Farmers Insurance wants to silence 2 ex-staffers
Former adjusters say Farmers' computer devalues claims
By Candace Heckman
SEATTLE POST-INTELLIGENCER REPORTER
October 31, 2002
Farmers Insurance has asked a state court to silence two of its former employees who say a new computer program being used throughout the industry places unfairly low values on its personal-injury claims.
A Snohomish County Superior Court judge was expected today to hear the insurance company's plea for a gag order on Robert Dietz and Christy Klein. Both say they quit their jobs because they were frustrated at new cost-cutting practices at the company.
(Update: The judge recused himself from the case before issuing a ruling.)
Dietz and Klein are scheduled to appear next month at what is expected to be a well-attended seminar for the Washington State Trial Lawyers Association. The former adjusters were scheduled to brief lawyers on a computer program called "Colossus," now being used throughout the industry to remove the human element from the claims-adjusting process.
Since leaving Farmers, the two adjusters also have become paid expert witnesses in lawsuits for consumers accusing their insurance companies of acting in bad faith. The two volunteered to do the seminar for the trial lawyers.
Dietz quit Farmers in August 2001, Klein in January 2002.
Farmers Insurance Exchange filed a lawsuit last week against Dietz and Klein, hoping to get court approval to gag the former adjusters and thoroughly question them on their knowledge of the Colossus program.
In its lawsuit, Farmers says the company began nationwide implementation of Colossus in March 2000. Two months later, the lawsuit says, Farmers entered into an agreement with Computer Sciences Corp. of California, which licenses Colossus, to modify the program at Farmers' direction.
In his response to the lawsuit, Dietz said that he was one of 30 to 40 of the company's most experienced claims employees who were asked to participate in a "tuning session" specific to the Northwest during which the adjusters agreed to benchmark values. The values were to be used to approximate how much to pay a customer who, for example, broke a leg versus the amount to be paid to a customer who broke his neck.
Dietz said that he was told those values would then be lowered to 80 percent and entered into the computer program.
Mary Flynn, corporate spokeswoman for Farmers in Los Angeles, declined to comment on the lawsuit because she said she did not know enough about it. She said that company officials typically do not comment on pending litigation.
By sharing what they know of the Colossus software, Dietz and Klein would breach "the duty of loyalty they owe their former employer," Farmers' lawsuit states.
Neither of the two former adjusters signed confidentiality agreements with Farmers.
"My vast experience in evaluating claims was replaced by values generated by a computer," Dietz said in court documents in response to the suit. "More often than not, these values were not representative of what I had experienced as fair and reasonable. As such, it became difficult to settle claims, and it was at times embarrassing to even make the offer that Colossus recommended, knowing it would be rejected, and suit would be filed."
Dietz and Klein's attorney, Karen Koehler of Bellevue, said that requests for gag orders from the insurance industry claiming the spread of trade secrets are typical.
"We're always fighting them and we're always losing," Koehler said. "This is what we deal with. It's intimidating for some people."
Koehler is organizing the continuing legal education seminar for the state trial lawyers. To keep their licenses, lawyers are required to annually attend such professional development courses.
The course is called "The Rise of Colossus" and is open only to lawyers.
The session is to teach lawyers about Colossus, an artificial intelligence program introduced to companies in the 1990s as a tool to help adjusters place values on insurance claims. But adjusters who have left the industry since its reported widespread use by Allstate Insurance Co. in 1997 say that the computer consistently delivers value ranges that are well below what human adjusters would consider a fair settlement.
"Top of the range settlement offers were often rejected by the claimant -- which result in an increasing number of cases remaining open -- thus increasing my pending case load," Klein said in her response to the lawsuit. "It also drove more cases into litigation in an attempt to reach a fair settlement."
Klein also worked for Allstate and used Colossus there.
About half of insurance companies that operate in the United States, including some of the largest, such as Aetna, Hartford Financial Services and Zurich Personal Injury, use the Colossus program. But those companies have done a good job suppressing information about the program.
Colossus is not mentioned in insurance policies or advertising brochures. Neither is the fact that claims are being adjusted by computer.
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