Thursday, February 11, 2010

Do you have to contact the media before Farmers Insurance will pay your claim?

Molly McClure came home to find her heavy metal patio cover collapsed under the weight of ice and snow. The attached awning brought the backside of her roof soffitt down with it.

Molly said, “From corner to corner it’s along the whole backside of the house that’s damaged.” The real split was between Molly and Farmers Insurance after the adjustor denied her claim.

Molly said, “I’m shocked it’s not covered. I can’t believe they wouldn’t cover that because it’s obvious there is damage to the house.” The denial letter implied the awning doesn’t have walls so is not considered a structure.

Faced with $6,600 in repair costs, Molly and her father Dale have argued with Farmers Insurance representatives for three weeks. Six On Your Side contacted the media Vice President for Farmers in Los Angeles Jerry Davies, and e-mailed photos of the damage to him.

Within 12 hours Dale McClure received a call from his local agent. Dale said, “Our agent said we won which is a good thing. Its what we wanted to hear.”

Molly has been told Farmers will replace her awning, repair the soffitt and even compensate her neighbor who spent three hours helping her raise the roof soffitt.

In a statement Jerry Davies of Farmers Insurance said, “Farmers claims executives visited with the agent and went to the customer’s home for a review of the claim. After further review farmers has decided the claim will be covered. We are pleased that she is fully covered.”

However the McClures say this should be a lesson to any homeowner with a covered patio or carport. Molly said they should check their homeowner’s policy regardless of the insurance company to see if those attachments to their homes are covered.

Watch the Video


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Saturday, February 14, 2009

Farmers Insurance is one of the 10 Worst Insurance Companies for Consumers

The American Association for Justice has recently released a report entitled The Ten Worst Insurance Companies in America. You can read it here (pdf). The Alabama Association for Justice has prepared a statement on the report, which appears below:

10 Worst Insurance Companies for Consumers Ranked; No. 1, 3, 4 and 7 Sell Policies in AL

Insurance Industry Employs "Deny, Delay, Defend" Strategy, Puts Profits Over Policyholders

MONTGOMERY - In recent years, Alabama homeowners have seen sharp increases in their insurance premiums. A new study put out by the American Association for Justice ranks the 10 worst insurance companies in the U.S. for consumers and explains the overall rise in premium costs to an industry-wide strategy of denying claims, delaying payments and defending those positions as long as possible in hopes that weary claimants will settle for less than their claim is worth.

"Nationally, we've seen insurance companies continue to put profits over the best interest of their policyholders," Gibson Vance, president of the Alabama Association for Justice (ALAJ), formerly the Alabama Trial Lawyers Association, said, adding that "in Alabama it's no different."

In Alabama, State Farm (#4 on the 10 Worst Insurance Companies List) is the leading insurer of property and casualty insurance, followed by Allstate, AIG and Farmers (#'s 1, 3 and 7 on the 10 Worst Insurance Companies List). Alabamians pay the ninth-highest average homeowners premiums in the nation, which insurers say is because of hurricane risk, but interestingly only 12 percent of the state is coastal. In addition, property and casualty insurers took in $6.6 billion in premiums from Alabama policyholders in 2006 but only paid out $3.5 billion in losses.

Thousands of court documents, materials uncovered from litigation and discovery, testimony, complaints filed with state insurance departments, SEC and FBI records, and news accounts were reviewed to compile the rankings and statistics of the study. Financial documents also revealed extravagant profits and executive compensation while policyholders' claims were routinely delayed and denied. Over the last 10 years, the property / casualty and life / health insurance industries have each enjoyed annual profits exceeding $30 billion. The insurance industry takes in over $1 trillion in premiums every year. It has $3.8 trillion in assets, more than the GDPs of all but two countries. The CEOs of the top 10 property / casualty firms earned an average of $8.9 million in 2007. The CEOs of the top 10 life / health insurance earned an average of $9.1 million. The median insurance CEO's cash compensation is $1.6 million per year, leading all industries.

"The 10 worst insurance companies that made the list did so because of their shameful treatment of policyholders. As the study shows, Allstate's Your in Good Hands' motto only applies if you don't make a claim," Vance said.

10 Worst Insurance Companies for Consumers

1. Allstate (NYSE: ALL) set the standard for insurance company greed and placing profits over policyholders. Allstate contracted with consulting giant McKinsey & Co. in the mid-1990s to systematically force consumers to accept lowball claims or face its "boxing gloves," an aggressive strategy designed to deny claims at any cost. One Allstate employee reported that supervisors told agents to lie and blame fires on arson, and in turn, were rewarded with portable fridges.

