
in order to reduce the average paid amount of first and third party
claims.
I was trained in the use and application of "PP&R" as a means of
evaluation of performance for State Farm Personnel. I am familiar
with the use of "Quarterly Reports" as a substitute for "PP&R"s where
State Farm Management are concerned. During the course of my tenure
at State Farm, I was aware that job performance and promotional opportunities
would be evaluated in part based upon statistical performances produced
both in average paid claims as well as the average percentage of
claims pending. Such evaluations would also encompass adherence
to the philosophies of State Farm. Management was given specific
goals and objectives in the form of quarterly reports which would
include these average claim values and pendings. In my experience
with State Farm, regular circulars and reports were put out by each
region, including each unit's performance on claims in the different
coverages in terms of both average paid and average pendings. These
reports were used as a motivational tool to encourage the use of
tools such as IME's and paper reviews for medical claims both first
and third party.
I became intimately involved with cost containment measures implemented
by State Farm during my tenure with the company. I am aware there
are numerous manuals, guidelines and memoranda that were regularly
disseminated among State Farm claims centers uniformly throughout
the nation. I am aware of the existence of specific manuals concerning
the settlement of liability and underinsured/uninsured claims and
training programs that include slides and videotape presentations.
I am familiar with State Farm's procedures and practices in determining
its goals in each of the coverages provided within the State Farm
policy including UIM. These goals were determined by State Farm
Corporate with the recommendations from each of the Regional Vice
Presidents. The goals were then conveyed to the Claims Managers,
Division Managers and Claims Superintendents through the use of "Quarterly
Reports". Ultimately, each claims handler was held accountable to
these goals. Goals were established for an entire year. At the
end of each quarter, each superintendent would report the actual
statistical performances in relation to these goals. Naturally, the
expectation was to meet or exceed the goal in each category. In my
experience with State Farm, these goals were always below the actual
results for the previous year. I am familiar with goals being established
for UIM average severity and UIM average pendings. The actual results
for each State Farm unit, section, region and state would be published
and distributed on a monthly basis to all State Farm Management.
It is through this process, State Farm establishes the environment
to aggressively reduce each claim so as to be recognized by a superior
for merit increases and/or promotion. It is a driving force within
each State Farm employee to reduce their respective average paid
claims and average pending percentages.
It is my experience that the expectation of State Farm Corporate
was to attempt to pay as little as possible in the settlement of
all UIM claims. Their motto "We pay every dollar we owe, but not
one penny more" is typical of the underlying attitude throughout
State Farm personnel. It was significant to realize a moderate savings
on each claim settled. State Farm is the largest personal lines
auto insurer in the world. A savings of one or two thousand dollars
on each UIM claim settled would realize a national yearly profit
in the billions. I am familiar with State Farm's philosophy, that
the occasional incidental loss it experiences by an adverse judgment
against it does not outweigh the economic benefits of continuing
with its philosophy and claims handling policies in the same fashion
across the country. Until such time that a judgment matches or exceeds
the continuing annual benefits of this practice, State Farm will
not change.
It should be a "given" that the victims of accidents need the benefit
of their insurance more than at any other time. Another "given"
is the insured victims are emotionally and financially vulnerable.
It is hard to imagine more economically abusive conduct than a corporation
using programs to seek to exploit the claim transaction and to delay
or attempt to intimidate by refusing to honor in good faith the contract
with their insureds so as to enrich the insurer. State Farm's incentive
schemes, PP&R and Quarterly Reports, for claim handlers and management,
do exactly that.
I have attached my resume as foundation for the above statement.
RESUME
Always,
James Mathis
Email: jj2all@aol.com
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Second Letter From James
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Here is an interesting issue State Farm would not like the public
to be aware of.
Have you been getting all the information when presenting a third
party claim or a UIM/UM claim to State Farm? Do you honestly think
so? I am aware of the policy of State Farm directing it's representatives,
management and defense counsels to not divulge any information which
is not specifically requested in interrogatories. Therefore, there
were those instances in my experience where the umbrella policy existed
but was not divulged. This occurred most often when it had been
determined by State Farm the claim was within the limits of the underlying
liability coverage or UIM/UM coverage.
I was just contacted by Mrs. B. She is a State Farm insured and
presently has a claim in suit. She has brought the suit against
the Allstate liable party as well as the driver of her State Farm
car. Both parties are contributory to the negligence of the accident.
The driver of the car she was in was her husband. They carry auto
liability coverage with State Farm as well as an umbrella policy.
Mrs. B states her damages exceed five million. The Allstate car
was being driven by someone other than the owner. Both the owner
of the car and the driver have separate Allstate policies. Their
combined limits according to Mrs. Bernakow are $350,000.00. State
Farm had two IME's performed on Mrs. B while handling her PIP claim.
Both confirmed the accident had caused fibromyalgia to Mrs. B.
