Anderson Cooper on car wrecks & Allstate

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
policyholders.

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
expenses.

(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
e-mail.

(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
Allstate.

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
lawsuit.

(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
possible.

SHANNON KMATZ, FORMER ALLSTATE CLAIMS AGENT: $100? Yes, I've offered people
$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
right.

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.

ROBERT HARTWIG, PRES. INSURANCE INFORMATION INSTITUTE: Insurers don't
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.

(END VIDEOTAPE)

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.

(COMMERCIAL BREAK)

COOPER: Before the break, we introduced you to a woman who said she was
dragged through the ringer by car insurance giant Allstate. She said that
Allstate wanted her to settle for thousands of dollars less than what she
was entitled to. She refused the deal they offered her and went to court.

And that's where she says the battle got even tougher. Her case is not an
isolated one, however. As our reporting reveals, accident victims across the
country are fighting back against the insurance companies they thought would
protect them.

Once again CNN's Drew Griffin.

(BEGIN VIDEOTAPE)

GRIFFIN (voice-over): When Ann Taylor's car was rear ended...

ANN TAYLOR, ACCIDENT VICTIM: I woke up the next morning, I couldn't move. I
had severe pain in my back. Down both legs were numb and tingly.

GRIFFIN: The doctor diagnosed herniated disk muscle tears. And the treatment
would mean time off work, therapy and medical bills. The person who hit her
was a State Farm employee driving a State Farm car. So Taylor thought at
least financially she'd be covered. It added up, said Taylor, to $15,000.

But after dragging out her claim, State Farm offered her only $2,000.

TAYLOR: I was just very insulted.

GRIFFIN: Taylor hired Attorney Jeff Cook and decided she would fight. It
turned into a major legal battle eventually ending up in this courtroom.

Taylor's case is an example of how the two largest auto insurance companies,
State Farm and Allstate, have changed the way they handle claims when people
are hurt in minor impact crashes.

CNN's investigation reveals a strategy to increase profits by limiting
payments to accident victims. And former insurance insiders say most of the
industry has adopted the strategy. Allstate and State Farm, the industry
leaders, would not talk to CNN for this report.

But Jim Mathis, a former insurance company insider, who now testifies
against the insurance business in court, did. And he says cutting payments
to people like Taylor has meant billions for the insurance companies.

MATHIS: It's not based on what should be a settlement value or offer to this
claim. It is not based on ethics. It's based on -- it's not based on
profits. It's based on how much profit.

GRIFFIN: Taylor's case finally got to court three years after her accident.
The lawyer brought in medical testimony. To present its case, State farm
just dug deep into Ann Taylor's past.

JEFFREY COOKE, TAYLOR'S ATTORNEY: The lawyer stands up and says to Ann
Taylor during her cross-examination, tell the jury about your back injury
when you were 16 years old.

GRIFFIN: In fact, the attorney for State Farm raised questions about Ann
Taylor falling off a horse when she was in high school. And the lawyer also
asked Taylor, a nurse, about throwing out her back when she moved a patient.

(On camera): The attorney even brought up personal things that Ann Taylor
had to sell a horse, that Ann Taylor had to sell her house, that Ann Taylor
had even broken up with a longtime boyfriend. And couldn't all these things
add to stress and that could have caused her back pain?

TAYLOR: They didn't have any expert testimony. They never had a physician
look at me.

GRIFFIN: They tried to make you out to be a liar.

TAYLOR: Exactly. GRIFFIN (voice-over): The attorney for State Farm did
produce one piece of evidence -- very large photos of two slightly damaged
cars.

TAYLOR: They expected the jury to see those and to say, she really wasn't
hurt.

GRIFFIN: Michael Freeman is a crash expert, often called in to testify when
insurance companies are trying to use photos to deny a crash victim was
injured.

How did the insurance companies use photos? Well, take a look at a photo of
a car with minimal damage, he says, and convince the jury what they probably
were already thinking. That doesn't look like much. How could that person be
hurt?

MICHAEL FREEMAN, FORENSIC EPIDEMIOLOGIST: You're eventually being judged by
what your car looks like, not by what your doctor says. Or by what the
impact of a particular crash has had or an injury has had on your life.
That's not fair. It's not right. It's fraud.

GRIFFIN: What stunned Taylor in the end is that State Farm's strategy
worked. The jury didn't believe she was hurt. They awarded her just $1,500,
less than what State Farm originally offered.

We contacted three of the jurors. They said this photo played a big part in
their verdict. And they thought the insurance company had already paid its
share and Taylor was only trying to get more.

Why did they look at her and must have assumed this lady is trying to rip
off the insurance companies, she's a fraud?

COOKE: When she walked in the courtroom and she walked to the jury box and
she walked to the testimony box and she walked out of the courtroom at lunch
and at the end of a day, they assumed that she was not significantly
injured.

GRIFFIN: It's a case straight out of the McKinsey playbook, the three D's.
By denying her claim, State Farm forced Taylor to hire an attorney and sue.
After a three year delay, Taylor walked into a courtroom with no noticeable
pain. And by defending the case for years, State Farm forced her attorney to
front expensive litigation costs, which in the end, he didn't get back.

FREEMAN: They make these cases so expensive to litigate, that attorneys
won't want to take them.

GRIFFIN: Indianapolis Superior Court Judge David Dreyer says he hears it
from colleagues across the country, courts bogged down with minor impact
cases. He says the insurance companies' own lawyers admit to him they're
being forced to drag the cases out.

JUDGE DAVID DREYER, INDIANAPOLIS SUPERIOR COURT: They've confided to me that
they would rather settle a case and that they aren't allowed to settle by
the insurance companies that of course control the defense.

GRIFFIN: It's a strategy spelled out in this affidavit from a former
Allstate attorney in a lawsuit against Allstate. She explains how 10 years
ago the insurance giant was changing the way it did business, driving
lawyers out.

The former Allstate attorney says Allstate's strategy was to make fighting
the company, quote, "so expensive and so time-consuming that lawyers would
start refusing to help clients." The president of the Insurance Information
Institute says the change was need.

HARTWIG: We have a group of attorneys, quite frankly, who are very upset
because, guess what, the gravy train has ended.

MARTINEZ: She had like taken off the other way.

GRIFFIN: Remember Roxanne Martinez from the beginning of our investigation?
She was sideswiped and Allstate offered her $15,000 to cover her medical
bills and lost wages. Her case also dragged on for years.

But after listening to what her lawyer said was a deliberate attempt to drag
Martinez through the ringer, her jury awarded $167,000 plus interest.

MARTINEZ: You know, I was happy. I thought, well, you know, all my bills are
getting paid.

GRIFFIN: Industry insiders say 80 percent to 90 percent of accident victims
don't fight. They take what the insurance company offers.

Drew Griffin, CNN, Santa Fe, New Mexico.

(END VIDEOTAPE)

COOPER: Interesting. You might think all the savings would mean lower
premiums for drivers. Well, guess again. The Insurance Information Institute
says auto insurance rates have actually gone up 30 percent over the 10 years
since this went into effect. The president of that institute told us rates
would actually be much higher if the companies hadn't cracked down on fraud.

How much you pay per year on car insurance depends on where you live in many
cases. Here's the raw data. Last year the five cities with the most
expensive auto insurance rates were Detroit, Philadelphia, Newark, New York
and Los Angeles. The least expensive city was Roanoke at just over $900,
followed by Chattanooga; Nashville; Green Bay, Wisconsin; and Raleigh, North
Carolina

Labels: Allstate, car wreck, damages, insurance, money