State Farm Is Embroiled in Scandal—and Things Just Got Worse

In May 2025, I printed the primary article of what would show to be roughly 50,000 phrases’ price of insurance coverage tales. The maiden effort targeted on Oklahoma Insurance Commissioner Glen Mulready’s sneaky ploy to unfold a false declare—by way of The Wall Street Journal — that hail alone, and never insurance coverage firms’ insurance policies, defined Oklahoma’s outsize householders charges.

A few months later, I obtained an nameless textual content from somebody accustomed to my protection, advising me to attend an upcoming listening to in a case generally known as Nida v. State Farm.

Nida was a consolidation of 9 instances, which in flip had been consultant of 125 bad-faith instances in opposition to State Farm. The instances had been remarkably comparable: A house would undergo roughly $30,000 in harm, and State Farm would produce a lowball provide of 10 p.c of that quantity in compensation.

The listening to was held in a cavernous previous courtroom in Oklahoma City, with nice murals on the partitions, historical nicotine stains on the ceiling, and sufficient arduous wood pews to accommodate the indicted congregation of a megachurch. But aside from the attorneys, I used to be just one in the echoey room.

The Nida instances, I discovered, had been settled kind of instantly after plaintiffs’ attorneys received entry to the key paperwork and started deposing State Farm executives. The paperwork remained underneath a protecting order as a result of the instances had been settled. But then State Farm briefly—and unintentionally, the corporate later claimed—made the phrases of the settlements public. A brand new lawsuit was filed, and in courtroom, I witnessed one of many plaintiffs’ attorneys reveal the settlement quantity of simply one of many 125 instances.

Not $30,000. Not $50,000 or $100,000. Just one case settled for $3 million.

Multiply that by 125. Round all the way down to be secure (not everybody would have essentially been in line for such an eye-popping payout). That’s how a lot State Farm appeared keen to pay to guard the key paperwork.

The Nida case is ongoing, however that was not State Farm’s largest drawback. Their drawback was that it by no means stopped hailing in Oklahoma.

In early December, I wrote about a denied declare from a Tulsa police lieutenant named Billy Hursh, a sort and clean-cut man who, alongside his spouse and son, exhibited the nostalgic attraction of a Hummel figurine. With that, the trickle of instances become a deluge. A fellow journalist later informed me that she seen 10 new roof declare instances being filed day-after-day in courts throughout the state.

A number of days after my Hursh piece ran, Attorney General Gentner Drummond filed to help in the instances. Drummond charged that State Farm had dedicated racketeering offenses. (It wasn’t the primary time that State Farm had been threatened with RICO legal guidelines. In 2018, the corporate paid $250 million to wriggle out of a lawsuit that alleged it had bought a seat on the Illinois Supreme Court.)

It was about then that the Oklahoma Supreme Court obtained concerned, with each the key paperwork and the AG’s intervention. State Farm was producing writs of prohibition like they had been gobbling aspirin, and I wrote about one other bad-faith case: The insurance coverage firm was combating tooth and nail to disclaim the roof declare of none aside from a retired chief justice of the Oklahoma Supreme Court.

I wrote tales about secret paperwork from the previous. A State Farm whistleblower from the Nineteen Nineties—a girl who has since gone lacking—left behind a sheaf of paperwork that had been leaked to her after she appeared on an episode of 60 Minutes. Other pleadings in Oklahoma sneaked in particulars of the “process” that Allstate had first tried out on residents of Albuquerque, New Mexico, in 1997.

All the whereas, each plaintiffs’ attorneys and attorneys for State Farm refused interview requests concerning the quickly accumulating instances in Oklahoma. (State Farm’s company media middle has additionally persistently refused requests for interviews with State Farm executives.)

Then phrase got here: A decide in Comanche County had ordered State Farm to supply 800,000 paperwork. State Farm did so, however designated all 800,000 paperwork confidential. The plaintiffs argued that this was in violation of Oklahoma regulation, and the decide agreed. He ordered the discharge of 31 paperwork out of the 44 requested by attorneys, totaling 159 pages. It was the primary time any of the State Farm Documents had develop into public. I drove three hours to Comanche County to seize them earlier than State Farm may file a keep.

One determine on the coronary heart of the Great Oklahoma State Farm Roof Claim Saga is a girl named Nicole Manduca, a 27-year State Farm veteran who rose by the ranks from declare consultant to senior chief and director of property and casualty operations, amongst different titles.

