Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

We all know that an insurer’s claims file will typically contain the following:

• Correspondence between the insurer and the insured or any representative of the insured
• A copy of the policy at issue
• A list of any payments made on the claim to date
• The adjuster’s log or a listing of entries for the adjuster’s notes
• For those claims where the insured retained a public adjuster, the estimate prepared by the public adjuster on behalf of the insured
• Receipts, canceled checks, invoices, credit card statements or any other documentation provided by the insured to support expenses incurred in connection with the loss
• Any estimate of damages prepared by the insurer’s adjuster regarding the loss
•  Reports by engineers, roofers or other tradesmen who inspected the insured property and prepared a report for the insurer regarding the loss
• Claims summary
• Whether the file was reported to the Special Investigation Unit

A claims file can also contain other information that can be helpful to you in developing your bad faith case against a carrier. Claims files usually identify all personnel who were involved in the claim. Charles Miller, Insurance Law Center, Discovery in Insurance Bad Faith Cases, Part I. You should be able to identify the adjuster(s), supervisor(s), or any other type or level of employee that was involved in the file and the level of each person’s participation. Once you obtain this information, you can decide whether it is necessary to depose one or more individuals regarding their involvement in the handling of the claim. If you decide that it is necessary to depose particular employees, you may want to serve additional discovery seeking the personnel files for each employee that you want to depose. Why would you want to do that? Wouldn’t you want to know how much experience the adjuster had and what training he/she received? It could be important to find out whether any employee was financially rewarded for reducing payments on claims. When handling your client’s claim, was the employee in compliance with industry standards? Was the employee following the insurer’s standards? These are all questions that you should ask yourself when you get the claims file. Based on the facts of your case, it may be crucial for you to delve into these additional areas in order to properly develop your case.

The carrier’s claims file will likely also identify the claims programs, procedures and/or software that were used in the handling of the claim. Charles Miller, Insurance Law Center, Discovery in Insurance Bad Faith Cases, Part I. The policies and procedures in place at the time your insured sustained the loss will help you understand what measures were implemented by the carrier to decrease payments in claims. The experts in the field provide examples of programs that have been used by insurers such as the following: “CCPR” (Claim Core Processing Re-Design) for Allstate; Quantum Leap for Safeco and State Farm; and “ACE” (Advancing Claims Excellence or Accelerating Claims Excellence - depending on who you ask) for Nationwide. Based on the carrier’s specifics, your expert can help you understand how the program the insurer implemented affected the handling of your client’s claim.

An insurer’s claim file might also include reserve information. Last week’s blog titled Reserves Are Important in Insurance Coverage and Bad Faith Claim Disputes discussed what reserves are and why they are important to a bad faith claim.

So why are we talking about what’s in a claims file? Because in many jurisdictions you are entitled to the claims file in a bad faith lawsuit. Of course, you can expect the usual work product and attorney client objections. That’s when you bring in your expert, do your homework and file a motion to compel, because the case law in many jurisdictions is on your side.

Courts must distinguish between reports prepared in response to an unfortunate event that might well lead to litigation, and materials prepared as an aid to litigation. The work product doctrine is not an umbrella that shades all materials prepared by the lawyer, the doctrine focuses on material assembled and brought into being in anticipation of litigation.

Clover Staffing, LLC and Johnson Controls World Services, Inc., et al., 238 F.R.D. 576, 579 (S.D. Tex. 2006); Citing U.S. v. El Paso Co., 682 F.2d 530 (5th Cir. 1982); See also, Electronic Data Systems Corp. v. Steingraber, No. 4-02-CV-225, 2003 WL 21653414 (E.D. Tex. July 9, 2003). Additionally, the work product privilege does not extend to the underlying facts relevant to the litigation. Furthermore, if the insurer assembled the materials in the ordinary course of business or pursuant to public or insurance requirements unrelated to the litigation with its insured, then the documents are typically not shielded by the work product privilege. Navigant Consulting, Inc. v. Wilkinson, 220 F.R.D. 467, 473 (N.D. Tex. 2004). In the insurance context, courts have routinely recognized that the investigation and evaluation of claims is part of the regular, ordinary and principal business of insurance companies. Lanelogic Inc. v. Great American Spirit Ins. Co., No. 3-08-CV-1164, 2010 WL 1839294 (N.D. Tex. May 6, 2010); Douga v. D & B Boat Rentals, Inc., No. 04-1642, 2007 WL 1428678 (W.D. La. May 10, 2007).

