One of the largest home insurance companies in the United States is facing a rather large criminal investigation. State Farm is under investigation in relations to how they dealt with several thousand hurricane claims in Texas.
The head of the public integrity of the Travis County District Attorney's office, Gregg Cox, confirmed to ABC News that him and his team became suspicious after communicating with top State Farm managers in Texas. State Farm is facing lawsuits from multiple customers claiming that State Farm defrauded them.
There were questions raised about a supposed "cover-up" by State Farm managers in relation their denial of customer insurance claims. The majority of the claims pertained to a common roof damage that occurs during high winds or hurricanes.
A longtime homeowner in the area, Jim Warner, was a loyal State Farm Insurance customer for over 20 years. Warner found himself in the middle of the criminal investigation. Warner stated that he had never filed an insurance claim until Hurricane Ike in 2008 and he always paid his monthly bills to State Farm in a timely manner.
Warner filed a lawsuit because he claims the company did not follow through on their slogan, "Like a good neighbor, State Farm is there". Warner loyally paid State Farm with the impression his policy would cover all types of damage to his roof; however, when he filed a claim he was shocked to learn that was not the case.
Warner believes that State Farm clearly establishes an internal policy of intentionally denying consumer claims for roof damage similar to the damage to Warner's roof. Steve Mostyn, Warner's attorney, stated that the denial of these claims most likely discreetly saved State Farm close to $1 billion.
Steve Mostyn says State Farm documents obtained in the lawsuit reveal an attempt by managers to hide the company's policy of non-payment from state insurance regulators.
"They absolutely went through an effort to cover it up," Mostyn stated. "These emails are coming from the top. [They are] setting policy. And that policy by their own admission … shows conclusively they have not paid thousands of people".
Warner's problems started after the high winds of Hurricane Ike 'lifted' the shingles on his roof. This broke the seal under the shingles that would normally create a water-tight barrier. Warner stated that an independent adjuster he hired concurred that the damage was immense and he also stated that Warner's roof needed replaced.
Warner alleges that State Farm repeatedly refused to admit the unsealed tabs were damage that should be paid under his policy. So, Warner filed a complaint with the Texas Department of Insurance, in hopes that the regulator could help. Warner's lawsuit states that it was during the investigation of his complaint to insurance regulators that State Farm started covering up its practices of refusing to pay for this kind of damage.
Upon reviewing documents ABC News obtained, they found a draft letter in which State Farm clearly disclosed how the company did not pay for insurance claims related to broken seals on roofs. The draft stated, "Regarding the detached seals, there is no coverage as this condition is not considered…physical loss".
When the "catastrophe section manager" for State Farm saw that statement written out, he immediately demanded they remove it from what state regulators would be told, in his own words, "This letter needs to be revised to delete the reference to unseal tab".
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.
Attorney Mostyn says State Farm fought hard to keep from having to disclose those and other documents, but lost the fight. He says other documents show the insurer attempting to delete other references to the company's policy of not paying lifted-shingles claims.
State Farm Lloyds says it will soon file papers with the court disputing the claims made in Warner's recently amended lawsuit.
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