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CNN Expose on Allstate and State Farm

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Below is a Transcript of CNN’s Expose on Allstate and State Farm. A friend sent this to me without a link. As soon as I find one I’ll send it to you. However, it’s a good read as to why you need to hire an attorney if you are injured in automobile wreck.

Wed., Feb. 7, 2007
Insurance companies fight paying billions in claims
COOPER: Traffic accidents, of course, are a fact of life. So is dealing with
insurance companies. You pay them to protect you. That’s the idea. But some
accident victims say they’re being forced to settle or go to court because
the claims are denied.

We wanted to know the facts, and in a CNN investigation, we looked into
whether some big name insurers are more interested in profit than

CNN’s Drew Griffin tonight, keeping them honest.

DREW GRIFFIN, CNN CORRESPONDENT (voice-over): I happened in Santa Fe, New
Mexico, much the way Allstate describes it in its commercials.

Roxanne Martinez, driving down Sorios (ph) Road about noon, when the SUV
pulled out from Tisuki (ph) Drive.

ROXANNE MARTINEZ, ACCIDENT VICTIM: I remember, you know, like hitting the
driver’s side window. And then I just — I don’t know.

GRIFIN: The passenger side had been sideswiped. On the driver’s side,
Roxanne was smashed against the window.

MARTINEZ: I had upper back pain. I went to chiropractors, physical
therapists, massage therapists, acupuncture. They told me that my spine was
damaged. GRIFFIN: The person driving the SUV that hit Martinez was ticketed
and had insurance, Allstate. That was good because Martinez was racking up
bills, plenty of them, CT scans, doctors visits, x- rays, all bills she
thought Allstate would cover.

But after three years of fighting over bills and still hurting from the
accident, Allstate came with a “take it or leave it offer,” $15,000.

MARTINEZ: That was for, I guess, the car, medical. I mean, that was
everything. You know, I thought they’d pay all your bills and, you know,
keep on paying your medical bills.

GRIFFIN: Roxanne Martinez was battling Allstate, the second biggest auto
insurer in the nation. What she didn’t know was that both Allstate and the
largest auto insurer State Farm, had changed the way they handled so-called
minor crashes like hers.

(On camera): In an 18-month investigation across the country, CNN found that
if you are injured in a minor accident, chances are high the two companies
would challenge your medical claim, offering you barely a fraction of your

(Voice-over): They would do it by forcing people into court, dragging out
court cases for years and by convincing the public it was all designed to
fight growing fraud in the car accident business.

But documents examined by CNN indicate the motive was profit. And Allstate
has gone to great lengths to keep those documents secret. In two states
where Allstate has been sued, the company has defied judge’s orders to make
the documents public.

According to Nevada Insurance Law Professor Jeff Stempel, the new get tough
strategy is adding up to billions in profit for the insurance companies and
little, if anything, for the public.

JEFF STEMPEL, UNLV. LAW PROFESSOR: We can see that policyholders
individually are getting hurt by being dragged into court on fender bender
claims. And yet we don’t see collateral benefit in the form of reduced
premiums, even for the other policyholders. So, I think now we can say to
continue this kind of program is, in my view, institutionalized bad faith.

GRIFFIN (on camera): We wanted to ask Allstate and State Farm all about this
on camera in an interview, but they both said no. Allstate did send us an

(Voice-over): In an e-mail, All State told us it did not believe it would
have any real opportunity of being successful in getting CNN to do a
balanced report.

State Farm sent an e-mail, too, saying, “we take customer service seriously
and seek to pay what we owe, promptly, courteously and efficiently, and we
handle each claim on its own merits.”

And State Farm also added this — “Any attempt to generalize that State Farm
has adopted consultant recommendations as other insurers is just plain
wrong. Who is the consultant State Farm refers to? The giant of the
consulting industry, McKinsey & Company, hired by both State Farm and

McKinsey and company said it does not discuss any of its clients’ business.
And at the same time Roxanne Martinez thought she was in good hands with
Allstate, Allstate was advised by McKinsey in writing to put boxing gloves
on those good hands.

That strategy, says Martinez’s lawyer, was to take valid claims and pay
pennies on the dollar.

Attorney David Berardinelli’s has written a bout about it, and is
challenging Allstate’s strategy in what he hopes will be a class action

(On camera): So if you wanted to increase profit, you would try to chop the
small claim?

DAVID BERARDINELLI, ATTORNEY: Sure. If you could take $1,000 off of a
million claims, do the math.

GRIFFIN: A lot of money.

BERNARDINELLI: A lot of money.

GRIFFIN (voice-over): Shannon Kmatz was an Allstate claims agent in New
Mexico before she became a cop. She says she was trained by Allstate to
treat most minor accident victims as frauds and offer them as little as

$50. They have minimal damage to the back of their vehicle and they’re
claiming that they are hurt.

GRIFFIN: Then Kmatz got to see the insurance strategy firsthand from the
other side.

KMATZ: I turn around and get in a car accident myself. My car has minimal
damage, and I can’t walk. And I realized, whoa, what am I doing? This is not

JIM MATHIS: It really came down to three basic elements. A position of
delay. A position of denying a claim. And then ultimately, of course,
defending that claim that you denied.

GRIFFEN: The three D’s?

JIM MATHIS: Exactly.

GRIFFIN: Jim Mathis is a former insurance company insider who now testifies
against insurance companies in court.

MATHIS: And the profits are huge. Profits are good. And as long as the
public allows this to occur, the insurance companies will get richer and
people will not get a fair and reasonable settlement, period.

blanket deny claims on any grounds whatsoever.

GRIFFIN: Robert Hartwig is president of the Insurance Information Institute,
an insurance industry trade group.

HARTWIG: What insurers are trying to do is monitor costs. And every insurer
is under the same pressure to do it.

GRIFFIN (on camera): And this Allstate training manual obtained by CNN
details how that was going to be done. By forcing what the manual calls
smaller walk away settlements.

(Voice-over): The walk away settlement for Roxanne Martinez was a “take it
or leave it offer” of $15,000 that came three years after her accident. She
said that would pay a little more than half of her costs.

MARTINEZ: It’s kind of hard when you’re thinking, are they going to leave me
broke? Or you know what? I mean, that’s what — that was very stressful.


COOPER: But Roxanne Martinez decided that instead of taking Allstate’s
offer, she would take Allstate to court. We’ll tell you what can happen if
you take an insurance company to court, next on 360.


COOPER: Before the break, we introduced you to a woman who said she was