One of the most common frustrations among licensed drivers is the reaction of their insurers when the driver makes a claim for damage caused by another driver. The Montana Commission of Securities and Insurance (CSI) just reduced the frequency of such instances by settling a giant case involving a number of bad faith actions by State Farm during a two-year period from November 1, 2019 to April 1, 2021.
The investigation
The CSI began investigating State Farm’s claims settlement practices after receiving a number of complaints from State Farm policy holders. According to media accounts, the policy holders alleged that State Farm followed a uniform practice if it was asked to pay a liability claim on behalf of a driver insured by the insurance giant. Instead of paying the claim based on the facts of the case, State Farm would routinely and arbitrarily assign a relatively small percentage of fault say, 10-15%, to the victim, thereby reducing the amount that it owed the victim.
The settlement
The CSI announced that State Farm has agreed to pay a fine of $2,000,000 for claims handled in this matter prior to conclusion of the investigation. The commissioner said that State Farm was not paying the amounts required by law and were unlawfully shifting the burden of injuries and property damage to the victims.
The settlement agreement gives State Farm a contingent refund of half of the fine, or $2,000,000, if it polices its claim settlement policies within one year. State Farm is also obligated to pay reparations to persons who were entitled to receive compensation. State Farm said that it has already reviewed 2,400 Montana claims and paid $1,182,927 in reparations to individuals who were wrongfully denied a payment from the insurer.