Snake Killer

Jurors in Zilisch's case believed Mendoza. They told attorneys they wanted to give her $100 million so that State Farm would hear about their verdict. But the group feared Zilisch would likely have to wait through years of appeals to see any of that. Jurors agreed on the $1 million amount ($460,000 in compensatory and $540,000 in punitive damages) -- a token amount for the huge company -- hoping the insurer would simply write her a check.

The jurors' hopes were misplaced.

The teenager who crippled Kim Zilisch and killed her fiancé was out of prison and starting a new life after six months.

But 10 years after the crash, after arbitration in her favor, the jury trial in which she prevailed, after the Arizona Court of Appeals and the state Supreme Court rendered decisions on her side, Zilisch still is waiting for State Farm, her own insurance company, to settle up with her.

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Attorney Cal Thur confirms a report that some lawyers have a nasty nickname for State Farm: They call it "Snake Farm."

Company officials have steadfastly denied any wrongdoing over the years, claiming the firm's primary goal is to treat its policyholders fairly and pay what is owed. But those who have tangled with the company disagree. The "good neighbor" can be downright vicious, they believe.

Thur claims State Farm's practices are "among the most egregious in the industry." And he says State Farm's behavior has a trickle-down effect. Because it is the biggest by far, other insurance companies tend to mimic its practices to remain competitive, he says.

Ina De Long, a California insurance consultant who worked for State Farm for nearly 25 years before quitting in protest of what she considered deceitful policies, believes her former employer is, indeed, the greatest offender in the business.

"State Farm is the very, very best at being bad," she says. For the last 10 years, in addition to working on consumer education and insurance reform, De Long has traveled the country testifying as a witness against insurance companies. "About 80 percent of the trials are against State Farm," she says. "In most of the litigation, the really despicable stuff out there is done by State Farm."

The attorneys who take on State Farm are a special breed. They readily admit that their numbers are few because it just takes too much time and money to fight State Farm. And because the company has a reputation -- documented in court records -- for destroying evidence and asking that cases be sealed, those attorneys and others dedicated to insurance reform have little in the way of public record to document patterns of abuse.

But a review by New Times of numerous cases across the country found a litany of common allegations against State Farm lodged by its own policyholders. The company is routinely accused of making low settlement offers or dragging out cases just to wear down its own clients. Critics decry State Farm's practice of incorporating generic or used parts in auto repair estimates to drive down the costs of claims. And questions have begun to surface over the company's use of what those in the industry call a "paper review" process in which an outside firm is asked to examine medical documents to make sure a person's injury is really related to an accident. Skeptics believe -- and one judge has found -- that State Farm employs that process as a method to routinely cut or refuse payment of medical bills.

There is a universal theme to such cases: State Farm uses various techniques to drive down the amount of claims the company pays out to its own policyholders.

Last year, a record jury verdict resulted in a $1.2 billion judgment against State Farm in an Illinois class-action lawsuit after the jury found the company was defrauding its clients by utilizing generic parts -- made by someone other than the original auto manufacturer --in its repairs. Plaintiffs had alleged, and a judge found, that the cheaper, generic parts are substandard and not as safe as original parts.

The jury and judge ruled the parts -- which are sometimes used without the car owners' knowledge -- are not of "like kind and quality" to restore a damaged vehicle to its "pre-loss condition" -- promises made in State Farm's policies.

An earlier Consumer Reports investigation had found that generic parts are inferior to name-brand parts in both fit and protection. Researchers tested fenders and bumpers in their study, but noted one instance in which one car's hood suddenly flew off while its driver was passing another vehicle. The hood was an example of "offshore tin" -- a repair shop nickname for inferior foreign-made parts, the magazine noted.

The company has appealed the verdict (which includes $730 million in punitive damages), and stands by its use of generic -- sometimes called "after market" -- parts.

Company spokesperson Ana Compain-Romero says the ruling was "a major setback for State Farm policyholders and all consumers" that will serve to drive up rates if left to stand. The company has quit using generic parts pending the appeal, but says it remains "confident of the quality of these parts." And it says it will fix or replace for free any parts that are causing any problems.

An emerging area of concern focuses upon State Farm's review of medical documents. The insurance industry giant has drawn attention to its practice of turning medical paperwork over to an outside company for fraud review. Critics charge the process is a sham, and, in a recent ruling, an Idaho judge labeled one such subcontractor "bogus," which, in turn, sparked the Arizona Department of Insurance to begin an investigation into State Farm this past spring. Although there were no similar complaints about State Farm in Arizona this year, the state agency said the findings in the Idaho case were serious enough to warrant a local probe.

State Farm says it contracts with outside companies in a small percentage of cases in which the claim and medical bills seems disproportionate to the injury received. It says the second layer of scrutiny -- just a review of documents by a physician -- is useful in helping to detect insurance fraud.

But after Dateline NBC reported this summer that two medical consulting companies were used by State Farm only to cut -- not truly evaluate -- medical claims, a national investigation into the company's medical document review practice began. Arizona became one of 11 states lending an investigator to that ongoing probe.

Other recent cases have yielded jury verdicts and court rulings ripping State Farm for its treatment of some of its own policyholders.

In Campbell v. State Farm, an elderly Utah man was led to believe by the company that he would prevail in the civil trial stemming from a 1981 fatal car accident. Records show State Farm refused to settle the case for Campbell's $50,000 policy limits, destroyed evidence that would show Campbell's real liability and told Campbell to "put a 'for sale' sign on your place" when a jury returned with a $254,000 verdict against him.

A subsequent bad-faith trial in 1996 resulted in a $145 million punitive and $2.6 million compensatory damages verdict against State Farm in the Campbell case. In a ruling two years later, the judge said he would cut the punitive damages to $25 million. He also found evidence that not only had State Farm hurt Campbell, now aged 82, but that nationally, "a considerable percentage of policyholders are victimized by a wrongful denial of benefits, oftentimes when these policyholders are the most vulnerable." The judge said there was "ample evidence" that the company made a "deliberate and wrongful effort to enhance corporate profits" at the expense of policyholders and that for the past 20 years, State Farm had "resorted to a variety of wrongful means to attempt to evade detection of, and liability for, its unlawful profit scheme."

That case is still on appeal, underscoring what former State Farm employee Ina De Long contends is the company's purposeful practice of dragging cases out rather than pay what it owes. "Mr. Campbell is very old, very sick and he's spent the last 20 years of his life fighting State Farm," she says.

In Castillo v. State Farm, a 1991 appellate court case from California, a jury ordered the company to pay $250,000 in compensatory and $6 million in punitive damages for making consistently low offers to a California policyholder who requested her $15,000 policy limits for injuries in a rear-end car accident. There was evidence Castillo was targeted because she was a minority and that State Farm had asked a doctor to change his report because it supported Castillo's claims of permanent injuries.

In another California case, Gourley v. State Farm, an appellate court found in 1990 the company intentionally made "grossly insufficient" settlement offers, and cited "substantial evidence" that State Farm used a "stonewall" or "see you in court" attitude. Gourley won a bad-faith judgment of nearly $16,000 in compensatory and $1.5 million in punitive damages.