"State Farm's insistence on seeing a non-existent report was a pretext to drag out the claims process," justices wrote.
During the lengthy negotiations with State Farm, Zilisch says her attorney began to mutter things like "this is typical."
State Farm insisted Betty Olson's leased Cadillac was fixable, even though the front end was nearly sheared off and the repair bill came to $31,000.
Jurors said State Farm should pay $6 million for refusing to declare this Cadillac a total loss.
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Gulinson says he believed Zilisch's case clearly should have been settled early on for the policy limits. "They were attempting to find excuses not to pay for it," he says.
Zilisch finally realized that there was nothing unusual or complex about her case. She simply was being jacked around so State Farm could save money -- in fact, an insignificant amount for the behemoth company.
"I felt betrayed," she says. "My insurance company is supposed to be there for me. What happens to those 'good neighbors' when you have a fire or you've been in an accident? They beat you up. You feel like you're a victim of your own insurance company."
More than two years after the accident, faced with Zilisch's unrelenting resolve, State Farm finally wrote a check for $100,000. But a higher court later ruled that payment didn't excuse the company's behavior.
Hoping to make State Farm accountable for putting Zilisch through the wringer, Gulinson referred her to Cal Thur, a Scottsdale attorney who has spent much of his career fighting insurance companies. He specializes in "bad faith" cases, litigation which seeks to prove companies have intentionally treated policyholders unfairly, breaching their contractual promise to look after clients.
It was Thur who in 1981 tried the first successful bad-faith case in Arizona in which an insurance company was found to have purposely mistreated its own policyholder. (Before that, Arizona courts didn't recognize that such a thing could occur -- that an insurance company could intentionally abuse its own client.) In nearly 20 years of specializing in nothing but bad-faith insurance cases, Thur has taken 30 cases to trial. Six were against State Farm, more than any other single insurance company. He won five of those.
Thur, who worked for two years as a claims adjuster for Fireman's Fund after moving to Arizona in 1959, has earned a reputation as the go-to guy when other attorneys believe they have taken an insurance dispute as far as they can. And many people -- both consumers and attorneys -- call his office and ask for help with complaints against insurance companies.
"We can't handle all the calls we get," he says.
Taking a bad-faith case to trial involves an incredible amount of preparation. And, Thur says, an attorney can only handle one or two State Farm bad-faith cases at a time because the company's lawyers deliberately tie you up with so much legal paperwork, you can't do much else.
A State Farm lawyer once described this as a "mad dog defense" during a "Trial Preparation Seminar" held at a divisional claims superintendents' conference at the home office. In the 1986 training video, Guy Kornblum, described as the company's "top guy," advised going on the offensive right after being sued.
"And we keep plaintiffs tied up in law and motions for months," he said. "Now it's the old mad dog defense tactic, but it works."
Today, State Farm denies employing such tactics, but says the company does vigorously defend cases when it feels it must to prevent frivolous lawsuits.
Zilisch's lawsuit was filed on April 7, 1993. Her case went to trial three years later.
In court, Zilisch listened to former and current State Farm employees describe how the company bullied the "weakest of the herd," inviting disgruntled elderly or female clients to challenge them in court because State Farm assumed it could overpower them. She heard testimony that showed the company had a policy of stringing policyholders along, offering them settlements lower than what they deserved, and rewarding employees who could pay out the lowest claims by finagling auto repair estimates.
Then, testimony showed, if those policyholders dared to challenge State Farm, they faced the "mad dog" defense, intended to wear them down with legal wranglings.
In March, the Arizona Supreme Court found in Zilisch's case there was evidence that "State Farm engaged in a deliberate practice of underpaying claims nationwide," that the company set arbitrary claim payment goals for its personnel and rewarded them for reaching those goals so it could have "the most profitable claims service in the industry." The court noted evidence that the company subjected Zilisch to unreasonable delays, made her an "outrageous" settlement offer of $55,000 and treated her in a way "consistent with the way it did business across the country."
The justices said the fact that State Farm ultimately paid Zilisch her $100,000 policy limits is not an absolute defense to the bad-faith claim:
"The carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in paying a legitimate claim. . . . It should not force an insured to go through needless adversarial hoops to achieve its rights under the policy. It cannot lowball claims or delay claims hoping that the insured will settle for less."
Despite the Supreme Court decision, the case was not resolved. As Zilisch learned at her trial, the company has an arrogant attitude toward such rulings. Verdicts that jurors might deem big enough to issue a wake-up call to State Farm don't even register on the corporate giant's radar screen, evidence showed.
