[Senate Hearing 119-100]
[From the U.S. Government Publishing Office]
S. Hrg. 119-100
EXAMINING THE INSURANCE INDUSTRY'S CLAIMS
PRACTICES FOLLOWING RECENT NATURAL DISASTERS
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HEARING
BEFORE THE
SUBCOMMITTEE ON
DISASTER MANAGEMENT, DISTRICT OF
COLUMBIA AND CENSUS
OF THE
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
MAY 13, 2025
__________
Available via the World Wide Web: http://www.govinfo.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLIISHING OFFICE
60-721 PDF WASHINGTON : 2026
=======================================================================
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
RAND PAUL, Kentucky, Chair
RON JOHNSON, Wisconsin GARY C. PETERS, Michigan
JAMES LANKFORD, Oklahoma MAGGIE WOOD HASSAN, New Hampshire
RICK SCOTT, Florida RICHARD BLUMENTHAL, Connecticut
JOSH HAWLEY, Missouri JOHN FETTERMAN, Pennsylvania
BERNIE MORENO, Ohio ANDY KIM, New Jersey
JONI ERNST, Iowa RUBEN GALLEGO, Arizona
ASHLEY MOODY, Florida ELISSA SLOTKIN, Michigan
William E. Henderson III, Staff Director
David M. Weinberg, Minority Staff Director
Laura W. Kilbride, Chief Clerk
Ashley A. Gonzalez, Hearing Clerk
SUBCOMMITTEE ON DISASTER MANAGEMENT, DISTRICT OF COLUMBIA, AND CENSUS
JOSH HAWLEY, Missouri, Chair
RICK SCOTT, Florida ANDY KIM, New Jersey
JONI ERNST, Iowa RICHARD BLUMENTHAL, Connecticut
ASHLEY MOODY, Florida ELISSA SLOTKIN, Michigan
Chris Weihs, Acting Staff Director
Stephen Andrews, Counsel
Naveed Jazayeri, Minority Staff Director
Paul H.J. Hurton III, Subcommittee Clerk
C O N T E N T S
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Opening statements:
Page
Senator Hawley............................................... 1
Senator Kim.................................................. 3
Senator Moody................................................ 19
Prepared statements:
Senator Kim.................................................. 43
WITNESSES
TUESDAY, MAY 13, 2025
Panel I
Natalia Migal, Homeowner......................................... 5
Nick Schroeder, Property Adjuster, Pilot Catastrophe Services.... 6
Clifford Millikan, Property Adjuster, Pilot Catastrophe Services. 7
Doug Quinn, Executive Director, American Policyholder Association 9
Jacob Vertel, Homeowner.......................................... 11
Panel II
Michael Keating, Operations Vice President, State Farm Mutual
Automobile Insurance Company................................... 27
Mike Fiato, Executive Vice President and Chief Claims Officer,
Allstate Corporation........................................... 29
Alphabetical List of Witnesses
Fiato, Mike:
Testimony.................................................... 29
Prepared statement........................................... 60
Keating, Michael:
Testimony.................................................... 27
Prepared statement........................................... 58
Migal, Natalia:
Testimony.................................................... 5
Prepared statement........................................... 47
Millikan, Clifford:
Testimony.................................................... 7
Prepared statement........................................... 52
Quinn, Doug:
Testimony.................................................... 9
Prepared statement........................................... 55
Schroeder, Nick:
Testimony.................................................... 6
Prepared statement........................................... 50
Vertel, Jacob:
Testimony.................................................... 11
Prepared statement........................................... 57
APPENDIX
Statement from the American Property Casualty Insurance
Association.................................................... 65
Letter from a whistleblower (Allstate)........................... 71
Letter from a whistleblower (State Farm)......................... 72
Statement from the National Association of Mutual Insurance
Companies...................................................... 74
Responses to post-hearing questions for the Record:
Mr. Keating.................................................. 82
Mr. Fiato.................................................... 116
EXAMINING THE INSURANCE INDUSTRY'S
CLAIMS PRACTICES FOLLOWING RECENT NATURAL DISASTERS
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TUESDAY, MAY 13, 2025
U.S. Senate,
Subcommittee on Disaster Management,
District of Columbia, and Census
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:40 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Josh Hawley,
Chair of the Subcommittee, presiding.
Present: Senators Hawley [presiding], Scott, Moody, Kim,
and Blumenthal.
OPENING STATEMENT OF SENATOR HAWLEY
Senator Hawley. Let me call to order today's hearing
entitled; Examining the Insurance Industry's Claims Practices
Following Recent Natural Disasters. This is the first hearing
of the Subcommittee on Disaster Management, and I am delighted
to work on this Committee with my colleague and Ranking Member,
Senator Kim.
This has been a great start to our--what I hope will be a
great collaboration, and I want to say a special thank you to
our witnesses who are in the room. We will have a chance to
hear from each of you in just a moment. I am going to introduce
each of you, give you the opportunity to make an opening
statement, and then we will have some rounds of questioning.
Before we start that, let me just say a word about what
brings us here and the significance of this hearing. In the
last year alone, disasters have devastated communities across
our country. In the State of Missouri, where I am from,
tornadoes have ripped across the State, leaving thousands
without power, leaving homes damaged, in some cases, leaving
families without loved ones.
Hurricanes Milton and Helene have cut a brutal path through
the southeast, uprooting trees, destroying roofs, turning
family lives into a nightmare. On the other end of the country,
in California, brutal wildfires have burned entire communities
to the ground.
These disasters have done more than cause property damage,
though that is quite significant. They have done more than
cause inconvenience, though that can be harrowing. They have
destroyed the lives of people. We are not talking here about
minor inconveniences. We are talking about moms who have had to
haul five-gallon buckets of water because the pipes are gone.
We are talking about grandparents who have had to sleep in
their cars because there's no roof over their heads. We are
talking about families who are maxing out their credit cards
because their insurance companies won't pay out any damaged
claims, and that's what brings us to today's hearing.
