State Farm Faces Criminal Investigation For Denying Hurricane Ike ClaimsSeptember 13, 2012
State Farm Insurance is the nation's largest home insurer. According to ABC News Agency, the insurance company faces a criminal investigation in Texas concerning the handling of tens of thousands of hurricane claims. Reportedly, the investigation has also been confirmed by the Travis County District Attorney's Office. Sources say the investigation was instigated after officials reviewed several emails from some of State Farm's top executives. These emails have also led to several civil lawsuits against the State Farm, which claim plaintiffs were defrauded by State Farm and its subsidiary.
According to reports, the documents in question relate to an alleged cover-up by State Farm management related to its denial of consumer insurance claims for a common type of roof damage that occurs during high wind events and hurricanes. Many of the people filing lawsuits against State Farm feel betrayed by the company because they were current on premiums and some had never even filed a claim with company before Hurricane Ike. These individuals have stated they don't feel like State Farm has lived up to its slogan, "like a good neighbor, State Farm is there." These individuals were under the assumption that their insurance policies covered all types of roof damage and were stunned to learn that was not the case.
According to the allegations alleged in the lawsuits, State Farm documents establish a clear internal policy of intentionally denying consumer claims for roof damage similar to what the victims of Hurricane Ike experienced. According to some estimates, the systematic denial of those types of claims may have quietly saved State Farm close to $1 billion.
Reportedly, problems with this type of claim began after Hurricane Ike caused the shingles on many home owners' roofs to become lifted. The winds from Hurricane Ike caused a seal to break underneath shingles which usually form a water type barrier. Sources some State Farm customers even had independent adjusters view the roofs and recommend they be replaced. However, according to reports, State Farm repeatedly refused to admit the unsealed tabs were damages that should be paid under the policy. Further, plaintiffs allege that when consumer claims were made to the Texas Department of Insurance State Farm began covering up its practice of refusing to pay those claims.
According to ABC News, in a response letter to the investigation of the Texas Department of Insurance, State Farm clearly disclosed how the company did not pay for insurance claims related to broken seals on roofs, saying, "Regarding the detached seals, there is no coverage as this condition is not considered… physical loss." However, when the "catastrophe section manager" for State Farm saw that statement written out, he directed it be removed from what state regulators would be told, instructing, "This letter needs to be revised to delete the reference to unseal tab."
According to ABC News, the reference was subsequently removed, and that same catastrophe manager then forwarded the newly revised letter to other unnamed colleagues at State Farm "for your review" before it was sent off to the state. Reportedly, other documents show the insurer attempting to delete other references to the company's policy of not paying lifted-shingles claims. According to allegations in the lawsuit filed by a Houston attorney, nearly 100,000 people may have had their claims for similar problems wrongly denied, estimating that many additional consumers who did not hire independent investigators to inspect their roofs may be unaware they are actually damaged today and susceptible to problems in future windstorms.
Texas State Senator Rodney Ellis has reviewed many of the documents, stating that he finds them troubling and that law enforcement officials should step in. Reportedly, Ellis has successfully called other insurance companies to task on the very same issue of not paying for lifted shingles damage. He previously called for a civil investigation by the Texas Department of Insurance against the Texas Windstorm Insurance Agency and its sister company the Texas Fair Plan Association, alleging a similar organized pattern of non-payment of lifted-shingle claims.