Even though litigation is pending or may eventually ensue does not cloak such routinely generated documents with work product protection.

Piatkowski v. Abdon Callais Offshore, L.L.C., No. 99-3759, 2000 WL 1145825 (E.D. La. August 11, 2000).

If the document would have been created without regard to whether litigation was expected to ensue, it was made in the ordinary course of business and not in anticipation of litigation.

Additionally, courts have explained that insurers cannot reasonably argue that the entirety of its claims files are accumulated in anticipation of litigation when the insurer already has an inherent duty to investigate, evaluate and make a decision regarding claims made by its insureds. Harper v. Auto-Owners, Inc. Co., 138 F.R.D. 655, 662 (S.D. Ind.1991); Pete Rinaldi’s Fast Foods v. Great American Ins. Co., 123 F.R.D. 198, 202 (M.D. N.C. 1988).

It is presumed that a document or thing prepared before a final decision was reached on an insured’s claim, and which constitutes part of the factual inquiry into or evaluation of that claim, was prepared in the ordinary and routine course of the insurer’s business of claim determination and is not work product. Likewise, anticipation of litigation is presumed unreasonable under [Federal Rule of Civil Procedure 26(b)(3)] before a final decision is reached on the claim. The converse, of course, is presumed for documents produced after claims denial.

Simply put, the work product privilege usually does not apply unless and until the carrier has denied coverage. In most jurisdictions the way to overcome the foregoing presumptions is for the insurer to demonstrate, by specific evidentiary proof or objective facts, that a reasonable anticipation of litigation existed when the document was produced, and that the document was prepared and used solely to prepare for that litigation, and not to arrive at a claim decision.

I hope you tune in next week for more bad faith discussions.

Happy Friday!

As the state insurance consumer advocate, Sean Shaw has a full plate as the 2010 legislative session looms just two months away. He will present regulators and legislators recommendations to improve the claims process for homeowners and possibly increase supervision for public adjusters. The recommendations are the product of several meetings of the Claims Resolution Roundtable, which Shaw hosted this summer and fall with insurers, contractors, adjusters and consumers.

The group has one more meeting the first week in January and recommendations to legislators have to be ready by the end of January.

I really do not know who the property insurance consumers were at the previous meetings. I do not know if there were any. It appeared to me that most participants in attendance were those from the insurance industry and their favored insurance restoration contractors. My impression was that the proceeding seemed more of a love fest for the insurance industry. It is not going to be that way at the January 6th Roundtable, although I expect the meeting will be quite constructive and enlightening.

Unlike many newspaper articles where reporters provide a spin to what is said, Garcia provided questions and the answers given by Shaw. I was troubled by the fact that Shaw sees contractors providing legal advice to policyholders:

Q: You headed the claims resolution roundtable. Did the group finalize its recommendations for the legislature?

A: That's what we're doing right now. We got a lot of suggestions. We're trying to separate the doable from the not-doable, the good from the bad.
Some of them don't require much legislation. Some might require some continuing education for adjusters or contractors. Some may require letting contractors know what is covered by an insurance policy. Others may require letting insurers know how contractors operate in the real world.

The benefit that can come from legislation or rulemaking is a uniform [claims] estimation system. I don't know what it would look like yet, but I believe that is one of the recommendations coming from the roundtable. We have another meeting coming Jan. 6.