Where do Americans turn after catastrophes like the ones we
have experienced just in the last calendar year? The answer is
they turn to their insurance companies, and they don't turn to
their insurance companies for a handout. This is not charity
that we are talking about. They turn to their insurance
companies because they pay premiums to those insurance
companies. It's a contract.
By the way, it's required in law. Americans are required to
purchase, property owners are required to purchase insurance,
and so they do so dutifully in every State in the union, and
they pay their premiums dutifully in every State in the union.
Unfortunately, time after time, they find when disaster strikes
in their moment of utmost need, the insurance companies come
back to them and they delay, and they deny, and they offer
excuses. They send out 2 adjusters, 3 adjusters, 15 adjusters,
and 25 adjusters, and they constantly change the estimates.
At the end of the day, they just won't pay what is due,
what is required, what is just. It is not a one-off situation.
It 'i not like it's happened to just one family. It is a
deliberate strategy to maximize profits. We are going to hear
about it today. We are going to hear about it on this panel.
Let me just give a brief overview of how it works. It goes
something basically like this. When a disaster destroys, let's
say, your home, the insurance companies send out an adjuster,
often a third-party adjuster. That person writes up a report,
often in good faith, doing their best to estimate the damages.
And then what happens? Then the insurance company
intervenes. Then the insurance company says, you need to change
the facts that you found. You need to change your estimates,
you need to change what's in the report. They adjust
arbitrarily the award, down, down, down, down.
The policy holder never knows, and the policy holder gets
no say in the process, and the policy holder is left to try and
put back together her life as these insurance companies make
billions and billions of dollars in profits. We are going to
hear about it from the witnesses who are here today.
I will just say that even before today's hearing, Committee
staff, my staff working with Senator Kim, has done a thorough
investigation that we will continue. We will be submitting into
the record evidence today that we have gathered that will
corroborate the testimony that you are about to hear.
This is a system that we are talking about here. This is a
system that promises homeowners that they are in good hands,
that they will watch over them like a good neighbor. After
billions and billions of dollars in premiums are collected and
pocketed by these insurance companies, the people who are left
holding the bag are the policy holders, American citizens at
their moment of maximum despair.
There's something wrong with that system. There needs to be
some accountability, and we are going to do our best to start
getting it today. With that, let me turn it over to Ranking
Member Kim for his statement.
OPENING STATEMENT OF SENATOR KIM\1\
Senator Kim. Thank you, Mr. Chair. As this is our first
hearing, I just want to congratulate Senator Hawley on his
chairmanship, and I hope we will be able to continue productive
bipartisan work in this Congress.
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\1\ The prepared statement of Senator Kim appears in the Appendix
on page 43.
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I thought the Chair really laid it out strong, which is
that this is about where do people turn when a crisis arises,
when they are in their time of deep need. I am grateful for the
witnesses here for joining us, and giving us your insights into
the different experiences that you have had to try to elucidate
what it is that we can do here in Congress to be able to make
sure that the American people have that sense of assurance when
disaster strikes, when they are in their time of greatest need.
That is a time when survivors are most vulnerable. That is
when many Americans turn to their insurance company thinking
that they have done everything right to prepare for the worst,
thinking that the process would work for them. Unfortunately,
that help does not always materialize. Instead of being handed
solutions, they are often met with more problems.
My home State in New Jersey is no stranger to this. After
Superstorm Sandy, insurance companies that participated in the
National Flood Insurance Program (NFIP) were found to be
wrongly rejecting or underpaying valid claims. Since then, the
problems have persisted. Hurricane Ida, another challenge that
we faced caused another wave of damage through my State. It is
not just in New Jersey, but across the country. In Florida,
after Hurricane Ian, third-party adjusters came forward and
accused insurance companies of altering their reports to
underpay disaster survivors.
Now we are here to examine additional disturbing claims
that insurance companies are continuing to deny coverage and
underpay claims. This is an important topic. I also just want
to take the time, though, to be able to raise that as we move
forward with this Subcommittee's work, that we ensure that we
are taking a holistic approach grappling with the problems that
American people face when they try to recover from a natural
disaster.
That includes having honest and productive conversations
about the government's role; in particular, the Federal
Emergency Management Agency (FEMA). In the wake of a natural
disaster, FEMA has been a critical lifeline for so many
Americans on the road to recovery. Yes, it needs reforms. Yes,
there are changes that need to happen, but that is something
that we can try to work on in a bipartisan way.
Emergency managers, first responders, and other people in
my community are deeply concerned about some of the rhetoric
coming out of this administration about abolishing or getting
rid of it. Already, we are seeing some of the Trump
Administration efforts to chip away at some critical programs.
When we see the workforce shrinking, when we see canceling of
the Building Resilient Infrastructure and Communities (BRIC)
program, we have to take a step to be able to think through our
role here in Congress, on this going forward.
FEMA, like private insurance, is one of the tools that the
American people have available to them. You need both market
solutions and the Federal Government to strengthen resiliency
and recovery in our country. People in disaster prone States
that I have talked to have spoken about the fear and the
uncertainty about what comes next when it comes to disaster
recovery. We owe it to them to be more transparent about this.
The administration has assembled a council to review FEMA
and disaster response. I think this Subcommittee could make
sure that we do our own due diligence so we can be prepared to
engage in discussion with the Executive Branch about that best
way forward. The goal is always to ensure that the American
people in their time of greatest need and difficulty can feel
reassured that they are not alone, that they can turn to others
for help, whether that be FEMA, insurers, or others.
We are facing some of the most intense natural disasters in
our nation's history, but also living through a time of such
distrust in government, public institutions, et cetera.
Congress must be vigilant about any changes that may weaken the
ability of the American people to tackle the disaster
challenges they face.