2. Unum (NYSE: UNM) - Unum's actions are even more shameful considering the type of insurance it sells: disability. Unum's behavior was epitomized when it denied the claim of a woman with multiple sclerosis for three years, stating her conditions were "self-reported," contrary to doctors' evaluations. In 2005, Unum agreed to a settlement with insurance commissioners from 48 states over their practices.

3. AIG (NYSE: AIG) - The world's biggest insurer, AIG's slogan was "we know money." AIG, described by commentators as "the new Enron," has engaged in massive corporate fraud and claims abuses. In 2006, the company paid $1.6 billion to settle a host of charges.

4. State Farm - State Farm is notorious for its deny and delay tactics, and like Allstate, hired McKinsey consultants. State Farm's true motives became apparent during Hurricane Katrina; for example, it employed multiple engineering firms until they could deny the claims of the Nguyen family of Mississippi. In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims.

5. Conseco (NYSE: CNO) - Conseco sells long-term care policies, typically to the elderly. Amongst its egregious behavior, the insurer "made it so hard to make a claim that people either died or gave up," said a former Conseco-subsidiary agent. Former Conseco executives were fined when they admitted to filing misleading financial statements with regulators.

6. WellPoint (NYSE: WLP) - Health insurer WellPoint has a long history of putting profits ahead of policyholders. For instance, California fined a WellPoint subsidiary in March 2007 after an investigation revealed that the insurer routinely canceled policies of pregnant women and chronically ill patients.

7. Farmers - Swiss-owned Farmers Insurance Group consistently ranks at or near the bottom of homeowner satisfaction surveys, and for good reason. For example, Farmers had an incentive program called "Quest for Gold" that offered pizza parties to its adjusters that met low claims payments goals. Like Allstate, it also hired the McKinsey consultants.

8. UnitedHealth (NYSE: UNH) - The SEC opened an investigation into former UnitedHealth CEO William McGuire for stock backdating, which ultimately led to his ouster in 2006 and returning $620 million in stock gains and retirement compensation. Physicians have also reported that their reimbursements are so low and delayed by the company that patient health is being compromised.

9. Torchmark (NYSE: TMK) - According to Hoover's In-Depth Company Records, Torchmark's very origins were little more than a scam devised to enrich its founder, Frank Samford. Torchmark has preyed on low-income Southern residents and charged minority policyholders more than whites on burial policies.

10. Liberty Mutual - Like Allstate and State Farm, Liberty Mutual hired consulting giant McKinsey to adopt aggressive tactics. Liberty's tactics were highlighted when a New York couple's insurance was "nonrenewed" by Liberty, even though they lived 12 miles from the coast and never experienced weather-related flooding.

To see how consumers can hold the insurance industry accountable and view a full copy of the study, visit

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Thursday, December 18, 2008

Farmers Insurance Blames Santa Cruz County for Fire

Insurance giant says county liable for Trabing Fire
Kurtis Alexander - Sentinel Staff Writer

In claims filed with Santa Cruz County, Farmers Insurance Group contends county officials contributed to the spread of last summer's Trabing Fire by failing to keep roadsides free of flammable vegetation and harboring conditions that advanced the flames.

The county denies the charges, and on Tuesday, the Board of Supervisors dismissed a dozen requests by the insurance giant for nearly $3 million worth of property damage that resulted from the fire.

Attorneys for the county declined comment, citing the possibility of a lawsuit and a policy of not discussing litigation. The issue has yet to proceed to court.

The Trabing Fire started June 20 when a vehicle on Highway 1, at Buena Vista Drive, sprayed hot exhaust into dry grass. About 630 acres burned, including 26 homes and nearly 50 other buildings.

While the county is not responsible for maintaining the state highway, Farmers Insurance alleges that once the fire started, overgrown vegetation on nearby county roads fanned the flames and contributed to the destruction.

"The injury to plaintiff's insureds was approximately caused by this dangerous condition," the claims read.

Officials with Farmers Insurance declined to immediately comment.

Cal Fire Chief John Ferreira, the state's top fire official in Santa Cruz County, says the county's vegetation management practices probably had little to do with the fire and its advance.

"Even had the roadsides been mowed, the fire would have raced through there because of the weather conditions and dryness," he said.

Only bare ground would have stopped that fire, Ferreira said, something that is virtually impossible to provide.

This is not the first time the county's vegetation management program has drawn criticism.

In 2005, the Board of Supervisors imposed a ban on the use of herbicides to control roadside brush, which triggered concerns among the public, as well as some in the Public Works Department, that the county would not be able to keep up with its pruning responsibilities.

Mowing the vegetation, which many said was more environmentally friendly than spraying, takes longer and costs more.

Jane Amaral, a Farmers Insurance customer who lost a greenhouse to the Trabing Fire, said she took note when the county changed its clearing methods and has since seen more brush accumulate along Larkin Valley Road.