Shaw's view of the contractor/insurer/policyholder relationship seems extraordinarily naive. I have legions of horror stories of contractors ripping off policyholders and giving wrong coverage opinions. Many of these policyholders are fairly sophisticated commercial clients. Certainly, if those policyholders are having problems, think about the residential insureds. The consumer protection laws developed to protect consumers from rip-off contractors were mandated because legions of examples were provided to demonstrate a basic need to protect consumers from the sales tactics and performance issues of contractors. Shaw seems to have public recognition of this concern as a consumer advocate. I have warned about insurance restoration contractors in Are Insurance Restoration Contractors Ripping Off Insurers and Policyholders? I even published a comment by a former restoration contractor warning of these problems in Former Restoration Insider Comes Out Swinging Against Florida's Limitation of Public Adjuster Solicitation.

Public adjusters will be a topic of conversation on January 6, as well. Here is what the Miami Herald story reported on Shaw's view of public insurance adjusters:

Q: Many insurers are calling for increased regulation of public adjusters, saying these adjusters are responsible for most of the re-opened Wilma claims. What's your take on public adjusters?

A: It's a very complicated transaction when you have a claim. The public adjusters serve a vital role in helping homeowners navigate through this process.

Insurance companies will argue -- and I don't want to make their argument for them -- that public adjusters are responsible for re-opening claims that are invalid or they're are soliciting in a way that invites fraud.

There are a few bad actors giving the entire public adjusting community a bad name. But you don't throw the baby out with the bath. We enforce regulations or come up with new ones to take care of the problem. You just don't say that public adjusters are a bad thing.

I am looking for the evidence regarding the invalid claims and the manner of solicitation that invites fraud. Insurance claims managers hate re-opened claims. For insurers with a mindset to pay as little as possible, there is only one way to go when a claim is re-opened. Those types of insurance claims managers will do or say anything to express displeasure if it is shown that their original adjustment resulted in underpayment as a result of an initial adjustment that was not thorough, or worse, outcome oriented to limit what a policyholder can recover.

Regarding the solicitation issue, the legislature has already limited the "sign with us and get a free television regardless of if you get anything" solicitation a few public adjusters were offering in Miami. I am curious if there are other solicitations that encourage policyholders to commit fraud and will certainly support such reforms if proven. My impression has been that those were already flushed out a couple years ago and that the insurers use the "fraud" card as a means to improperly classify public adjusters as a derogatory class when they should be more concerned with their own internal management memos which suggest methods to underpay claims.

If I had one suggestion for the consumer advocate, it would be to start asking for those internal memos. Remember how Allstate claimed that its highly criticized claims program, Claims Core Process Redesign, did not apply to homeowner claims until Kevin McCarty’s Office of Insurance Regulation demanded all the memos? Allstate’s lie was revealed when it posted those memos on its website as a result of that investigation. I guarantee that there would be a significant change in the management of claims if our regulators and Sean Shaw would start asking claims management for their internal claims handling memos and directives. Many well meaning field adjusters would applaud such requests that would prove their claims management says one thing publicly and another privately.

If insurance claims management has nothing to hide regarding their internal claims directives, why would they not endorse such requests by regulators? Competitors that cheat at claims would have a much higher chance of getting caught and the propensity to do so would be reduced because the risk of being caught would be much greater. That would be a meaningful suggestion and action by a true consumer advocate. Let's see if Sean Shaw has the type of courage and vision to really help policyholders get paid quickly and fully.

Here is an excerpt of the Court proceedings:

I find with respect to each of the Plaintiffs, Roxanne Martinez, Charlie Jimenez, Adan Carriaga, and Christa Okon, I find by a preponderance of the evidence that Allstate has violated Section 59A-16-20E and G. It violated Section G by compelling each of the Plaintiffs to litigate their insurance claims through a jury trial to obtain final judgment, and to recover amounts due under a policy by offering substantially less than the amounts they ultimately recovered when they went through trial.