In earlier tales, I had reported that Manduca had bragged about setting an arbitrary objective of a 50 p.c discount in payouts in the Wind/Hail Initiative, representing billions of {dollars} of denied claims. The new paperwork reveal that early in 2020 Manduca recognized full roof replacements on wind and hail claims as the corporate’s “biggest bucket of opportunity” for decreasing declare payouts.

In newly launched e-mail and textual content exchanges, Manduca ceaselessly referred to what she referred to as “the hypothesis”: Before 2020, she mentioned, State Farm was awarding full roof replacements on 85 p.c of small hail-damage claims and 65 p.c of wind claims. Citing knowledge from the consulting large Accenture, Manduca claimed that nationwide “averages” on hail and wind roof replacements had been 8–10 p.c and 5 p.c, respectively.

Presumably, “the hypothesis” was that State Farm may save a load of cash if full roof alternative charges had been in line with the nationwide “average.”

To perceive that little bit of sophistry, you must step into the previous.

Insurance firms have at all times sought to finesse additional income. The lunge towards greed, nonetheless, took a quantum leap ahead in the Nineteen Nineties, when Allstate referred to as on corporate supervillain McKinsey and Company to assist the insurance coverage trade scrappily claw its manner from extremely worthwhile to too large to fail.

That’s the place the story begins repeating. After receiving a McKinsey “fact-gathering” report totaling greater than 12,000 pages, Allstate recognized the most effective space in which to pursue “opportunity dollars”: roof harm in wind and hail claims. In the years to come back, Allstate would safe Accenture knowledge suggesting that nationwide roof alternative charges had been considerably decrease than what sure firms had been then paying out.

There was an issue, nonetheless. The Accenture knowledge that first Allstate, after which State Farm, claimed to depend on has confirmed not possible to confirm. When requested to offer proof of the info in courtroom, State Farm’s attorneys had been compelled to say that they couldn’t.

In devising and championing the Wind/Hail Initiative in Dallas in 2020, Manduca and a number of other different State Farm executives repeated what Allstate did in Albuquerque in 1997. Both obtained caught with their hand in the cookie jar and paid a worth (Allstate has misplaced a number of courtroom instances over the previous 20 years), however not sufficient of a worth to vary their habits—at the least to date.

The insurance coverage giants additionally obtained assist from the courts. In a landmark 2003 resolution in Campbell v. State Farm, the Supreme Court shot down a $146 million punitive judgment in opposition to the corporate, successfully inoculating it in opposition to the form of huge award which may truly compel a company unhealthy actor to vary its reprehensible methods.

Apart from the choice, the oral argument in Campbell v. State Farm is notable for a quote from Justice Antonin Scalia. Rather than the form of flippant quip that has solidified Scalia’s legacy as a conservative icon, his feedback in Campbell had been a plaintive name, a winsome acknowledgement that there have been few methods left to carry insurance coverage firms accountable.

“No amount of money will suffice; maybe we have to send them to jail,” Scalia mentioned. “Whatever it takes to stop them. I mean, what if nothing will stop them but sending them to jail?”

They don’t simply come out and say it.

The inside State Farm paperwork learn just like the faux-sacred texts of a Ponzi scheme cult. Neutered acronyms abound. The paperwork communicate of “quality” after they imply “arbitrarily reducing payouts.” An elevated “error rate” means an worker will not be being sufficiently ruthless in denying claims. The “Art of the Conversation,” a coaching module provided to claims handlers tasked with delivering information of declare denials to insureds, is the whitewashed technique of instructing a human being to be merciless to a different human being.

What turns into palpable in the paperwork is that the largest drawback the insurance coverage firms had in implementing craven revenue initiatives was the reluctance of managers and brokers and declare handlers to get totally on board. Internal communications usually learn just like the goofy rhetoric of a cult chief scheming one of the best ways to show determined initiates into brainwashed acolytes.

Hence, Nicole Manduca, in the early months of the 2020 rollout in Dallas, wrote in newly launched textual content exchanges to colleagues that “expanding/broadening management review on higher hail/wind severity threshold nets us the most gain.” In different phrases, get your managers in line, or it doesn’t work.

