Suit accuses Allstate of underpaying claims; similar case against State Farm advances

OKLAHOMA CITY — Allstate Insurance Co. was accused Tuesday of engaging in a scheme to pump up corporate profits by underpaying on claims filed by Oklahomans to cover storm damages on homes.

Attorney General Gentner Drummond filed a lawsuit in Cleveland County alleging that Allstate employed a "disaster payment minimization scheme" designed to reduce claim payments and increase profits.

Similar lawsuits, including one filed by a Broken Arrow couple, have been filed against State Farm Fire and Casualty.

In the Allstate suit, Drummond accused the company of selling homeowner policies that were supposed to provide replacement cost coverage on storm damages, but using "undisclosed" internal standards and claims-handling practices to limit coverage and reduce payments on claims.

Drummond said Allstate unfairly altered its claims process by limiting the authority of field adjusters, relying on third-party inspectors and reviewers, and applying restrictive internal standards that were not disclosed to policyholders. He said the practices resulted in the denial or underpayment of valid storm-related claims across the state.

"This lawsuit is about protecting Oklahoma homeowners and holding insurance companies accountable when they fail to honor the promises they make to policyholders," Drummond said in a media statement. "Insurance companies have a legal and contractual obligation to treat policyholders fairly, communicate honestly and evaluate claims in good faith."

The state is seeking injunctive relief, civil penalties, "disgorgement" of profits and restitution for affected consumers.

The AG filed a similar lawsuit against State Farm on June 24, a day after the Oklahoma Supreme Court issued a ruling that the state could not join a bad-faith claim lawsuit previously filed by one of the company's policy holders. In that case, Broken Arrow residents Billy and Lacy Hursh allege that State Farm denied their claim for serious roof damage after a hailstorm and left them to cover about $22,000 out of pocket.

The Whitten Burrage law firm represents about 600 other Oklahoma homeowners with similar claims against State Farm. More than 900 such lawsuits have been filed statewide.

The Hursh case, filed in Oklahoma County District Court, advanced a step on Tuesday after Judge Amy Palumbo ruled that State Farm was out of compliance with earlier discovery orders and directed the company to turn over internal underwriting and claims-handling documents.

"This was a huge win for Oklahoma homeowners," attorney Hannah Whitten said. "This ruling means our clients will finally get real access to the internal records that show how State Farm handled these claims. We look forward to proving our allegations that State Farm intentionally reduced roof payments it owed to Oklahoma families."

In a media statement, State Farm strongly denied any allegations that it acted to deny people payments on legitimate claims.

"State Farm is facing intensified scrutiny in Oklahoma as media reports and lawsuit allegations frame individual claim disputes as evidence of a broader, intentional effort to underpay or deny wind and hail roof claims, an accusation we take seriously and strongly reject," the company said. "This coverage is shaping public perception at a time when many homeowners are already stressed by storm damage, rising repair costs, and higher premiums. Oklahoma's high frequency of wind and hail events, combined with inflation in materials and labor, is a major driver of homeowners insurance cost pressure statewide. Even amid the criticism, State Farm has paid more than $1 billion to Oklahoma customers for wind and hail losses over the past two years and remains committed to serving communities through more than 300 local agents and ongoing work with state regulators."

Allstate didn't immediately respond to an emailed request for comment on the suit filed Tuesday.