Insurer Policy Rewrites Could Complicate Property Damage Claims Nationwide
State Farm reduced roof claim payouts by $1.4 billion between 2020 and 2021 after internally revising how adjusters evaluated hail and wind damage, according to documents unsealed by a Comanche County, Oklahoma judge. Internal emails show the company slashed its roof replacement-to-repair ratio from 5.6-to-1 down to 2.0-to-1 in a single year. One claims manager calculated that each percentage point reduction in approved claims was worth $78.8 million annually across the company’s claim volume. The documents surfaced in litigation now involving nearly 1,000 Oklahoma homeowners.
State Farm brought in Haag Engineering to retrain adjusters on damage assessment, but internal correspondence indicates Haag’s engineering standards did not align with the company’s own policy language. Company agents flagged the problem directly to leadership, with one Kentucky-based agent writing in 2021 that inspectors were “low balling at best and almost NEVER replace a roof.” A 2020 internal business plan identified roofs as the company’s “biggest bucket of opportunity,” noting they accounted for 70 percent of claims and 57 percent of payouts. State Farm maintains the changes ensured it was “properly paying claims” and not approving payments with “no evidence of damage.”
Oklahoma Attorney General Gentner Drummond sued State Farm in June under the state’s anti-racketeering statute, calling the operation a “Denial Enterprise” and suggesting criminal charges could follow. Attorneys representing policyholders argue the documents show a mismatch between what State Farm sold and what it delivered, a violation of insurance law in most jurisdictions. State Farm says bad-faith lawsuits represent roughly 1 percent of the 30,000 claims it handles each year in Oklahoma and that it has paid more than $1 billion for wind and hail damage in the state over the past two years. Only 31 documents have been unsealed so far, with hundreds of thousands more still under court seal.
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