I find that Allstate violated Section 59A-16E by not attempting to effectuate a prompt, fair, and equitable settlement of their claims in which liability had become reasonably clear.

I find that each of the Plaintiffs suffered actual damages as a result of Allstate's willful violations of Sections 59A-16-20E and G, and that each of the Plaintiffs are, therefore, entitled to recover their actual damages under Section 59A-16-30.

I find that each of the Plaintiffs' claims for damages will be taken under advisement by me, and I did consider the Plaintiffs' presentation this afternoon about what you claim the actual damages are for those claims. I'd like to take some time and think about that and determine, after considering the evidence, what the actual damages are for each of the Plaintiffs under their claims under the UCPA.

The Court also found these practices amounted to an abuse of process:

I also find in favor of the Plaintiffs with respect to malicious abuse of process. I find that Allstate has used the judicial process in New Mexico and with these Plaintiffs, the jury trial process and judicial proceedings, for each of the Plaintiffs with the primary motive to accomplish an illegitimate purpose and not intended by that process, and in a manner suggesting the wrongful use of the jury trial system; an attempt to delay or extort each of the Plaintiffs into accepting less than the full value of their benefits under their policy, their MFRA policies, providing coverage for their claims.

The transcript is available here.

My hat is off to David Berardinelli. I gave him kudos in a prior post, David Berardinelli's Fight Against Allstate's Claims Culture.

Chances are that if such a claims program were in place and advertised to potential purchasers, nobody would buy from that insurance company. Revenues would drop and losses would incur. So, when Safeco Insurance Company started on such a claims program to increase overall corporate profits, do you think the Safeco executives wrote their customers, agents, and potential purchasers about such a program if it were really in the customer’s interest as well? Of course not. But, this is exactly what happened at Safeco.

Last year, Liberty Mutual Insurance Company purchased Safeco Insurance Company. After doing due diligence, the managers and executives at Liberty Mutual knew that Safeco’s claims philosophies fit within Liberty Mutual’s. Liberty Mutual had its own claims payment reduction programs as well. Similar to Allstate, Liberty Mutual hired outside claims consultants to develop claims philosophies that added to corporate profit through claims reduction programs. The purchase of Safeco Insurance Company by Liberty Mutual Insurance Company is a match made in heaven for the short term investors of Liberty Mutual and the executives of those companies.

Our firm has been retained on a number of property insurance disputes involving these companies. As a result of my involvement in one particular matter where I have received no response from Safeco, I have decided to do something about these companies claims problems in the same manner I approached Allstate Insurance Company when I was chair of the Bad Faith Litigation Group for two years in the mid 1990s and Allstate was underpaying claims based upon its wrongful claims program known as Claims Core Process Redesign. I will help organize a cooperative effort of those that have been victimized by these companies to publicly warn other consumers of these companies’ claims practices and raise knowledge with regulators interested helping insurance customer interests.

While Chair of the Bad Faith Litigation Group, I presented numerous seminars regarding Allstate’s claims practices. An example is my 1997 presentation to the Montana Trial Lawyers Association, “Overcoming Allstate's Trade Secrets and Work Product Objections.” The results of these networking activities regarding Allstate were documented in part on previous posts:

1. "Deal, or No Deal?"
2. The Good Hands Gets the Iron Fist
3. Ed Liddy
4. David Berardinelli's Fight Against Allstate's Claims Culture
5. Allstate Does the Right Thing
6. Allstate Testifies Today
7. States Seek McKinsey Reports

My intention is to create similar networking and transparency with Safeco and Liberty Mutual and share the 150,000 internal documents we have already collected regarding the secret claims practices of these companies. In this manner, other victimized policyholders will not suffer the similar consequences without understanding why the claims programs were not isolated just to them and the real motive for the delays and denials by Safeco and Liberty Mutual. Possibly, executives at Liberty Mutual will stop these practices and do right to their customers. If not, at least brokers and customers will know what Safeco and Liberty Mutual are about when it comes time to pay fully and promptly following a loss.