I look forward to hearing from the witnesses today about
their ground experiences, and from the insurance companies
about what they plan to do better in terms of serving policy
holders. We may hear some harsh criticism, but criticism, I
hope that will work to rectify these problems. I do want to
make sure that we are commending some of the insurance
companies for showing up today as well to be able to hear that
feedback.
Thank you. I yield back.
Senator Hawley. Thank you very much, Senator Kim.
It is the practice of the Homeland Security and
Governmental Affairs (HSGAC) Subcommittee to swear in witnesses
who testify in front of us. So, now, I will ask you to rise and
raise your right hands, and repeat this oath, if you are
willing. Do you swear that the testimony that you will give
today is the truth, the whole truth, and nothing but the truth,
so help you, God?
[Witnesses answer in the affirmative.]
Let the record reflect that each witness answered in the
affirmative. That's a good start. With this, let me go down the
line here and introduce each witness, and then give each of you
the opportunity for an opening statement.
We will start with Natalia Migal. Natalia is an Allstate
policy holder who lives in Georgia and suffered extensive
property damage following the devastation of Hurricane Helene.
With that, Natalia, please go ahead. Take your time.
TESTIMONY OF NATALIA MIGAL,\1\ HOMEOWNER
Ms. Migal. Chairpersons, Senators, and Members of the
Committee, my name is Natalia Migal, and I am here today
representing my family; my husband Brad Kozak, our 11-year-old
son, and 9-year-old daughter. We live in Sandy Springs,
Georgia, and our house is insured by an Allstate homeowners
policy.
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\1\ The prepared statement of Ms. Migal appears in the Appendix on
page 47.
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On September 27, 2024, at 5:30 a.m., our family was
abruptly woken by a loud crack. A massive 70-foot oak tree fell
onto our home. This happened after persistent rain from
Hurricane Helene. We immediately called Allstate to file a
homeowner's claim. Allstate's intake process was quick and we
were promptly assigned an adjuster.
The general description of the damages as follows; while we
can still live in the house, there is severe and structural
damage to our roof on two separate building structures. Damages
are both internal and external. In addition, electrical
systems, brickwork, gutters, lightings, doors, and more were
damaged. The total damage was very extensive and has been
thoroughly documented and shared with Allstate.
Allstate's first inspection took place a few weeks later.
Our first adjuster visit took approximately 5 hours. The
adjuster was very detail-oriented and thorough. He spoke with
us at length and took copious amounts of photos. He verbally
confirmed what we suspected, that this was a significant loss.
After the initial inspection, I followed the adjuster's
guidance and contacted a number of contractors, including but
not limited to general contractors, roofing contractors,
electricians, chimney, landscaping, and fence repairs. I was
provided with a number of quotes, which reflect the cost of
living and cost of needed repairs to bring our house back to
standard. These quotes were shared with Allstate.
However, before the adjuster could complete his report,
Allstate removed him from this file stating that the process
was taking too long. We called Allstate many times about this
to stress that we wanted to continue the process already in
flight. Nonetheless, Allstate sent a new adjuster, against our
wishes, and new inspection was scheduled and the process
started all over again.
The second inspection lasted under 2 hours and
significantly downplayed the damage. For example, the adjuster
stated that he would include money only for one half of the
collapsed roof because he was not convinced that all of it
needed repairs. I assure you that the entire structure did need
repairs after the impact of the 70-foot tree.
In December, we received Allstate's initial evaluation of
$46,000 and we were stunned. This amount did not begin to
reflect the real-world cost of the repairs and estimates from
the contractors. It was perfectly clear that working with
Allstate will be increasingly difficult. On January 6th, we
retained Matthew Hunter of Hunter Public Adjusting for an
independent view of the situation.
Matthew conducted a multi-day inspection and confirmed our
fears. He also recommended hiring a structural engineer. We
engaged with Shields Engineering Group, whose report again
confirmed our concerns. Our damage was extensive and the cost
to restore our home was far beyond Allstate's offer. Matthew
also formally requested that Allstate reassign our claim to the
Large Loss Division. Despite repeated requests, these were
consistently denied.
On March 14th, we submitted our sworn proof of loss of
$497,000. Only then did Allstate reassign our case to the Large
Loss team who appointed a third party adjuster (TPA). Few days
later, Matthew met with the third adjuster onsite. The adjuster
reviewed both the engineering's report and Matthew's estimate
and expressed no disagreements. He stated he would submit the
full estimate for approval. However, the final estimate came
back from Allstate at just $100,000.
When Matthew contacted the adjuster for an explanation, the
adjuster confirmed that Allstate had rejected his initial
submission of over $400,000, instructing him to remove numerous
line items, not once, but twice until the amount was reduced to
a fraction of the actual loss.
This brings us to May, 8 months since the tree fell on our
house. No significant repairs have been made. Our roofing
remains damaged and a hazard to our family; electrical wires
visible, doors difficult to close, fences broken, and much
more. As you can imagine, it is difficult to embark on a repair
and reconstruction project without clarity on the budget.
We are homeowners, not lawyers, not engineers, not
insurance experts. We have been Allstate customers for 6 years
since October, 2019. During that time, we have paid our bills
on time and in full, but when we needed Allstate the most, they
failed us. This is no longer about just a roof, it's about the
failure of a system that leaves families vulnerable after a
catastrophic event.
We respectfully call this body for oversight to ensure that
insurers are held accountable when they act in bad faith, delay
resolution, or make it financially impossible for families to
restore their homes and their lives.
Thank you for your time, your service, and hearing our
story today.
Senator Hawley. Thank you very much, Ms. Migal. Our next
witness is Nick Schroeder. Mr. Schroeder is an adjuster who
works for Allstate through Pilot Catastrophe. He was the first
adjuster to inspect Ms. Migal's home, and he's sitting just to
her left. Mr. Schroeder, go ahead.
