Shawn Ashley, Quorum Call
(QC) Attorney General Gentner Drummond filed a new lawsuit Wednesday against State Farm Fire and Casualty Company, alleging the insurer engaged in a coordinated scheme to wrongfully deny or underpay legitimate hail and wind damage claims submitted by Oklahoma homeowners.
The new lawsuit follows Tuesday’s Oklahoma Supreme Court decision that determined that the state’s claims must be pursued in a separate action.
Filed in Cleveland County District Court, the new lawsuit alleges State Farm implemented an internal program known as the “Hail Focus Initiative” that was designed to reduce roof replacement approvals and minimize claim payments to policyholders across Oklahoma. According to the petition, State Farm marketed homeowners policies as providing replacement-cost coverage for storm-related damage while allegedly using undisclosed internal standards to limit coverage and deny valid claims.
“This case is about more than individual claim disputes,” Drummond said in a press release. “The allegations describe a corporate scheme that threatens the integrity of Oklahoma’s insurance marketplace and undermines public confidence in an industry families rely on when disaster strikes. My office will continue fighting to ensure Oklahoma consumers receive the benefits they paid for and the fair treatment they deserve.”
The lawsuit alleges State Farm engaged in a pattern of deceptive and fraudulent conduct that harmed policyholders throughout Oklahoma by using undisclosed claims-handling practices, restrictive internal standards and outcome-oriented engineering reviews to reduce claim payments and increase corporate profits. The Attorney General’s Office asserts claims under the Oklahoma Consumer Protection Act, and the Oklahoma Racketeer-Influenced and Corrupt Organizations Act, as well as common-law claims for civil conspiracy and unjust enrichment. The state is seeking injunctive relief, civil penalties, disgorgement of profits, restitution and other relief authorized by law. “It is unacceptable that Oklahomans are paying rising homeowners insurance premiums yet receiving less protection in return,” Drummond said. “Inflation and weather do not explain, let alone justify, the widening gap between what Oklahomans pay and what they receive. This new action will prevent State Farm from continuing to delay the
matter with procedural posturing.”
The Oklahoma Supreme Court ruled Tuesday an Oklahoma County District Court judge erred when she allowed Drummond to intervene in a civil suit filed against State Farm. “It is a fundamental procedural rule in Oklahoma that an intervenor must take the case as they find it; they are not permitted ‘to enlarge the issues or compel an alteration of the proceedings, or to include matters not germane to the issues presented,’” the court wrote. “Indeed, an intervenor ‘is admitted to the proceeding as it stands,’ and cannot be allowed to expand the litigation beyond its original scope or character.”
The original case, the court explained was a private contract dispute. Drummond’s intervention introduced “…quasi-criminal elements that would not only impermissible broaden the scope of this civil contract dispute but also the nature of the recovery sought.” The court added, “Such an expansion is impermissible under Oklahoma law.” The court noted, “The proper recourse could be for the Attorney General to bring his claims in a separate lawsuit…” that would avoid the restraints on intervention.