She is a corporate lawyer and has been unable to work since the accident
date in 1994. Since, State Farm's own IME's confirmed the accident
related fibromyalgia, they would be aware her claim would exceed
the limits of the underlying carrier. They have yet to inform her
of the umbrella policy and it's availability to her for any claim
exceeding her husband's limits of coverage under the liability portion
of their State Farm policy. They have failed to inform her of ability
to access her UIM coverage if the claim exceeds the Allstate' s policies.
They have failed to protect her husband from an excess judgement
which she may have should the lawsuit continue to judgement and exceed
the limits of the two Allstate policies as well as her husband's
liability policy. They have failed to inform her since she had two
cars insured with State Farm at the time of the accident, both with
UIM/UM coverage on them, that in fact she may be able to stack or
float the policies should the claim exceed the Allstate policies
and her husband's State Farm Policy.
Mrs. B was unaware of these issues until she called me on Monday
of last week. I walked her through the different policies she had,
Allstate had and her husband had at the time of the accident. I
also suggested she send a certified letter to State Farm requesting
they divulge all policies and coverages, all declaration pages (including
Homeowners) and also demand the limits of her UIM/UM and accessible
umbrella policy immediately.
The umbrella policy for State Farm is handled by the Fire Company
and is governed by the Operational Guide rather than the Claim Procedural
Guide. The policy is not indicated as coverage available on the ACR
when the claim is opened. Therefore, the auto handler for the claim
is unaware of it's existence until he or she requests the information.
State Farm specifically designed the program for their ACR or ECF
to function in this manner so that the umbrella policy information
would be readily available to the handling any claim. State Farm
in it's guidelines for discovery in the handling of a suit, cautions
that only the specific information requested should be delivered
to the plaintiff. The interrogatories should be carefully read so
as to exclude the divulgence of information beyond the scope of the
request. For example, if a declaration page is requested for the
auto coverages available for a particular loss is requested, it would
be reasonable to not divulge the existence of the umbrella policy
or it's declaration page. In this manner, the additional coverage
is kept from the plaintiff and thereby controlling the claim. It
will of course be available should the award or judgement exceed
the underlying coverage.
State Farm's umbrella policy is unique in that in can be accessed
by the UIM or UM coverage if the insured is aware he/she may purchase
the amendment allowing this benefit. The cost is minimal compared
to the benefit it extends to the insured. Agents for State Farm
are not encouraged to sell this amendment. Claims handlers rarely
are aware of the amendment. Even most management are ignorant to
it's existence. The significance of this additional coverage is
material when a UIM or UM claim would exceed the limits available
to the insured. Also, the umbrella policy does cover some of the
claims which would have been declined under the UIM and UM language.
An example where the umbrella coverage might be more significant
is when a fatality occurs. Especially, if this is a UIM or UM claim.
The language of the State Farm policy states the coverage will apply
to damages a person may legally collect as a result of an uninsured
or underinsured accident. Once a representative of an estate is designated,
that person may legally collect the coverage available under UIM
or UM coverage of his/her own policy. Should that person have the
amendment allowing the umbrella policy to be accessed by the underlying
UIM or UM coverage in the auto policy, they would have both limits
available to satisfy the claim. Of course, each state has different
wrongful death statutes and what may be considered for damages. But,
in the event the damages would exceed the UIM or UM limits, this
additional coverage would be available. This very issue was determined
by claim committee in 1990 by State Farm General Claims in their
decision. I am personally aware of this as I did the claim committee
for that claim.
A note of interest is that most states have different statutes for
UIM or UM claims. In Washington for example, the statute is six
years after the date of declination. If State Farm did not advise
the insured of the applicable coverage, such as an available umbrella
policy which could be accessed for a UIM or UM claim, then the insured
would not have presented a claim under that coverage. Therefore,
the claim would never have been declined. So, in Washington, the
claim would still not have run it's statute of limitations. State
Farm discussed this very issue in the decision to pay the claim of
the representative of the estate in the suit brought against them
which resulted in the aforementioned claim committee. In that lawsuit
the representative of the estate was the nephew of a man not insured
with State Farm who was killed in an uninsured auto accident. The
uncle was not a resident relative either. However, the State Farm
insured had UIM and UM coverage available on his own State Farm policy.
As a final point, consider would an agent of State Farm have a fiduciary
responsibility to inform an insurer interested in acquiring an umbrella
policy to protect their assets that this option exists. It would
be reasonable to assume it would be where by statute it is required
to offer identical coverage under UIM/UM as an insured purchases
under their liability coverage. Where that particular statute doesn't
exist, there would still be the fiduciary responsibility of the agent
to offer adequate coverage which would be obviously sought by an
insured had the insured been made aware of it. Therefore, it is
my opinion every insured who possesses or has possessed an umbrella
policy and was not afforded the opportunity to access it when either
a UIM/UM claim of such magnitude so as to exceed their underlying
limits, would have a claim with the agent's E&O carrier.
I hope this information is useful to those who have had a claim or
will have a claim of this type.
Sincerely
James Mathis
Email: jj2all@aol.com
==============================
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Created: October 12, 2000
Last Updated: October 12, 2000