“Put in wind file — do not pay bill — do not discuss”
I-Friends,
This above quote comes from a handwritten Post-It stuck to a claims file in the State Farm Catastrophe Team’s office containing a report from an independent engineering firm dated Oct. 12, 2005, that found that wind caused roof, interior structural and other damage to the totaled Biloxi home of Thomas and Pamela McIntosh, who had $1.07 million in coverage.
On Oct. 20, the engineer, Forensic Analysis & Engineering Corp., Raleigh, N.C., did a second report that found no wind damage. When Mr. McIntosh asked for a copy of his engineering report, he was told none had ever been finished, then was sent a copy of the second one, without being told of the first. Total payout: $36,000.
That’s only one of many gems to be found on ITP’s Key Documents site, which now contains all four parts of Mississippi Attorney General Jim Hood’s testimony on Feb. 28 before Barney Frank’s House Financial Services Committee.
War Eagle and I differ over which is the best part. How to choose?
I like the bit about E.A. Renfroe, the Birmingham, Ala., adjusting firm that receives 75% of its revenue from State Farm, according to Hood. Renfroe convinced a Birmingham federal judge, William M. Acker Jr., to order the return of 15,000 documents delivered to Hood by two Renfroe executives, Kerri Rigsby and sister Corri Rigsby Moran, who had become “concerned by the apparently fraudulent nature of the conduct they observed” while working in State Farm’s CAT office. Judge Acker agreed that the sisters’ conduct violated the Alabama Trade Secrets Act and the terms of their employment conduct, which required that any concerns of unethical or illegal conduct be brought to Mr. Renfroe himself, one of the company’s two shareholders, the other being his wife. Hood had argued that the records should be for the grand jury’s eyes alone.
Thus, Hood concludes: “…an employment contract in a neighboring state (Alabama) may be interpreted in a way that guts the investigative powers of a grand jury in a sister state.”
But War Eagle’s eyebrows were raised by this passage:
“As our criminal investigation progressed, we realized that some of the documented conduct may not constitute a violation of Mississippi state law, but that federal criminal charges may be appropriate.”
“Business practices observable in the handling of Hurricane Katrina claims that have caused problems for State Farm reaching as far back as the Northridge Earthquakes in California in 1994 and the rash of tornadoes in 1999 raised our concerns that State Farm’s response to disasters was part of a disturbing business model that could be applied in other states in future disasters.
Hood also opens the Pandora’s Box of “ACE,” State Farm’s “Advancing Claims Excellence” program designed by consulting powerhouse and Enron figure, McKinsey & Co., based on 52d Street, which a 1995 State Farm newsletter said would take “a billion dollars of costs out of our system every year!” A 1997 memo asked State Farm branch offices to return all ACE-related documents to Bloomington because “we anticipate Advancing Claims Excellence may be an issue in future lawsuits.”ACE is the progeny of Allstate’s “Claims Core Process Redesign,” designed by McKinsey in 1992 and revealed in last year’s landmark book, From “Good Hands” to Boxing Gloves; How Allstate Changed Casualty Insurance in America,” by David J. Berardinelli et al.
More on all this later, of course, in ITP: Catastrophe Modeling Among the Magyar Peoples.
Thanks to Bela Kun, Imre Nagy, Franz Liszt, George Soros, Frank Lowy and the good folks at the Eklektika on the Nagymezu.