"When they sprayed it, it didn't come up as fast," she said. "The mowing doesn't seem to be as efficient."

Amaral, who has already received her insurance payment, is among those whom Farmers Insurance is trying to hold the county liable for.

Public Works Director Tom Bolich acknowledged Tuesday that the new vegetation management practices don't accomplish as much as when herbicides were used. But, he said, they meet their primary goal of ensuring safe clearance and visibility on 270 miles of county roads.

The claims submitted by Fire Insurance Exchange, a division of Farmers Insurance, convey the damages of 12 Farmers Insurance customers on Trabing Road, Larkin Valley Road and Azure Lane, and ask the county to pay losses on buildings as well as certain living expenses of fire victims.


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Thursday, December 11, 2008

Farmers Insurance broke the law by failing to disclose a $5 service charge

Court: Farmers Insurance broke law, can keep money
The Associated Press 12:58 p.m. December 11, 2008
SANTA ANA, Calif. — A California appeals court says Farmers Insurance broke the law by failing to disclose a $5 service charge – but the company won't have to pay back more than $115 million it collected.
The 4th District Court of Appeal in Santa Ana ruled Tuesday that Farmers did violate a state code by failing to disclose the $5 it adds to monthly premiums to cover billing costs. The fee isn't charged to customers who pay the premium in a lump sum.
A class-action lawsuit accused Farmers of unfair competition and a lower court in San Diego ordered it to repay policyholders about $115.6 million.
But the appellate court threw out the award, saying the plaintiff lacked standing to sue because he didn't show he would have rejected the policy because of the fee.


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Tuesday, November 25, 2008

Farmers Insurance Increases Homeowner Rates In California

California Insurance Commissioner Steve Poizner has allowed two of California’s largest home insurers –State Farm and Farmers – to increase premiums by a combined $115 million. State Farm customers will soon face an average 6.9% hike and Farmers policyholders’ rates will climb 4.1%, according to recent decisions by the Commissioner. In both cases, the nonprofit Consumer Watchdog had formally challenged the rates and petitioned Poizner to hold hearings pursuant to Proposition 103, but the commissioner rejected those requests.

In an economy like this, Californians are relying on the insurance commissioner to keep premiums as low as possible, but Commissioner Poizner refused to hold a hearing to investigate rate hikes that will affect more than 2.5 million homeowners. We reviewed the proposed rate increases and concluded that they were unjustified. The commissioner should not have allowed these insurers to jack up prices like this.

At least $20 million of the increase for State Farm was allowed as an exception to Proposition 103’s strict limit on excessive insurer expenses in order to let the insurance giant charge customers for “higher quality of [customer] service.” Included in Farmers’ rate hike was a special exception to the expense limit for millions of dollars allegedly spent on the company’s fraud prevention efforts. According to our review, the company did not meet the standard required to pass those costs on to policyholders.

We’ve noted that both State Farm and Farmers are financially well-positioned to pay claims resulting from the recent Southern California wildfires and do not need premium increases to address those losses. We intend to challenge the Commissioner’s decision allowing Farmers’ rate hike and is reviewing the propriety of the State Farm increase.

If the rates take effect, policyholders with State Farm will see an average increase of about $60 per year and Farmers customers will pay about $30 more on average.

With sinking economy, insurers turn to rate hikes

Insurance company profits are tied to their investment income and when the economy weakens companies try to push premiums higher in order to maintain high profits. We are concerned that other insurers will press the Department of Insurance for more rate hikes as their investment portfolios tank. As evidence, consider Allstate, which was forced to lower its California homeowners’ insurance rates by about $250 million last spring. Allstate requested a 6.9% rate hike increase for homeowners in September. That proposal is still under review by the Department of Insurance.

While everyone is feeling the sting of a bad economy, insurance companies want to pass the pain on to homeowners and other policyholders.
The insurance commissioner stands between these companies and our wallets and Californians need him to be there.

California’s insurance reform law, Proposition 103, requires insurance companies to open their books and submit to public hearings to prove their rates are adequate without being excessive. Members of the public can challenge rate hike proposals, and the commissioner must grant a hearing if the requested change exceeds 7%. It is left to the commissioner’s discretion whether or not to initiate a full hearing for changes less than 7%, as was the case in the State Farm and Farmers matters.

In recent years, Consumer Watchdog has successfully challenged several insurance rate proposals, resulting in more than a billion dollars in savings for California policyholders.

Consumer Watchdog is a non-profit, non-partisan public interest group. In addition to being their Executive Director, Doug Heller is Consumer Watchdog’s lead legislative and regulatory advocate on insurance and energy issues. Heller spearheaded the two-year battle for the nation's strongest whistleblower protections, which are now California law.


