A Cleveland County judge's denial of confidentiality for documents in a lawsuit against State Farm earlier this month unveils internal emails and other communication to the public, giving new insight into the company's controversial claims practices.
District Judge Jeff Virgin both partially granted and denied a motion by State Farm and Casualty Company to maintain confidentiality protections on certain discovery materials earlier this month in a more than two-year-old lawsuit against the company.
The case, Gary Lyle and Melanie Lyle v. State Farm Fire and Casualty Company and Michael Garey Insurance Agency, Inc., was filed in February 2024.
Non-redacted exhibits include internal emails, instant-message transcripts, data dashboards and executive communications from 2020 to 2021 related to State Farm's handling of wind and hail damage claims, with information detailed that includes references to an internal initiative called the "FME."
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According to the Lyles' February 2024 petition, their Cleveland County home and shed were damaged in an October 2021 storm. State Farm's estimate calculated the replacement cost of covered damage at $25,052.49 and, after depreciation and the deductible were subtracted, offered the couple $12,783.37. The Lyles allege their contractor identified roughly $42,000 in additional damage that State Farm's estimate did not include.
The petition brings claims for breach of contract and bad faith against State Farm, along with claims of constructive fraud and negligent misrepresentation against Michael Garey Insurance Agency, Inc. The Lyles seek damages in excess of $75,000, along with punitive damage, attorney fees and costs.
The Lyle case brings documents to light that have relevance in other lawsuits against State Farm in Oklahoma and nationwide. In the Sooner State where residents pay among the highest homeowners premiums in the U.S., more than 1,000 lawsuits have been filed against State Farm and Allstate by homeowners alleging similar fraud claims.
More: Inside the secret documents found by attorneys in cases against State Farm, Allstate
In a statement Monday, State Farm said it's committed to meeting the needs of policyholders in Oklahoma, and the company is proud of the team's work to help communities recover after disaster strikes. The statement also says in the past two years, State Farm has paid more than $1 billion to Oklahoma customers for wind and hail damage to their homes and property.
"By contrast, the number of bad faith lawsuits currently pending in Oklahoma is approximately 1% of the approximately 30,000 residential and commercial claims presented by State Farm policyholders that the company has responded to over the past five years," the company statement reads. "Efforts by trial lawyers to turn disputed allegations into broad, misleading, conclusions about State Farm's claims practices creates confusion for customers, agents, and communities that depend on a strong and stable insurance market after severe weather."
The newly public exhibits document internal State Farm discussions from 2020 to 2021 about the volume and cost of roof-replacement payments tied to wind and hail claims.
One exhibit shows State Farm employees discussing percentages, suggesting at the time that indemnity spending was their biggest opportunity for improvement. The exchange claims the company was replacing roofs and paying claims at rates far above industry norms for small hail and light wind events. Revell Parrish, attorney with Glass & Tabor, LLP, who is representing the Lyles, said Monday those percentages were never substantiated in the discovery he's reviewed.
Nicole Manduca, a leader of State Farm's Property and Casualty Operations, said in an early 2021 instant message to Kathy Ress, her superior at the time, that they were at about 90% total roof replacements with small hail in their initial analysis.
"State Farm tried to tell a story about how they came up with these figures, and when you start peeling back the layers, this story that they created has more holes than Swiss cheese," Parrish said.
Another case exhibit made public last week shows Manduca explaining to a colleague in 2020 that "full roof replacements" represent the "biggest bucket of opportunity" for savings.
Parrish, who has deposed Manduca multiple times in separate cases, pointed to a March 2021 message in which Manduca wrote that she believed State Farm would "realize improvements in wind and hail results" in 2021.
This raises the question of how the company leadership could know they were going to save money.
"Unless you're going to cheat people," Parrish said. "You're not clairvoyant ― you don't have a crystal ball."
Other exhibits reference the financial stakes State Farm associated with roof-claim decisions. In one exchange, State Farm's Tom Moss wrote that each percentage point of claims not paid represents tens of millions of dollars in avoided indemnity spending.
Parrish said he views that exchange, combined with the broader record, as evidence that cost considerations, not claims accuracy by itself, drove the initiative. Meanwhile, State Farm maintains that its claims procedures are intended to promote accuracy in payments.
In response to a comment from Ress about the FME dashboard, which is short for the company's Fire Model Enhancement program, Manduca said that was a "passion project," and she believes they will "realize improvements in wind/hail trends in 2021."
Ress responded in the instant messaging session with "silver platter for you; lol."
Parrish called that the worst document he's seen in his review of State Farm materials. He said it reflects a casual attitude toward money he contends should have gone to policyholders.
One of the documents released last week shows a 2021 message from one of State Farm's own agents, complaining policyholders are discontent. The agent said in August 2021 that he had more complaints on claims that year than "any previous year," and it was his 39th year as an agent.
Several exhibits reference a review process tied to the FME, in which a team manager was required to approve certain wind and hail claims, like those involving hail one inch or smaller, or wind under 50 mph, based on data from a weather-tracking tool. Parrish said that in depositions in other cases, State Farm personnel have acknowledged that team managers making those calls didn't necessarily have more field experience than the adjusters whose decision they were reviewing, and in some instances, they hadn't personally handled wind and hail claims.
Parrish also said Virgin has ordered State Farm to produce personnel files, performance reviews, compensation information and additional emails and instant messages related to individuals connected to the FME initiative in both the Lyle lawsuit and another case. He said the company has not yet complied, but the documents are ordered to be produced within the next 30-60 days.
This article originally appeared on Oklahoman: Attorney says State Farm documents reveal 'more holes than Swiss cheese'