New documents reveal State Farm program to slash storm payouts

An Oklahoma judge in late August ordered State Farm to release formerly sealed documents as part of a lawsuit, providing an inside look at the company’s claims process in storm-prone states. 

The backdrop: Homeowners Neil and Lacy West sued State Farm in 2023 after hail left the family with $50,000 in damages, and State Farm offered to pay just 10 percent of the estimated cost. 

• Many homeowners across the U.S. have filed similar suits — over 1,000 legal cases are ongoing against the insurance giant. 

What’s happening: According to the newly released documents, State Farm launched a new program in 2020, dubbed the “Wind/Hail Initiative,” to cut down on its roofing claims costs. 

• The company retrained employees on how to accept and deny insurance claims, required supervisor sign-off for every roof replacement, and created a “Hail Reconciliation Unit” to challenge public adjusters’ damage evaluations, according to an attorney’s assessment of the documents. 

Zoom in: In an internal message, one State Farm executive said that the company saw a “$1.4 [billion] decrease” in payouts in the first year of the program. 

• Before, the company replaced five roofs for every one it repaired. After the new program, that ratio fell to two to one. 

Why it matters: Contractors are paying the price firsthand. “There’s been apparent damage from either wind or hail, and they’ve just completely denied it,” said Thomas Byus, who started Oklahoma-based Flex Roofing and Restoration in 2018. “They say it’s either wear and tear, or old damage, or just make up any excuse as to why they’re not gonna cover it.”

• Roofers can try to help the homeowner’s case by submitting supplements — an additional request for funds to cover extra repairs — to the insurer after the initial inspection. But contractors are caught holding the bag if the carrier denies the supplemental claim, Byus noted. 
• That’s where having a Rolodex of public adjusters makes the difference. “If they don’t have much experience with dealing with insurance carriers … then I would say go with the public adjuster right off the bat,” he said.

The other side: In statements to media outlets, State Farm has denied wrongdoing and said it has paid more than $1 billion to Oklahoma customers for wind and hail damage to their homes and properties. 

• “State Farm is committed to meeting the needs of our policyholders in Oklahoma and we’re proud of our team’s work to help communities recover after disaster strikes,” the company said. 
• “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,” it added.

What they’re saying: Byus has thought of leaving the insurance market altogether. “I like that it’s being exposed, but I feel like they’re gonna shell out a bunch of money and pay the right [people] to cover them up in some way,” he said.

Looking ahead: The Oklahoma judge ordered State Farm CEO Jon Farney to testify in an upcoming deposition. The West family’s suit goes to pre-trial on October 22, where a potential trial date may be scheduled. State Farm also requested a change of venue or court date due to Neil West’s upcoming election for district judge on November 3.

Editor’s note: This story has been corrected. An earlier version misstated that the West’s court date was scheduled for December 7, but the court hasn’t set an official date yet.