TESTIMONY OF NICK SCHROEDER,\1\ PROPERTY ADJUSTER, PILOT
CATASTROPHE SERVICES
Mr. Schroeder. Thank you, Senator. I have worked as a
licensed insurance adjuster for nearly 6 years, holding
licenses in six States. During this time, I have inspected
property damage and prepared repair estimates on behalf of over
17 insurance carriers, including Allstate and State Farm.
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\1\ The prepared statement of Mr. Schroeder appears in the Appendix
on page 50.
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While handling claims for Allstate following Hurricane
Helene, I was assigned to investigate a property damage claim
submitted by Mrs. Natalia Migal. My inspection revealed
significant structural damage, including a slate roof impacted
by a fallen oak tree, compromised framing in the breezeway,
damage to an underground sprinkler system and broken terracotta
floor tiles. Although I was initially directed to attribute the
floor tile cracks to settling and to recommend a repair rather
than a replacement of that breezeway roof. I concluded that a
full replacement was necessary due to split rafters and a
cracked concrete underlayment. Shortly before I finished my
estimate, however, I was taken off the case, and the claim was
reassigned to a different adjuster.
In general, my experience handling Allstate claims was
marked by repeated frustration. My estimates were frequently
rejected, or returned with requests, or modifications that
often reduced coverage. These changes typically involve
reclassifying line items to minimize costs, such as coding a
job for an electrician to a roofer when other roof work is
present as in replacing an electrically powered roof vent. This
recoding would then prevent the estimating software from
prompting a labor minimum charge for an electrician to safely
disconnect and reconnect the hardwired vent.
But more commonly, these changes were to simply exclude
hail-damaged shingles due to wear and tear. In one case
involving policy holders Suzanne and Dennis Carter, I was
instructed to deny shingle damage as wear and tear despite
visible hail impact marks of consistent size and shape as
nearby dented roofing metal. Although I provided a hail report
confirming activity near the property on the reported date of
loss, the claim was reassigned after I refused to amend the
estimate to exclude the hail damage.
In another case involving Nicolette Little, I was able to
finalize an estimate only after arranging for my team lead to
personally review and approve it. At one point, an Allstate
staff adjuster who was assigned to assist me in getting claims
approved, advised me to remove coverage for the wind-damaged
shingles based on a misunderstanding of standard damage
indicators.
He claimed a crease shingle was not wind-damage because it
was not torn. However, industry standard indicators of wind-
damaged, recognized across all carriers I have ever worked
with, to include torn shingles, blowing-off tabs, and shingle
creasing, making this directive contrary to basic industry
training.
In my professional opinion, the claims handling process I
observed from Allstate prioritized minimizing payouts often at
the expense of accurately addressing documented storm damage.
Senator Hawley. Thank you very much, Mr. Schroeder. Our
next witness is Clifford Millikan. Mr. Millikan is an adjuster
who works for Allstate through Pilot Catastrophe. He has a
connection to Ms. Migal as well. He was sent out to conduct a
reinspection of Ms. Migal's home. Mr. Millikan, the floor is
yours.
TESTIMONY OF CLIFFORD MILLIKAN,\1\ PROPERTY ADJUSTER, PILOT
CATASTROPHE SERVICES
Mr. Millikan. I've worked as a claims adjuster for Pilot
Catastrophe since 2014. By 2016, I transitioned to a full-time
adjusting, working primarily for Allstate and have been
deployed consistently for over 8 years.
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\1\ The prepared statement of Mr. Millikan appears in the Appendix
on page 52.
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Since 2020, I have observed significant changes in
Allstate's claim handling that in my view undermined the
interest of policy holders and eroded trust in the insurance
industry. First, Allstate has increasingly relied on third-
party non-licensed inspectors or so-called picture takers
instead of licensed adjusters to inspect damaged properties.
These individuals are not trained nor licensed adjusters. They
merely take random pictures and upload them to a portal where
an often inexperienced inside adjuster grabs the photo package,
reviews, and attempts to write an estimate.
The estimate is then sent to a reviewer who then determines
coverage and often mandates revisions. This is without
transparency as the reviewer's name does not go on the
estimate. This process confuses policy holders who mistake the
picture takers for adjusters and then the policy holder never
has an in-person experience with the adjuster who actually
submits the approved estimate. This process also increases the
likelihood of missing damage, which is often to Allstate's
benefit.
Field adjusters like me are in the best position to address
the damage to a property. We are licensed, and we are the ones
who physically inspect the property in person, and we have
training to assess damage appropriately. After we, as the
adjuster, inspect a property, we write an estimate which
explains the observed damage and estimates the minimal cost of
repair.
Second, all offset is stripped off field adjusters
regardless of experience of decisionmaking authority. Adjusters
now act just as glorified picture takers, submitting our work
to the reviewer who approves or denies the estimate, and
dictates revisions. In the overwhelming majority of cases,
Allstate reviewers who have never been to the loss, instruct
the adjuster to alter and delete factual and causal findings in
our estimate.
Frequently, these alterations and deletions are simply
false. Reviewers at times force adjusters to use material not
of like kind and quality, and not to consider engineer reports
because they were not ordered by Allstate, and to issue denial
letters that the adjuster must sign even when the adjuster
disagrees with the decision and believes it to be false. There
is no option for a discussion. It's the reviewer's decision and
that's final.
If an adjuster resists, the claim is reassigned to someone
who will comply. In most cases, the alterations and deletions
drive the estimate down, meaning the insureds receive less
money than required to indemnify them for the loss. As
adjusters, we pride ourself in having integrity. When forced to
do things that we do not agree with, we feel obligated to
express that with the insured.
When I have explained this to policy holders that I did not
make the decision, I was reprimanded and told this is not
permitted. In one case, I was sent out as a supplemental field
adjuster to look at the property of Ms. Natalia Migal and her
husband while onsite with the public adjuster (PA). I reviewed
the engineering report that was provided by the public
adjuster, a brick expert report again provided by the public
adjuster, and discussed the inspection results with the public
adjuster.
