State Farm’s secret roof-claim policy cut payouts by $1.4 billion, sparking lawsuits

Unsealed court filings expose State Farm’s 2020 decision to rewrite its criteria for hail and wind roof claims, a move that lowered indemnity payments by about $1.4 billion between 2020 and 2021. Emails show the company reduced roof-replacement ratios from 5.6 to 2.0 per repaired roof and later to 2.2, while internal calculations suggested each percentage-point cut in approvals equated to roughly $78.8 million in savings.

The strategy, driven by a belief that the insurer was too generous compared with rivals, involved outside consultant Haag Engineering, whose damage metrics conflicted with State Farm’s policy language. Agents in Kentucky and other states reported that adjusters were consistently low-balling estimates and rarely replacing roofs. Oklahoma Attorney General Gentner Drummond filed a RICO suit alleging a “Denial Enterprise,” and more than 1,000 related lawsuits are ongoing. State Farm’s legal team argues the records merely show one outlet claim-review practices, and the company says bad-faith suits represent about 1% of its roughly 30,000 annual claims.