Snake Killer

Among the business practices uncovered:

The company routinely tried to "lowball" its own policyholders who filed claims with them -- particularly those who were most vulnerable -- by offering them settlement amounts less than what the claims were actually worth.

For decades State Farm rewarded agents who were successful at this, even sponsoring contests to see who could most effectively chisel claims filed by the company's own clients.

While it is impossible to tell how many claimants simply accept a payment that is less than they are entitled to, those who dare to challenge State Farm find their cases intentionally dragged out in an effort to wear them down.

And anyone brave enough to stand up to the company in court faces a brawny legal department notorious for its oppressive tactics.

State Farm has denied any wrongdoing in Zilisch's case, says it always pays what is owed on claims and, despite internal documents to the contrary, denies ever rewarding its employees for arbitrarily cutting claim payments.

"We wouldn't be where we are today," says company spokesperson Ana Compain-Romero, "if we had shoddy business practices."

Zilisch would beg to disagree. And after proving that State Farm had mistreated her in court, Zilisch learned what other "successful" litigants across the country have found: that a jury verdict against State Farm is a hollow victory, only setting the stage for lengthy appeals.

Furthermore, a large punitive-damage judgment -- intended to punish the company in hopes of deterring such future conduct -- doesn't necessarily make any difference to State Farm.

Perhaps the most remarkable finding of the New Times probe is that a review of court testimony and judicial rulings in several cases suggests that State Farm is such an industry giant that it is, for all practical purposes, beyond the reach of judge and jury.

Plaintiffs' lawyers routinely argue for punitive damages as a way to "send a message" to defendants that certain types of behavior simply are not acceptable. But in State Farm cases, multimillion-dollar sums jurors think will lead to reforms are meaningless to a firm that has 67 million policies in effect and tens of billions of dollars in reserve.

A State Farm administrator testified in Zilisch's case that he would not bother to notify his supervisors of damages under $100 million, an almost unheard-of figure in punitive judgments.

In one case, an Idaho judge who found State Farm's treatment of its insured "outrageous, intentional, harmful and an extreme deviation from reasonable conduct" countered the company's protests about a $9.5 million punitive-damage award by noting that it amounted to less than two days' profit.

The judge said the award "could be recovered by lunchtime on the second day."

While some of State Farm's most questionable practices have been in place for decades, court records show it is only recently that judges, juries and regulatory authorities have begun to call the firm on its methods. A Fortune 500 company also named one of the most admired in the industry, State Farm is appealing two record-setting punitive-damage verdicts while its business practices are being investigated by insurance commissioners across the nation. Arizona's regulators are taking an active role in the probe.

Zilisch had no inkling of State Farm's business practices when she was involved in the accident 10 years ago. But what she learned at her trial, she says, "made your jaw drop."

Zilisch's case added insult to injury, literally. She had lost her fiancé and the use of one eye. She had every reason to expect that State Farm -- a company she had always trusted since her early days growing up 30 miles from company headquarters in Bloomington, Illinois -- would pay the benefits she deserved. With a $100,000 underinsured motorist policy in addition to traditional coverage, Zilisch had purchased far more than the legally required auto insurance. She did that just to be safe and she always paid her premiums on time.

In the beginning, as the months dragged on after the accident while State Farm investigated her claim, Zilisch thought the delays were merely because hers was an extra-complicated case. She didn't really have a lot of time to spend analyzing the situation. Between repeated medical examinations of her eye, physical therapy for other injuries, counseling for her emotional trauma and trying -- sometimes unsuccessfully -- to hold herself together at work, the young woman had no stamina for an audit of her insurance company. Besides, Zilisch had a lawyer watching out for her.

A Tempe police officer recommended to her parents just after the accident that she hire an attorney. Zilisch asked around at her church and found Gene Gulinson, who helped her secure a $145,000 settlement from the drag-racers' insurance companies. But State Farm balked at paying her own $100,000 policy limits, instead offering her various amounts ranging from nothing to $55,000. (An arbitration panel later valued her claim at nearly $400,000 to compensate Zilisch for her injuries, medical bills, loss of earning capacity and the very real diminishment of her life's potential because of her crippled eye and the death of her fiancé.)

State Farm sent her to what appeared to be a never-ending parade of "new" claims investigators while she continued to see doctors. The fifth physician she visited, a specialist in San Francisco, had examined Zilisch and concluded that, yes, the injury was permanent and that no surgery would help it. But while that doctor had talked with State Farm claims investigators on the telephone, he didn't prepare a full written report on the examination. The Arizona Supreme Court later chastised State Farm for delaying the evaluation and settlement of the claim for 10 months while it insisted on seeing that doctor's written report. The court noted that it had written reports from four other doctors agreeing on the permanency of the injury as well as the verbal agreement from the California doctor.