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[ Policyholder Awareness/Preparedness Forum ]

Posted by tonyb on May 17, 2003 at 7:42:48

Complaint Alleges Computer Program Sets Unfairly Low Settlement Offers. SEATTLE, May 14 /PRNewswire/

-- A Redmond woman today filed a bad faith lawsuit against Farmers Insurance Company of Washington (Farmers) accusing the company of systematically using a computer program called "Colossus" to provide an inaccurately low evaluation of her severe injuries in order to artificially reduce its settlement offer. According to the lawsuit, Farmers used Colossus to evaluate Barbara Martin's insurance claims arising from a serious automobile accident. As a result, the complaint alleges, Farmers assigned an intentionally low value to Martin's injuries and refused to pay her claim against her underinsured motorist (UIM) coverage. An arbitrator later determined the value of Martin and her family's damages, which included debilitating back injuries, resulting depression, lost wages, and a diminished ability to interact with her husband, son and baby daughter, at $377,000. Following the arbitration, Farmers paid the UIM policy limits. This lawsuit, filed in King County Superior Court, seeks additional damages for breach of contract and anti-consumer practices.

"Farmers advertises dependability and security, when instead all they're doing is removing human judgment from the equation by plugging people's injury and trauma into a computer," said Mike Nelson of Nelson Tyler Langer, the attorney representing Martin. "It's reprehensible that Farmers would extend its initial lowball offer, then drag Barbara through the expense and pain of arbitration. This lawsuit is the only way she has to achieve justice and hold the company accountable for its actions." The complaint alleges that Farmers bases its settlement offers on figures provided by Colossus, effectively eliminating the ability of a human adjuster to evaluate a comprehensive view of an insured's case. The program works when an insurance adjuster enters data and categorical information from medical records. Colossus then accesses a complex set of rules to decide the value of more than 600 trauma-induced injuries. However, the program doesn't account for intangibles, such as the lost ability to care for a child, the suit states.

"It's impossible for a computer to measure someone's personal pain or the impact on their life. To arrive at an appropriate settlement, you've got to interview people and take into account each claimant's individual case," said Rob Dietz, an industry consultant and former large loss adjuster for Farmers. "What's worse, an adjuster does not have the authority to override the Colossus recommended figures -- their ability to approve a settlement is directly tied to the Colossus recommendation."

The lawsuit states that the nature of the program's data-entry and computation features can result in artificially low settlement figures, allowing Farmers to effectively profit from claims rather than provide reasonable compensation to injured claimants. In addition, Farmers exacerbates the profiteering by creating compensation incentives for employees tied to the low settlement figures, according to the complaint. According to the Web site of Computer Services Corporation, the maker of Colossus, 13 of the top 20 U.S. Property and Casualty Insurers use the software to evaluate bodily injury claims. However, insurance companies and agents do not disclose the existence of the program, the complaint states.

"There's an old science fiction movie where a supercomputer called Colossus took over the world," Nelson added. "Well, this Colossus is taking over the insurance industry -- but it's fact, not fiction, and it's affecting people's lives." This is believed to be the first case brought in the United States specifically based on using Colossus for claims adjustment. "If I had known a computer -- not a human adjuster -- would serve as judge and jury on the most traumatic event of my life, I never would have stayed with Farmers," Martin said. "My life, my relationship with my family, can't be filled in on a bubble sheet with a No. 2 pencil." CONTACT: Mike Nelson of Nelson Tyler Langer, +1-206-623-7520,; or Annie Morrow of Firmani & Associates, Inc., +1-206-443-9357, or, for Nelson Tyler Langer.

Policyholder Resources

Mutual/Public Interest: this content is local to your area in that it affects virtually everyone in your area, indirectly or directly: property insurance policyholders. When the next news stories run having to do with a local disaster such as a hurricane, earthquake, flood, tornado, fire, etc., perhaps think of those disaster survivors and to what extent you may have helped in their preparedness and recovery. Thank you for any help you give.


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