The nation’s premier home insurer faces a new criminal investigation in Texas related to how it mishandled potentially tens of thousands of hurricane claims. Investigators recently launched the probe after reviewing newly released communications from top State Farm managers, many of which leading to lawsuits by customers who say they were defrauded by State Farm Lloyds, the Texas subsidiary of the larger insurance company.
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. Jim Warner, a longtime homeowner in Missouri City, Texas, had been a customer of State Farm Insurance for more than 20 years before finding himself in the center of the now brewing criminal investigation. He says he had never filed an insurance claim until Hurricane Ike in 2008 and had always paid his monthly bills to State Farm on time. However, Warner filed suit against State Farm after he says the company did not follow through on its slogan that promises, “Like a good neighbor, State Farm is there.” Warner always believed his policy would cover all types of damage to his roof, but when he went to file a claim he says he was shocked to learn that was not the case.
Warner’s lawsuit alleges that State Farm documents establish a clear internal policy of intentionally denying consumer claims for roof damage similar to what Warner experienced. Warner’s attorney claims the systematic denial of those types of claims may have quietly saved State Farm close to $1 billion. 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.
In Warner’s case, his problems began after he says the high winds of Hurricane Ike caused the shingles on his roof to become “lifted.” Those winds, Warner alleges in his suit, broke the seal under Warner’s shingles that normally create a water-tight barrier. Warner says an independent adjuster he hired agreed the damage was extensive and recommended Warner’s roof be replaced.
Warner alleges, however, State Farm repeatedly refused to admit the unsealed tabs were damage that should be paid under the policy. So Warner filed a consumer complaint with the Texas Department of Insurance, hoping the regulator could help. However, Warner’s lawsuit says it was during that very investigation of his complaint to insurance regulators that State Farm began to cover up its practices of refusing to pay for this kind of damage.
Warner’s lawsuit alleges that 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.
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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