Appeals court upholds certification of class-action suit against Farmers Insurance
OKLAHOMA CITY – The Oklahoma Court of Civil Appeals has upheld certification of a class-action lawsuit against Farmers Insurance Company Inc. and related companies over the way Farmers processed, reviewed and denied medical-pay claims for some policyholders.
According to the court’s opinion, in late 2000 Farmers started having such claims reviewed by Zurich Services Corp., a claims management company owned by Farmers that maintains a large database of charges billed by medical providers.“ZSC compares each incoming Farmers’ policyholder’s medical bill against the database, and ‘flags’ a charge as potentially unreasonable whenever it exceeds the 80th percentile of all charges in the database for the relevant PSRO (Professional Standards Review Organization) service,” the court said.
Farmers contended that Zurich individually reviews flagged charges, finding some unreasonable and notifying the provider or policyholder it is reducing or denying payment.
In their lawsuit, the plaintiffs allege that Farmers systemically uses the 80th percentile audit/review process to wrongfully deny payment or reimbursement of policyholders’ medical expenses in a predetermined way, regardless of whether a particular expense is unreasonable, mainly to reduce Farmers’ costs.
The plaintiffs sought class certification only on a breach of contract claim, although they have alleged causes of action for bad faith, unjust enrichment, fraud, deceit and conspiracy to commit a tortuous act.
The trial court’s order, which granted class certification, stated that Farmers writes the policy in 14 states, including Oklahoma. The trial judge found that, in Oklahoma alone, thousands of claims were adjusted annually using the 80th-percentile method.
That court also found that each claim was small and costly to litigate individually and that such litigation would be burdensome to the courts.
Writing for the court, Presiding Judge Doug Gabbard said the record supports that finding.
“Having considered all the facts and circumstances, we find that the core issues of the case present common factual and legal questions, and also find that a class action is superior to other forms of adjudication,” the appeals court concluded.
A Farmers attorney declined to discuss the court’s opinion.
Farmers could seek a rehearing before the civil appeals court or ask the Oklahoma Supreme Court to hear the case. The certification order could also be modified by the district court.
A plaintiff’s attorney did not return a phone call seeking comment.