Our office has handled literally thousands of Michigan no-fault PIP cases over the years. State Farm has been a defendant in many of those cases. It has been our experience that no auto carrier is more aggressive and more outrageous in the defense of their claims than State Farm Insurance. This is especially true in no-fault cases.
Today, another firm was able to get a judge to remove a protective order that shows the secret to State Farm’s sauce. State Farm has a program known as “Advancing Claims Excellence,” better known as the ACE Program. In the 1990s, State Farm purchased this program from McKinsey & Company, a large, multi-national consulting company that created the program for State Farm and other car insurance companies so they could increase their profits.
The ACE Program is literally a toolkit for State Farm insurance adjusters and their supervisors on how to deny claims and not pay out no-fault benefits – all in the name of achieving higher profits.
According to internal State Farm Insurance documents, the ACE Program focused on reducing “shortfall” in Michigan auto claims. This meant reducing pay-outs to the tune of $30,000,000. After reviewing 244 closed PIP files, an internal audit showed that if State Farm adjusters simply denied claims earlier, and used so-called “independent medical examinations” or IMEs earlier and more often during the pendency of a claim, State Farm could reduce payouts by up to 56%. This so-called use of “medical management” is pivotal in State Farm’s claims handling.
To do this, State Farm would initiate a systematic and wide-spread change in its claims handling process. Going forward, all Michigan car accident no-fault claims would be thoroughly reviewed early on to ensure IMEs were used to cut-off benefits to claimants. For example, insurance adjusters were trained to: (1) initiate IMEs earlier, (2) use IMEs as a way to settle PIP claims earlier, (3) tell defense attorneys which IME doctors to use, and (4) to include only certain medical records for IMEs to review when authoring a report. This is not an exhaustive list and is only a sample of the tactics insurance adjusters were told to utilize to reduce “shortfalls” to increase profit.
The ACE Program also demanded more aggressive insurance defense lawyers to defend claims. The ACE Program required State Farm adjusters to hire defense lawyers who would be willing to try more cases and aggressively defend every single PIP lawsuit. State Farm adjusters would also have more control in handling cases in litigation, even though the adjusters were not lawyers and had no legal expertise.
The ACE Program completely changed the way insurance adjusters handled insurance claims. No longer were adjusters there to simply process and pay benefits such as medical bills and wage loss benefits. Instead, adjusters were trained to deny claims and stop the payment of benefits using specific guidelines implemented by the ACE Program.
State Farm Insurance denies the ACE Program currently exists. Although that is debatable, even if the Program is not around in name, its policies and guidelines have permeated the culture of State Farm claims handling so thoroughly that its principles are implemented by adjusters on all cases throughout the state of Michigan.
I am hopeful the contents of the ACE Program are disseminated in full. Only then will State Farm Insurance be forced to change the way it does business with its policyholders and car accident victims. For too long State Farm Insurance has gotten away with denying the existence of a systematic and unfair claims handling process that unreasonably denies payment to valid claimants. Today is a step in right direction.