While onsite, I agreed with the PA that the estimate over
$400,000 appeared to represent the covered damages. I then
reviewed all the information and drafted an estimate that
considered the recommendations laid out by that engineer that
would have attempted to bring the Migals back to the pre-loss
condition using the most cost-effective option.
My estimate totaled nearly $200,000. I felt I had figured a
method of using chimney brick to make spot repairs and replace
the full chimney with a similar product saving Allstate from
replacing all the brick on the entire home. I then submitted my
estimate to the reviewer who instructed me to make changes to
my estimate. After doing so, I submitted a revised approved
estimate for $100,000 or thereabout.
I believe some of these alterations were wrong because they
contradicted the engineering report and the brick expert report
without getting a second opinion from another engineer. These
new practices are wrong and the people most affected by them
are the ones who lack the resources to fight back like the poor
and the elderly.
Allstate is even making it so difficult for those who do
hire experienced contractors, public adjusters, or attorneys to
represent them that many merely lose interest because the time
involved is not worth the compensation and the effort. The
tactic seems to be working as designed.
As an adjuster, I am ethically obligated to write accurate
estimates that fully account for all covered damage regardless
of a policy holder's demeanor or tenure. Insurance contracts
are built on trust, promising ethical and fair claims handling.
These new current practices risk violating that trust, leaving
policy holders underserved.
I urge this Committee to investigate these practices to
ensure that the insurance industry upholds its duty to protect
policy holders' transparency and claims decisions.
Accountability for reviewers and restoring the adjuster's
authority could help rebuild trust and fairness.
Thank you for addressing this issue.
Senator Hawley. Thank you very much, Mr. Millikan. Our next
witness is Doug Quinn. Mr. Quinn is the Executive Director of
the American Policyholder Association (APA), which is a non-
profit that tracks and reports fraud committed by insurers
against their policy holders. Mr. Quinn, it's good to have you.
The floor is yours.
TESTIMONY OF DOUG QUINN,\1\ EXECUTIVE DIRECTOR, AMERICAN
POLICYHOLDER ASSOCIATION
Mr. Quinn. I am Douglas Quinn, Executive Director of the
American Policyholder Association. We are a non-profit watchdog
group that monitors and reports on insurer fraud against
property owners.
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\1\ The prepared statement of Mr. Quinn appears in the Appendix on
page 55.
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The APA formed after Superstorm Sandy. My home was flooded.
I was at my weakest moment, and instead of helping me, my
insurer hired U.S. Forensic, an engineering firm who created a
report that an independent engineer determined was false. My
insurer denied coverage for the worst damage to my home despite
being fully insured. It took me 7 years to rebuild and get back
home at 61 years old. This is one of the most traumatizing
betrayals of my life.
I was not alone. The ``Sandy Engineering Fraud Scandal'',
CBS News, 60 Minutes, and PBS Frontline all reported on policy
holders wrongfully denied nearly half a billion dollars in
claims. When asked if he participated in fraud, an insurer's
claims executive pled the Fifth Amendment.
Thousands of families paid for insurance as a safety net
only to be betrayed on their claims. For many, it was the end
of the American dream as they lost their homes. This was not
the first time insurers defrauded policy holders and it won't
be the last.
The APA routinely receives reports of insurer fraud. Often,
the insurer will hire an engineering firm to inspect the
property and write a report which will then be manipulated to
reach a predetermined outcome. Insurers are shielded by
plausible deniability that the engineers commit the fraud, but
the insurers are the ones driving it. They continue to use U.S.
Forensics and other fraudsters.
Insurers play the same shell game with adjusters. Many
adjusters inspecting homes are not employed by the insurer, but
rather by third-party administrators. They are technically a
separate company. These TPAs are simply alter egos of the
insurers and commit the same fraud the engineers do.
Trained adjusters write an honest estimate only to be
instructed to alter and delete facts by a reviewer. This is not
just a few bad apples. It's industry-wide and has been for
decades. It happened in Hurricane Katrina, it happened in
Hurricane Sandy, it happened in Hurricane Irma, and it's
happening right now.
I worked in the insurance industry for 30 years. There are
thousands of dedicated, honest professionals who take pride in
helping families recover after a loss. Many of those
professionals would be appalled to learn what happens to policy
holders during claims. Those aware of the fraud are afraid to
speak out and for good reason.
In this regard, insurers are like gangsters. Those who
speak out get blacklisted, harassed, and sued. After Hurricane
Katrina, two employees blew the whistle on State Farm's plan to
shift claims to the National Flood Insurance Program using
systemic engineering fraud. State Farm sued the two sisters,
but after years of litigation, State Farm agreed to pay the
Federal Government $100 million to settle the case.
Recently, Jordan Lee, a young insurance adjuster, reported
that a TPA he worked for altered his reports. The insurer that
hired the TPA, Heritage Insurance, is now suing Jordan for
defamation, even though he did not accuse Heritage of changing
the reports, but rather the TPA they employed. However, Florida
regulators recently hit heritage with a historic $1 million
fine for multiple violations in handling of insurance claims.
Jordan's a kid, he does not have any money. Most people
believe that they are suing Jordan not for money, but rather to
silence he and other whistleblowers. Many assert that the
insurance industry's playbook is break the law and ruin the
whistleblower. I routinely speak to insurance insiders who are
terrified of retaliation.
If it was not for whistleblowers like Jordan Lee,
journalists like The Washington Post's, Brianna Sacks, and
honest plaintiffs' attorneys like Stephen Bush, we would never
even hear about the fraud. In fact, all too often, we do not.
Insurers are committing fraud and ruining the lives of the very
people who pay them for protection. Premiums are skyrocketing,
but Americans receive less in claims. The American consumer is
being squeezed.
The fraud is about more than money. Americans buy insurance
for protection in their weakest moments when their homes are
wind-damaged, or burned, and they are scrambling to find
housing for their family and schools for their children. The
last thing survivors need is a war with their insurance
company. The stress destroys marriages and spoils childhoods.
