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.