On December 17, 2009, our firm with other consumer law firms will host a claims practice seminar in Houston that will focus on Hurricane Ike claims practices as well as Safeco and Liberty Mutual claims practices. Computerized legal databases now allow us to find all federal and most state lawsuits against Safeco and Liberty Mutual which involve property insurance or bad faith lawsuits. Those attorneys representing the policyholders will start getting their invitations today.

Websites about Safeco and Liberty Mutual along with Facebook sites will be up and running by next week so claims practice information may be shared among consumers, whistleblowers, and victims of these insurance companies. Honest and trustworthy insurance companies should applaud our efforts because companies that cheat on claims should not be allowed to gain market share by having lower rates by such practices than those that fully and promptly pay their claims. 

Ed Rust Jr. is very capable and bright, but is he earning the position or does he just get to keep it because of his dad and long standing family ownership of State Farm's management?

For example, in the 2001 case of Campbell v. State Farm Mut. Automobile Ins. Co., the Utah Supreme Court in 2001 found:

"2. The Nature of State Farm's Misconduct

This factor specifically analyzes the nature of the defendant's conduct in terms of its maliciousness, reprehensibility, and wrongfulness. It mirrors the "reprehensibility" factor described by the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559, 134 L. Ed. 2d 809, 116 S. Ct. 1589 (1996). There, the Supreme Court stated that the defendant's misconduct is "perhaps the most important indicium of the reasonableness of a punitive damages award." ...Repeated "trickery and deceit" targeted at people who are "financially vulnerable" is especially reprehensible and worthy of greater sanctions. ... Moreover, "deliberate false statements, acts of affirmative misconduct, or concealment of evidence of improper motive" also warrant larger awards. ...

With these standards clearly in mind, the trial court made nearly twenty-eight pages of extensive findings concerning State Farm 's reprehensible conduct. We summarize here three examples from those findings of State Farm 's most egregious and malicious behavior.

First, State Farm repeatedly and deliberately deceived and cheated its customers via the PP&R scheme. See Court's Findings, Conclusions and Order Regarding Punitive Damages and Evidentiary Rulings, Campbell, at 17-27. For over two decades, State Farm set monthly payment caps and individually rewarded those insurance adjusters who paid less than the market value for claims... Agents changed the contents of files, lied to customers, and committed other dishonest and fraudulent acts in order to meet financial goals...For example, a State Farm official in the underlying lawsuit in Logan instructed the claim adjuster to change the report in State Farm's file by writing that Ospital was "speeding to visit his pregnant girlfriend." ...There was no evidence at all to support that assertion. Ospital was not speeding, nor did he have a pregnant girlfriend. Id. The only purpose for the change was to distort the assessment of the value of Ospital's claims against State Farm's insured. As the trial court found, State Farm's fraudulent practices were consistently directed to persons--poor racial or ethnic minorities, women, and elderly individuals--who State Farm believed would be less likely to object or take legal action.

Second, State Farm engaged in deliberate concealment and destruction of all documents related to this profit scheme....State Farm's own witnesses testified that documents were routinely destroyed so as to avoid their potential disclosure through discovery requests....Such destruction even occurred while this litigation was pending... Additionally, State Farm, as a matter of policy, keeps no corporate records related to lawsuits against it, thus shielding itself from having to disclose information related to the number and scope of bad faith actions in which it has been involved.

