Kentucky Injury Law Blog

Following an 18-month investigation into the way the nation’s largest auto insurance companies handle claims involving minor motor vehicle accidents, CNN last year reported that there is a good possibility that the two largest insurers—State Farm and Allstate—will challenge any minor medical claim and offer to pay only a small fraction of all accident costs.

The news network says that the confidential documents it examined revealed that these actions are motivated by profits—papers that the companies are determined to keep private. The insurers reportedly execute this strategy by dragging victims of minor car collisions into court for cases lasting years in the name of supposedly fighting fraud.

When given the opportunity to respond to the allegations, both companies refused to engage in a discussion. State Farm said it addressed each claim on its own merits and that generalizations that it had adopted consultant recommendations like other insurance companies was inaccurate. The consultant the insurer was referring to, McKinsey & Co., works for both State Farm and Allstate.

One former Allstate claims agent, Shannon Kmatz, says that the company trained her to treat minor accident cases as fraudulent and to offer victims as little as possible. She says she has offered injury victims of minor accidents payments as low as $50.

Former insurance company insider Jim Mathis says the insurers’ strategy involves three D’s: delaying, denying, and defending the claim. The end profits for insurers that limit accident payments have reportedly been huge.

One victim involved in a rear-end accident, Ann Taylor, says that State Farm only offered her $2,000, even though her medical and recovery costs and lost wages related to her herniated disc muscle tears ended up costing $15,000.

Another injury victim initially offered $15,000 by Allstate spent years fighting her case in court until a jury awarded her $167,000 plus interest. According to industry insiders, however, 80-90% of accident victims do not contest what insurance companies offer them.

In Kentucky, our Louisville personal injury law firm helps clients file bad faith claims against insurers that refuse to pay accident claims or make unreasonably low offers to injury victims.

Related Web Resources:

Auto insurers play hardball in minor-crash claims, CNN.com, February 9, 2007

AAJ Report: Ten Worst Insurance Companies in America, July 9, 2008 (PDF)