The fraud also affects the Federal Government. When their
insurer denies valid claims, homeowners are forced to rely on
FEMA and Federal aid. The American taxpayer is now subsidizing
the fraud. This would not be possible if insurer fraudsters
were held accountable for their actions. But States have proven
incapable of doing so. The APA has given gift-wrapped fraud
cases to State authorities only to have them languish without
results.
It's time for Federal enforcement. It's time for Federal
prosecutions. It's time for these criminal organizations to be
brought to justice to this panel. I say the American public
needs you. Thank you.
Senator Hawley. Thank you very much, Mr. Quinn. Our final
witness is Jacob Vertel. Mr. Vertel is a husband, a father, and
a State Farm policy holder. He resides in North Carolina. He
and his family suffered devastating damage to their home after
a tornado, and he's here to testify to that effect. Mr. Vertel,
the floor is yours.
TESTIMONY OF JACOB VERTEL,\1\ HOMEOWNER
Mr. Vertel. Thank you. Early on the morning of September
27th, my family was awoken by a tree crashing through our roof.
My wife and in-laws who were in town visiting at the time
rushed into our toddler's room to make sure he was unharmed.
The storm was still raging, so we moved my pregnant wife and
child to the floor next to our kitchen island in our single-
story ranch home where we felt it was safest.
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\1\ The prepared statement of Mr. Vertel appears in the Appendix on
page 57.
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Before we lost power, I was able to file a claim with State
Farm. At that moment, I did not realize just how severe the
storm was. I was simply focused on figuring out where my family
would stay that evening. While on the call, we abruptly lost
power and cell service. For the next several hours, we sought
cover as a total of four trees fell on our home and water
poured through half the house.
Once the storm subsided, all five of us camped together for
3 days in what we assumed to be the safest section of the home.
With my wife's pregnancy being high risk, it was critical that
she had access to medical care, and our 2-year-old son needed a
safe environment. The moment I evacuated my family to my in-
law's home in Ohio.
With them safe, I returned to North Carolina to begin the
insurance process, and to find a place for us to stay once
water was restored to the area. Our first inspection was on
October 7th, 10 days after Hurricane Helene. The inspection
seemed to go well enough. While onsite, I spoke to the
inspector about the ample additional living expense coverage
included in our policy. You can imagine my dismay when I
received a voicemail the next day, walking back the information
he shared, instead stating that our home was being considered
habitable by State Farm.
A home where I watched water pour through the outlets,
where the sky is visible from our 2-year-old's bedroom, our
nursery to be, our living room, and our bathroom. At that time,
cell service in Asheville was still limited. My wife, from
Ohio, was trying to speak with State Farm. The few times I
managed to get on the phone with her, she gave me agonizing
updates about the undue stress being put on her as the basic
commitments of our policy were already being aggressively
denied.
It became clear we needed support and did not have the
capacity to take this on ourselves, so we hired a public
adjuster. Not long after, our decision to hire a public
adjuster was reaffirmed when we received our first estimate of
the damage from State Farm. The sum we were to receive would
not even cover fixing the roof, let alone repairing our entire
home.
From there, we watched as our case was handled with little
communication from State Farm. Emails went unanswered for weeks
at a time. We were told that State Farm had issued a payment on
our claim on October 24th. That check did not show up. One
month after the storm, I moved my family back to Asheville into
a rental at our own expense.
From this new home base, we spent months driving across
town trying to protect our house from further damage, draining
tarps, resecuring them, setting rodent traps, doing all we
could to prevent the pipes from bursting. Covered only by
tarps, our home struggled to retain heat during the mountain
winter. During this period, Buncombe County placed a placard on
our home stating that the property was, ``not safe to occupy or
enter.''
After 3 months of no movement, we were hopeful things would
finally start progressing when State Farm assigned a new
adjuster to our case. The damage payment that was supposedly
issued in October was reissued in December. However, we quickly
lost hope again when it became evident that we were starting
over from scratch having to provide all claim information
again. It was as if all information from the previous 3 months
was lost.
All the while, State Farm communication remained scarce.
Reinspections were discussed, then no one would show up. In the
little communication we did receive, it became clear that this
new adjuster was not qualified to speak on general home
construction and repair. We repeatedly reaffirmed the need for
critical repairs only to be met with the adjuster's opinion of,
``I do not think that is necessary.'' He dismissed formal
inspections conducted by contractors and mitigation
specialists. The broken trusses struggling to hold up our roof
simply were not a matter of opinion.
After 123 days of our home sitting untouched and relentless
communication on our end, a reinspection was finally scheduled.
During this inspection, as we stood staring at our gutted home,
State Farm's adjuster admitted that their initial estimate was
too low and said he would be refiling `for the policy limit'.
Even so, an hour later, we stood in front of the county's
unsafe structure notice as he told my now 8-month pregnant wife
that separate living accommodations for our family were not
required, and that the county notice, which we had provided at
least half a dozen times, did not matter in the eyes of State
Farm.
Despite dismissing the need for coverage, this adjuster
then admitted he was unfamiliar with our specific policy,
instead citing a policy that did not apply to us. He went on to
say that he would `see what he could do' about covering
additional living expenses now that it was winter.
After dealing with State Farm for 5 months, it was no
surprise that when a revised estimate of the damages came
through in February, only minuscule adjustments were made.
Expenses we had already covered personally, and for which we
had provided State Farm with invoices, were short paid. Again,
we found ourselves needing to continue covering expenses out of
pocket while still being unable to fix our home.
At that point, we sought legal assistance and were
ultimately forced to file suit against State Farm. After 157
days, only after we took legal action, the structural engineer
we had been requesting for months was finally sent by State
Farm.
