Former Employee Says Insurance Co. Pays Claims When Pigs Fly

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Former Employee Says Insurance Co. Pays Claims When Pigs Fly

Jury Hands Down $3 Million Verdict Against American Family Insurance

POSTED: 10:58 am MST February 13, 2006

UPDATED: 2:48 pm MST February 13, 2006

Video: Employee: Insurance Company Pays Claims 'When Pigs Fly'

http://www.thedenverchannel.com/news/7011681/detail.html

We're all supposed to have insurance and at one time we will all

likely need to file a claim. Ever wonder how the companies decide

what to pay and when to pay?

7NEWS looked into a company's practice that the state's insurance

commissioner calls " inappropriate and unprofessional conduct. "

The company, American Family Insurance, said it's done nothing wrong.

But a Boulder jury said there was something wrong and handed down a

$3 million verdict against American Family Insurance.

It was an expensive message for a practice the jury called " willful

and wanton " when refusing to pay a claim.

The Boulder jury said American Family Insurance must pay a

University of Colorado professor $3 million.

Nick Peressini was severely injured in a car wreck in 2002 and out

of work for more than a year.

" Essentially, after the accident, I never went back to work ... I

just needed the money to pay my bills and get my life going again, "

said Peressini.

American Family Insurance refused to pay Peressini's insurance

claim. He was forced to sue -- opening the door to a series of

surprising discoveries.

A former American Family Insurance employee described the company

culture promoted by a supervisor.

" It was pink pig ... She said it was meant to be that she would

approve something when pink pigs fly, " said the former employee.

That testimony helped convince the jury about the impact and

influence the toy pig had on decision-making inside American Family

Insurance.

Peressini's attorney, Sam Livingston, told jurors the pig symbolized

an insurance company ignoring state law and indiscriminately denying

claims.

" They were happy about and would celebrate, in effect, when they

would deny claims, " said Livingston. " They'd push the button and

make it flap its wings. "

American Family declined to talk on camera but on a written

statement American Family Insurance said, " Any sort of office humor

regarding the outcome of a claim review would have been

inappropriate. But to portray the toy as anything other than a

desktop knickknack is an extreme distortion of how our company

conducts business. "

" I think the story here is a corporate culture that got to the point

where this level of cynicism was tolerated, " said Livingston.

A business plan from 2003 and videotaped depositions raise other

questions. They show that American Family Insurance intended to

reduce payouts on claims based on competition and not the facts --

all in the name of running a tighter ship.

" Running a tighter ship means you will achieve a goal based on what

the competition is achieving, versus what the needs of your clients

are? " Livingston asked an American Family claims representative,

Phil , during a taped deposition.

" Well, yeah. You gotta be profitable. You gotta try to make money, "

said in the videotaped deposition.

Making money is not the issue. However, the company's blueprint for

reducing cost became a lightning rod in the case. The business plan

urged employees to reduce payouts by 28 percent over four years.

" You can't handle claims with an agenda, you have to handle claims

on the merits, " said Joe Conway, an insurance expert.

Conway has four decades of experience in the insurance industry.

During the trial he served as an expert, testifying against American

Family Insurance.

" They just set themselves up as the imperial insurance company and

this is what we are going to do, " Conway said.

American Family Insurance disputes the accusations saying, " Our

business plan identified procedures to help avoid the overpayment of

claims. Our business philosophy is clear. We pay what we owe. "

" From what I understand, I think this is an inappropriate and

unprofessional practice, " said Colorado's Insurance Commissioner

.

was disturbed by the pig, the business plan, and the push to

cut costs.

" It raises a red flag for us. And if we determine there is a

pervasive culture, whether it's at American Family or any other

insurance company, we will take action. "

The company has appealed the jury's verdict and denied any

wrongdoing although desktop toys, internal documents and employee

statements have clearly raised questions about the actions behind

the windows and walls of American Family Insurance's Englewood

offices.

In the deposition video, it is clear that is not sorry for how

Peressini's claim was handled.

Livingston: " For each one of those months, April through October,

you violated the regulation, correct? "

: " Yes. "

Livingston: " And that wasn't fair to Mr. Peressini, was it? "

: " No. "

Livingston: " So you think she's lying under oath about what she did,

or do you think maybe you ought to accept what she said under oath

and apologize to this guy? "

: " I'm not going to apologize. "

Livingston: " Why not? "

: " 'Cause I'm not going to. "

Livingston: " Why not? "

: " 'Cause I'm not going to. "

Livingston: " You don't think you've done anything wrong? "

: " I don't think we've done anything wrong. "

Livingston: " You've got some woman... "

: " I don't think we've done anything wrong. "

Livingston: " And you're saying that's the way we want to handle

claims in the future? "

: " I have no problem with the way this file was handled. "

Livingston: " So I guess it's going to take a jury to make you sorry

for this, isn't it? "

: " I'd love to hear what a jury has to say. "

American Family Insurance has removed the pink pig with wings from

its offices. The company is currently considering its options to

appeal the jury's verdict. As of Friday, Perissini had not received

any of the $3 million the jury had awarded.

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Investigators.