Third, State Farm has systematically harassed and intimidated opposing claimants, witnesses, and attorneys... For example, State Farm published an instruction manual for its attorneys mandating them to "ask personal questions" as part of the investigation and examination of claimant in order to deter litigation... Several witnesses at trial, including Gary Fye and Ina DeLong, testified that these practices had been used against them... Specifically, the record contains an eighty-eight page report prepared by State Farm regarding DeLong's personal life, including information obtained by paying a hotel maid to disclose whether DeLong had overnight guests in her room...There was also evidence that State Farm actually instructs its attorneys and claim superintendents to employ "mad dog defense tactics"--using the company's large resources to "wear out" opposing attorneys by prolonging litigation, making meritless objections, claiming false privileges, destroying documents, and abusing the law and motion process...

Taken together, these three examples show that State Farm engaged in a pattern of "trickery and deceit," "false statements," and other "acts of affirmative misconduct" targeted at "financially vulnerable" persons.... Moreover, State Farm has strategically concealed "evidence of [its] improper motive" to shield itself from liability, which was furthered by State Farm's treatment of opposing witnesses and counsel.... Such conduct is malicious, reprehensible, and wrong.

State Farm responds by arguing in its brief that even if its conduct was wrong, it does not "after all, involve murder, torture, or deliberate poisoning of the environment," and thus cannot warrant millions of dollars in punitive damages. Additionally, State Farm argues that under Crookston II, willful calculated fraud was not sufficient to justify a higher than ordinary ratio of punitive to compensatory damages...

State Farm fails to realize that, while Crookston II held that fraudulent conduct alone was insufficient to justify a large punitive damage award, it also observed that fraud combined with other factors justifies a higher award....the company's 'calculated and calloused attitude' toward settling valid claims." ...In this case, the jury was convinced, and the evidence shows, that State Farm engaged in a widespread pattern of fraud. Moreover, the evidence of its PP&R scheme demonstrates that State Farm specifically calculated and planned to avoid full payment of claims, regardless of their validity. Thus, the nature of State Farm's conduct supports the imposition of a higher than normal punitive damage award."

The United States Supreme Court reversed the amount of punitive damages and sent the case back further review of State Farms's claims culture. This occurred in 2004, before Hurricane Katrina, and the conservative Utah court held:

" In insurance each party must take a risk. But it is inaccurate to assert that if the insured event does not occur then the insured receives nothing in return for the premium payment made. Each insured receives at the time of contract formation present assurance of compensation if the loss occurs which is a valuable peace-of-mind protection.

....

Insureds buy financial protection and peace of mind against fortuitous losses. They pay the requisite premiums and put their faith and trust in their insurers to pay policy benefits promptly and fairly when the insured event occurs. Good faith and fair dealing is their expectation. It is the very essence of the insurer-insured relationship. In some instances, however, insurance companies refuse to pay the promised benefits when the underwritten harm occurs. When an insurer decides to delay or to deny paying benefits, the policyholder can suffer injury not only to his economic well-being but to his emotional and physical health as well. Moreover, the holder of a policy with low monetary limits may see his whole claim virtually wiped out by expenses if the insurance company compels him to resort to court action.

....As the facts of this case make clear, misconduct which occurs in the insurance sector of the economic realm is likely to cause injury more closely akin to physical assault or trauma than to mere economic loss....When an insurer callously betrays the insured's expectation of peace of mind, as State Farm did to the Campbells, its conduct is substantially more reprehensible than, for example, the undisclosed repainting of an automobile which spawned the punitive damages award in Gore....

...

This deceitful conduct can only be explained as part of a scheme to reduce State Farm 's economic exposure. The possibility that its dissembling would expose the Campbells to an excess judgment must have been apparent to State Farm . To react as it did when the excess judgment became a reality only confirms the toxicity of State Farm 's behavior.

...

When considered in light of all of the Gore reprehensibility factors, we conclude that a 9-to-1 ratio between compensatory and punitive damages, yielding a $ 9,018,780.75 punitive damages award, serves Utah's legitimate goals of deterrence and retribution within the limits of due process."