Now, 228 days after the storm, our home remains untouched
with no progress being made. My wife, who was 3 months pregnant
at the time of the storm, gave birth to our daughter two and a
half months ago. Our son turned 3 in April. What could have
been just a blip in his childhood has become a major event in
his life as he repeatedly asks to ``go back home''. We need
State Farm to give us our life back.
Thank you for hearing our experience.
Senator Hawley. Thank you very much, Mr. Vertel. Thanks to
all of the witnesses. We will now have some rounds of
questioning. I will start. Let me start with you, Ms. Migal. It
is September 27, 2024, Hurricane Helene hits Georgia, hits your
home causing very significant damage. I think we have a picture
of some of the damage here. Let's have a look. Does this look
pretty familiar to you?
Ms. Migal. It does.
Senator Hawley. It looks pretty severe. I mean, that's a
massive tree right there in the front part of your home. You
are an Allstate policy holder. Is that correct?
Ms. Migal. Correct.
Senator Hawley. And Allstate sends out an adjuster, you
said, pretty quickly, just a moment ago. Is that correct?
Ms. Migal. About 3 weeks after.
Senator Hawley. Oh, well, that's not very quick. OK. Three
weeks after. All right. And that you were told at the time in
this first inspection, verbally, that the adjuster agreed with
you that this was very severe damage. Is that fair to say?
Ms. Migal. Correct.
Senator Hawley. I think we maybe have a second picture.
Let's look at another view of this just to give a real
impression. Here's a breezeway that looks to be nearly
completely destroyed. You can see some of that roof damage,
quite extensive, that you were talking about in your testimony.
All of this looks familiar to you, I'm sure?
Ms. Migal. Yes.
Senator Hawley. Now, after this first adjuster agrees with
you that yes there's very significant damage. What did Allstate
when they finally came back with an actual assessment, a real
number, what was that number again?
Ms. Migal. $46,000.
Senator Hawley. $46,000. So, you went to considerable
expense on your own. You hired your own independent adjuster to
come back out and do all of this over again. And that person
looking at all of this evidence, that person found that the
damage was in the neighborhood of what?
Ms. Migal. I am sorry, can you repeat the question?
Senator Hawley. Yes. How your independent adjuster, how
much did that person estimate the damage was?
Ms. Migal. $497,000.
Senator Hawley. $497,000. Allstate offered you $40,000,
basically?
Ms. Migal. Correct.
Senator Hawley. And you are still waiting for this process
to be resolved all this time later. Is that right?
Ms. Migal. That's right.
Senator Hawley. Let me just ask you now, Mr. Schroeder,
because you were that first adjuster who worked for Allstate
who came out to look at this home. You were a field adjuster
deployed for Allstate through Pilot Catastrophe. Is that
correct?
Mr. Schroeder. Yes, that's correct.
Senator Hawley. You were the first one to inspect Ms.
Migal's home after the hurricane. Is that right?
Mr. Schroeder. Yes.
Senator Hawley. And you went in person, I think. Is that
correct?
Mr. Schroeder. Yes.
Senator Hawley. You spent several hours. Ms. Migal said in
her testimony a moment ago, you spent several hours doing a
very thorough inspection. Is that your memory also?
Mr. Schroeder. Yes, that's correct.
Senator Hawley. How serious would you say the damage was,
in your own, just personal recollection?
Mr. Schroeder. Extremely. Probably the most serious that I
saw on this deployment.
Senator Hawley. Wow. The most serious that you saw on the
deployment, which makes sense given these photos. So, you
start, if I understand correctly, you start to prepare an
estimate for a full replacement of this breezeway right here.
Does that sound right?
Mr. Schroeder. Yes, that's correct.
Senator Hawley. But then you were told by the higher ups,
``No, no, no, no, no. We are not going to do a full replacement
of the breezeway. So, only do an assessment for a partial
replacement of the breezeway.'' Is that correct?
Mr. Schroeder. Yes, that's correct.
Senator Hawley. OK. Then you start working on that and you
are working to get as big of a damaged claim as you can for Ms.
Migal in line with the facts after you have already been told,
no, we are not going to do the full thing. Then, before you can
even complete your work, you are taken off the case. Is that
right?
Mr. Schroeder. Yes.
Senator Hawley. Why do you think that happened?
Mr. Schroeder. I was told it was due to time. I was taking
too long, but I do not believe that is the case. I think that
Allstate saw from this, and my recently prior estimates of
being very thorough and complete, and going back and forth with
reviewers on coverage, that it was going to be a higher
estimate, and it would be more cost effective to reassign it to
an adjuster that would listen better.
Senator Hawley. Yes, an adjuster who would low ball the
policy holder, really? I mean that's what we are talking about.
You are removed from the case. It took 3 weeks to send you out,
to begin with, and then all of a sudden, boom, you are removed
once it looks like you are actually going to do some justice
for Ms. Migal.
Let me just ask you more broadly, Mr. Schroeder, have you
ever been told to change estimates to reduce payouts?
Mr. Schroeder. Yes, frequently.
Senator Hawley. When you have pushed back on this, if you
have ever said no, what happens then?
Mr. Schroeder. If I say no, then the claims typically get
reassigned due to--they say either lack of compliance or other
reasons like I am taking too long.
Senator Hawley. In your experience, was this kind of thing
a one-off thing or was this a pattern?
Mr. Schroeder. This was definitely a pattern.
Senator Hawley. Is it fair to say then that Allstate's
priority, in your experience, was not getting the best possible
award for their clients, it was in protecting their bottom
line?
Mr. Schroeder. Certainly, in protecting their bottom line.
Senator Hawley. Mr. Millikan, let me just come to you
because you were then another adjuster in this same case sent
out to look at Ms. Migal's property. You worked as a field
adjuster for Allstate through Pilot Catastrophe for about 8
years. Do I have that right, at least 8 years?
Mr. Millikan. Yes, sir.
Senator Hawley. In that time, you have personally inspected
hundreds of properties damaged after storms and disasters. Is
that fair to say?
