Farmers hit with $9.5 million jury verdict for failing to pay full medical reimbursements

A Multnomah County jury in December 2003 found that Farmers Insurance acted in bad faith and systematically defrauded thousands of Oregon policyholders by failing to reimburse the full amount of their medical expenses from automobile accidents.

After a five week trial, the jury returned a verdict of $1.5 million in compensatory damages and $8 million in punitive damages in the class action lawsuit. By state law, 60% of the punitive damages award goes to the Oregon Crime Victims Assistance Fund.

Oregon motor vehicle insurance law requires insurance companies to pay “all reasonable medical expenses.” Farmers violated that law by using a formula that reduced their reimbursements to doctors for any amount over what Farmers figured was the 80th percentile for similar medical costs.

Rick Yugler, attorney for the Beaverton man who initiated the lawsuit, told Sidebar (publication of the Oregon Trial Lawyers Association),
” The company was literally nickel-and-diming Oregon consumers. The amounts were so small that it was never enough for one person to pursue. Of course, all these small amounts added up to over a million dollars in profits for the insurance company.”

About 7,200 Oregon Farmers policy holders joined in the class action suit. More than 1,500 Oregon doctors, chiropractors and other medical providers may also be entitled to share in the verdict. Court approval of a claims process that would reimburse an average of $100 per policy holder or $500 per medical provider was expected.

Mark Strawn, an injured Farmers insured who initiated the action, had close to $17,500 in medical expenses, of which Farmers paid all but $427. On investigation, Yugler discovered Farmers’ system of cutting reimbursements, which was never disclosed in the insurance policy.

In response to this lawsuit, Farmers discontinued its practice in 1999. However, other insurance companies in Oregon and in other states use similar formulas to avoid paying policyholders their due, according to Yugler.

This article was based on “Multnomah County jury dings Farmers for bilking Oregonians,” an article in the December 2003 issue of Sidebar, and is used with permission.

In a related action, handled by Black, Chapman, Petersen & Stevens, and currently pending the Jackson County Circuit Court, for trial later this summer.  Allstate insurance is facing similar allegations of breaching  its duty of good faith and fair dealing to an insured whose need for neck surgery was denied after her neurosurgeon identified the  neck injury as caused by the insured’s auto collision.  Curiously, Allstate has paid the insured’s modest medical charges up to that point and then reversed its position after learning that plaintiff’s medical bills would increase by over $ 60,000.00.

This article was prepared by Frederick H. Lundblade III,  Tom Petersen and Peter E. Yeager