Unlike the vast majority of American corporations whose boards and regulatory audit committees would have cast out a CEO after such findings, State Farm's board of directors and audit committees did nothing. This financial and independent giant thumbed its nose at regulators and the courts. It made no change. I would be more than happy to share anything that anybody has to offer to explain how such a small amount of punitive damages changed one of America's largest corporations (allegedly non-profit).

Utah has Mormon conservatives, but what about Florida, where people from the north and south, liberal and conservative, must agree upon ethics? Is State Farm honest in Florida? How about this finding, which I reported in "State Farm's Freakoutnomics:"

"The recommended Order from the Judge who reviewed the rate increase explains how State Farm’s theory of loss is sham economics. Starting at page 15:

"...State Farm Florida also paid State Farm Mutual $12.8 million for a credit risk provision....
...
Of the total $700 million paid to private re-insurers, State Farm Florida paid approximately $151 million to private re-insurers other than State Farm Mutual. State Farm Florida paid $549 million to its parent company, State Farm Mutual.
...
Payments to unrelated private re-insurers represent arms-length transactions between a willing buyer and willing seller of reinsurance coverage. However, the fact-finder is unable to determine from a preponderance of the evidence whether either the cost of reinsurance purchased from State Farm Mutual or the cost of the credit risk provision purchased from State Farm Mutual is excessive or reasonable....

The economic reality is that State Farm Florida is merely the legal form in which State Farm Mutual chooses to do business in Florida. State Farm Mutual and its wholly-owned subsidiaries, including State Farm Florida, comprise a "group or combination" that the Legislature defines as a "person" ...

Transactions between State Farm Mutual and State Farm Florida for reinsurance and credit risk provisions totaling approximately $561.8 million, when viewed in the light of economic reality... may be transactions which State Farm Mutual engages in with itself and which lack any independent economic significance. Transactions with no independent economic significance would be sham transactions which may distort the economic costs... Such economic distortions may enable the group to derive a rate advantage from the legal form in which State Farm Mutual chooses to do business in Florida."

That is what the judge said and this is what I said:

"The above findings cannot be overstated. The judge made these findings after State Farm and Florida's Office of Insurance Regulation fought over the details of State Farm's request for a rate increase. The bottom line is that what State Farm Florida wishes to report as expense, is largely payments made to its parent company. Essentially, it is moving income from one pocket to another, while claiming it as an expense.

If the media would report on this finding with headlines such as, "Judge Rules State Farm Engages in Sham Transactions," I do not think that State Farm's explanation of financial loss and threats to leave Florida would have such an impact. If people knew the whole story, they would know State Farm’s tales of financial loss in Florida are nothing more than propaganda."

In Mississippi, so many clients had altered engineering reports that it was obvious the problem was not just a mistake. Every time the change was made, it was to lessen the amount owed. Who in any position of leadership would allow this to wrongfully happen without picking up the phone and asking to quietly resolve the matters? I have never spoken to Ed Rust Jr. Other insurers have been understanding enough to have their officers call their policyholders who have catastrophic claims. Slabbed and Anita Lee are reporting events necessary for an understanding of State Farm's litigation culture.

This week, the Florida Appellate Court decided the issue against State Farm and for Florida policyholders and for Kevin McCarty. The important thing is that a "sham" transaction and argument has been made to Florida Regulators and judges. Why should State Farm be able to hold a license in any state given the findings here and in Campbell? Because they have a tremendous amount of money and lots of really nice and friendly local agents? Maybe to keep the license throughout the rest of the country, State Farm should have to change culture at the very top. Do any of you think that you should run your family's business by birthright? Why should Ed Rust, Jr.?

What do you think?

For property insurance claims, Allstate has adopted a procedure called Claims Core Process Redesign. Following Allstate's battle with Florida's Office of Insurance Regulation, several documents discussing Claims Core Process Redesign were made public. For those of us engaged in Allstate claims and coverage cases, Allstate's new claims program has been dubbed, "NEX Gen." We had somebody take notes during a speech given by two Allstate claims executives about this new program at the recent ACE Claims Conference in Las Vegas. We will post on that later.