Manduca’s nervousness is clear as she sweats knowledge from the early months (“Concerned to see the larger % for Wind and Hail is flat”), as is her pleasure when instruments develop into out there to trace knowledge on the Wind/Hail Initiative (“I’m drooling. :o3:o3:o3”).

By 2023, the jury was in: The Hail/Wind Initiative was wildly worthwhile, with $1.4 billion in decreased indemnity from 2020 to 2021. Before the initiative, Manduca reported internally, State Farm changed 5.6 roofs for each roof they repaired. Since then, the variety of complete roofs changed had fallen to 2.1. The Wind/Hail Initiative was reaping billions.

In August 2023, whilst bad-faith roof instances had begun to pile up in Oklahoma, the newly launched paperwork present that the Wind/Hail Initiative had develop into a topic of dialogue at weekly conferences of a gaggle generally known as the Fix Profit Task Force. In brief, State Farm wasn’t involved by the roof claims in Oklahoma or the tens of hundreds of thousands of {dollars} they’d pay to make these instances go away. Instead, they doubled down, and now the very highest reaches of State Farm had been getting concerned. The morning conferences of the Fix Profit Task Force had been referred to as by State Farm CFO Jon Farney, who would quickly be promoted to develop into simply the sixth CEO in State Farm’s 104-year historical past.

Letters from three State Farm captive brokers embedded in the paperwork launched final week—every written because the Hail/Wind Initiative took maintain, and every expressing an alienation from the corporate that was equivalent to the agent who mentioned it operated like a secret society—inform the story of what has develop into of an iconic American model.

An August 2021 letter from Dublin, Ohio–primarily based State Farm agent Chad Harris described his expertise of getting pulled right into a declare dispute however being unable to speak with anybody from State Farm’s claims division. Harris complained that claims had been now being dealt with by outdoors contractors, and that nobody at State Farm was empowered to resolve a battle.

“This is terribly embarrassing for State Farm…and me, as the local agent,” Harris wrote. “This claim highlights all the current dysfunction within our SF claims operations and processes.”

Two months later, Louisville, Kentucky–primarily based State Farm agent Tracy Haus wrote to management to say that though she “bleeds State Farm logos” she was now nervous for State Farm’s repute: respected firms, she mentioned, had been now saying that State Farm was no totally different from Allstate.

“The old slogan of ‘we pay what we owe, not a penny less, not a penny more,’ is not the case right now,” Haus wrote. “We now pay really low and customers fight to get what we owe them in more and more cases…. We need a drastic change before it’s too late.”

Two weeks after Haus’s letter, Massillon, Ohio–primarily based State Farm agent Robert Garner wrote to management to explain the affect of a denied roof declare on his enterprise. He was dropping a number of purchasers over a single declare, Garner mentioned, and, like Harris, he was struggling to speak with the claims division.

“This is just one example of many other clients that feel the same way,” Garner wrote. “This is the first time in my 15 years I have had any issue with claims.”

What the brokers did not understand in 2021—that being sidelined in the declare course of was all a part of the Wind/Hail Initiative—should have develop into obvious in May of this 12 months, when State Farm introduced pay cuts of 35–40 p.c for 19,000 captive brokers throughout the nation.

The Great Oklahoma Roof Claim Saga has reached a fever pitch.

Today, once I attend a State Farm listening to in Oklahoma, there are usually three or 4 reporters in the courtroom, and cameras ready in the hallway representing many of the media shops in the state. Plaintiffs’ attorneys have begun giving interviews. Morose State Farm attorneys proceed to refuse remark.

Tuesday’s runoff election might sign whether or not Oklahomans are bored with feeble excuses for skyrocketing householders charges and the arbitrary denial of legitimate claims from wildly rich insurance coverage firms.

Regardless of the end result of the election, the litigation will proceed. Trial dates that took months to safe are quickly approaching, and in the identical case that compelled State Farm handy over 800,000 paperwork, plaintiffs’ attorneys had been granted a deposition of State Farm CEO Jon Farney. In a separate case, Nicole Manduca can be deposed as nicely—for the third time.

Two questions stay. First, will State Farm as soon as once more settle out of courtroom, not for tens of hundreds of thousands of {dollars} for 125 instances this time, however for no matter it should take to quash 1,000 excellent Oklahoma instances? And second, will plaintiffs’ attorneys and attorneys normal throughout the nation comply with the lead of Oklahoma and additional compound State Farm’s woes?

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