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Tuesday, May 27, 2008

Farmers Insurance Seeks Rate Increase in California

Rate increases sought for homeowners insurance
California's three biggest issuers want hikes as high as 9.3%. Insurance chief Steve Poizner's response could affect his political future.

By Marc Lifsher, Los Angeles Times Staff Writer
May 27, 2008

After dropping in recent years, the cost of insuring your home may be about to climb.

California's three biggest insurers, covering more than half of insured homes, have requests for rate hikes pending with Insurance Commissioner Steve Poizner.

How Poizner handles the proposed increases could affect his political future. As the only Republican statewide officeholder, he is being touted as his party's best candidate for governor in 2010.

The wealthy Silicon Valley entrepreneur turned consumer advocate may not want to run on a record of raising insurance premiums paid by millions of homeowners and renters.

"It's going to be very tough for him," said Amy Bach, director of United Policyholders, a national insurance consumer advocacy group. "It's going to hurt him if he approves new rates, and consumers publicize that and are critical of him."

Poizner doesn't fear repercussions from doing whatever he thinks is right, said California Department of Insurance spokesman Darrel Ng. "He is confident that should he decide to run for future political office, his good policies will be good for him politically," Ng said.

Third-ranked Allstate Corp. is seeking a rate increase of 9.3%. Industry leader State Farm General Insurance Co. and No. 2 Farmers Group Inc. are asking for a 6.9% hike.

All three companies have earned solid profits in recent years. In general, insurers say that they need more revenue from customers to cover a jump in the severity of individual claims and inflationary pressures on the cost of rebuilding homes damaged by fires and high winds -- although they didn't offer more detailed explanations for their rate increase requests.

"There's been an increase in materials for rebuilding and remodeling, and labor costs have gone up," said Jerry Davies, a spokesman for Farmers, a unit of Zurich Financial Services.

State Farm spokesman Bill Sirola acknowledges that his company "made significant profits in California between 2003 and 2007" and stresses that "those good times allow us to rebuild the capital we need for the bad times" that are sure to come.

Allstate, which recently limited its potential losses by refusing to take on new residential customers in California, contends that higher rates would enable it to increase its financial reserves so that the company could be prepared for future disasters, such as wildfires or earthquakes.

Consumer advocates counter that California insurers have little basis for raising rates. According to the Department of Insurance, insurers of residential properties paid 71 cents in claims for every $1 in policyholders' premiums last year. Most financial losses had more to do with weak performance of insurer investment portfolios related to the sub-prime mortgage meltdown, consumer groups say.

"Insurance companies are doing badly in the stock market, and they are trying to recoup their losses from policyholders' pocketbooks," said Harvey Rosenfield, the consumer attorney who wrote Proposition 103, an initiative approved by California voters in 1988 that increased government regulation of insurance rates.

Poizner is reviewing all three filings. Last May, however, he hinted he might reject Allstate's proposal and possibly order it to rebate customers should any charges be deemed excessive.

The Allstate filing, the subject of a hearing before a Department of Insurance administrative law judge, was submitted close to the end of former Insurance Commissioner John Garamendi's tenure in 2006.

Garamendi, a Democrat now serving as lieutenant governor, at the time had ordered Allstate, State Farm, Farmers and Safeco Corp. to cut rates because their customers had been filing fewer and less costly claims.

State Farm and Safeco subsequently lowered their premiums by 20% and Farmers reduced its rate by 18%. Only Allstate fought Garamendi, and later, Poizner, by seeking a substantial rate increase.

Sirola, the State Farm spokesman, welcomed the 2006 price cuts and boasted that lower rates would make the company more competitive, especially with Allstate.

But now State Farm and Farmers have changed their tune.

"We see an increase in the cost of claims," Sirola said. "We've tracked these trends over a number of years."

Allstate, meanwhile, said it felt vindicated by its chief competitors' asking Poizner for rate increases.

"It seems to show that this is an issue affecting the industry across the board," company spokesman Peter DeMarco said.

Some consumer activists, who applauded Poizner's tough stand with Allstate, say they're worried the insurance commissioner may be warming to companies' petitions to raise rates. As evidence, they point to new regulations issued last month by Poizner that critics claim were hastily considered and make it easier for companies to win approval for future rate increase requests.

Companies "see an opportunity to make more money from Commissioner Poizner," Rosenfield said. "I think they see a better chance of soaking the policyholder under Poizner than under Garamendi."

As California's insurance regulator, Poizner does not want to prejudge any company's legal filings, said Ng, the state insurance department spokesman.

He says Poizner is committed to approving rates that are fair to insurers and consumers.

"Just because companies ask for an increase doesn't mean it will be granted," Ng said.


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