At the end of Berrardinell's speech, he showed an Allstate television ad that had the most bizarre sounding but (most likely) unintentionally accurate pitch:

"Just Because You Have Insurance Doesn't Mean You Are Protected...That's Allstate's Stand."

Amen.

In today's culture, we too often honor swagger and pithy bluster. Those with ability to ridicule in fifteen seconds often become leaders of opinion. We are "dumbing down" the process of learning from one another when we need hard and thorough reflection of issues. I am as guilty as anybody of this. Hopefully, my ego and competitive nature will not stop me from changing the rhetoric you read here.

An internal Allstate claims manual in use before implementation of its Claims Core Process Redesign in the 1990's taught adjusters some practical tips for avoiding confrontation and coming to common ground when adjusting claims. It is worth copying here as I suggest that we can all learn a little better by listening a little more, appreciating our brother and sister's position, and saying a little less:

1. Let us seek to build our policyholder goodwill and cordial relationship by good, fundamental claim thinking and claim handling.
2. Think first before suggesting any failure on the part of the insured. Weigh the nature of his error and the necessity for saying or doing anything about it. Investigation or inspection may prove such failures on his part are not important to his claim and may not relieve us of any particular form of obligation which we are so anxious to perform through the Claim Department.
3. Be sure you know and understand thoroughly: the policy coverage's and requirements; what we expect from our insureds and why; which failures by the insured are serious and which are best overlooked for the moment, at least, while the adjuster attends to the claim and does the things that he is bound to do.
4. When it is necessary to call to the attention of the insured his failure to meet fully a policy obligation (and it may very well be necessary upon occasion) it should nevertheless be done with such tact, kindness, friendliness, and courtesy as to avoid as much as possible the natural human adverse reaction to any sort of fault finding or criticism.
5. You well know that the work of the claim man is one in which controversy is inherent. Because controversy cannot be avoided, there is an absolute necessity that we at all times be prepared, with poise and tact, to minimize not only its immediate effect upon the matter at hand, but also its long-term cumulative effect upon our public relations.
6. We must make conscientious efforts, constantly, not to allow ourselves to become so inured to controversies, misunderstanding and grief (which are every day things to us but which are exceptions to the average policyholder or claimant) that we are led to treat people with a lack of consideration, unkindness, or discourtesy.
7. If we not only possess a disposition to be sympathetic and friendly but, just as important, if we conduct ourselves in a manner which makes that disposition apparent and have a cheerful manner through it all, we will arouse a feeling of reciprocity in the policyholder or claimant. Actions cause like reactions. Of course, we must be Specific also when there is need, and we must always protect the company’s interests with acumen. But to be firm and keen and alert to protect the Company’s interests does not in any case require that we be discourteous or tactless. If rebukes are necessary upon rare occasions, they must be gentle and be delivered at the right time. Do not use vinegar; honey is much better.
8. Let us be courteous in every contact we have with our policyholders, who are our customers, and with the general public, whether we are dealing personally, by letter, or by phone. Be courteous even in the face of unreasonableness on the part of the other person. Discourtesy is a part of bad temper. Remember the old saying, “When you are right you don’t need to lose your temper; when you are wrong, you cannot afford to lose it.”
9. Let each member of the Claim Department project himself or herself into the position of the insured when his loss takes place and let us project ourselves into the position of the salesman who sold the policy, so that we will not only be competent claim men and women but cheerful and courteous individuals who may well be considered true representatives of Allstate.
10. No gifts, material considerations, or other things of monetary value are to be accepted at any time by any Allstate employee or members of the family of such employee from persons, policyholders, claimants, financial institutions, firms or corporations with whom we do business or with whom we might do business.

Again, I will write more on related issues of this topic this week. There is no place like home. Thanks to all that wrote guest Blogs in my absence.