Mr. Millikan. Thousands.
Senator Hawley. Thousands. And you are trained to determine
the extent, and cause of the damage, and how much it costs to
repair it. Is that fair to say?
Mr. Millikan. Yes sir.
Senator Hawley. All right. Let me just ask you about Ms.
Migal's claim. You were assigned to reinspect her home. Is that
right?
Mr. Millikan. Yes, sir.
Senator Hawley. You testified earlier that you went about
that diligently, you could see that there was very extensive
damage. That was your initial impression. Is that fair to say?
Mr. Millikan. Yes, sir.
Senator Hawley. And you reviewed all of the reports. There
was an engineer's report by this time, there was the public
adjusters report. You reviewed all of those things diligently.
Is that fair to say?
Mr. Millikan. Yes, sir.
Senator Hawley. When you submitted your report to Allstate
recommending several hundred thousand dollars' worth of
payments to Ms. Migal and her husband, what happened then?
Mr. Millikan. My estimate was rejected, and I was advised
to alter it to a lower figure.
Senator Hawley. So, you were told to alter the estimate and
to alter your findings as well?
Mr. Millikan. I was told to alter my estimate. I don't know
that the findings was told to be altered.
Senator Hawley. The alterations that you were told to make,
were those consistent with your own review of the property and
your own assessment of the damage?
Mr. Millikan. No, sir.
Senator Hawley. Did you write that up in a detailed
estimate which you were told to do?
Mr. Millikan. I did, yes, sir.
Senator Hawley. And Allstate, then they send that estimate
ultimately to the property owner. Is that correct?
Mr. Millikan. I am obligated to send the estimate to the
policy holder.
Senator Hawley. Is there any record anywhere the policy
holder would ever know that your initial findings, your
recommendations were rejected and somebody told you to come in
and alter them?
Mr. Millikan. No, sir.
Senator Hawley. Let me just ask you more broadly, have you
ever been told in other cases with Allstate to alter or delete
your findings?
Mr. Millikan. Absolutely.
Senator Hawley. In fact, you testified just a second ago, I
think, that you were frequently asked to alter factual
findings, delete material, and sometimes include items that
were false. Did I hear you correctly when you said that?
Mr. Millikan. Yes, sir.
Senator Hawley. In the overwhelming majority of cases where
you were asked to do something like this, did that cause the
estimate to the policy holder to go up or to go down?
Mr. Millikan. To go down.
Senator Hawley. What is your assessment of what Allstate's
ultimate goal here is? Is it to pay out the policy according to
the terms of the policy to the best extent they can, or is it
to protect their bottom line, and to use you and your report as
necessary to meet that end, to make sure they make as much
money as possible?
Mr. Millikan. 100 percent to use me, to enable them to make
as much money as possible.
Senator Hawley. You would say that this is a pattern, this
isn't just something that happened one time, like in Ms.
Migal's case. You have been doing this for a long time and you
have observed this to be a pattern with Allstate and in the
industry?
Mr. Millikan. I have, yes, sir.
Senator Hawley. Thank you for your testimony. Senator Kim.
Senator Kim. Yes. Thank you, Chair. I would like to just
pick up right where we are at actually. Mr. Schroeder, Mr.
Millikan, you both refer to an ethical obligation with your
work. Can you explain to me and to those that are not doing
that work, what do you mean by that? Is there a code of
conduct, a code of ethics that you have to abide by for your
license, Mr. Schroeder?
Mr. Schroeder. To do an estimate what is honest and true.
My evaluation to be honest and true. That's what I commit to
do.
Senator Kim. Yes. Mr. Millikan?
Mr. Millikan. Yes, sir. It's our ethical obligation to take
the damage that we identify, apply it to the policy, and
indemnify the insured for the full value of what we have found
to be damaged.
Senator Kim. With that ethical obligation, you are now
coming across people that you are engaged with in the insurance
companies that are telling you to change your estimate. Can you
give a little bit more detail? Who is it that you are
interacting with? Who are the people? What are their
credentials in terms of being able to tell you, or assess
whether or not they think you are right or wrong? Mr. Millikan?
Mr. Millikan. There's a team of reviewers and I do not have
access, or know their experience, or background. Their label, I
believe, is a vendor oversight team, or team member, or
training member. But think I kind of got sidetracked on your
question.
Senator Kim. No worries. I mean, but it sounds like they
are not necessarily abided by that same, or have that same
obligation when it comes to ethics in terms of the code of
conduct. They were not adjusters in the same way that you are.
Mr. Millikan. That's right. Yes, sir. There's been many
times whenever, as an adjuster, and I am an experienced
adjuster. I am not saying I am the best adjuster in the world,
but there's been many times where I have went out to losses and
inspected and identified with my own eyes hail damage, for
example, on roofs, and then submitted my findings to this new
process of the reviewers.
The reviewer tells me that what I am seeing is not hail
damage. Well, I was there, I seen the hail damage to the
siding. I have seen the hail damage throughout the
neighborhood. I saw the hail damage to the roof. They reject my
estimate, and tell me they are not going to approve it.
Senator Kim. But you are not necessarily certain what
expertise they have to be able to make that assessment, given
that you were the one that was on the ground?
Mr. Millikan. I cannot imagine they have any more expertise
than I do. No, sir.
Senator Kim. Yes. Mr. Schroeder, you were talking about how
they were telling you it's taking too long and that's why you
were removed from this particular case. But correct me if I am
wrong, but it sounds like if they remove you, they would have
to basically start from scratch all over again. Isn't that
right? Wouldn't that seem to take a little bit more time too?
Mr. Schroeder. Yes, that's correct. That's exactly what
happens. I actually had contacted Mrs. Migal just to see out of
my own curiosity, to check in a month after I had been removed.
She had not received an estimate yet for those repairs. I don't
think that that was accurate in why I was removed from the
case.
Senator Kim. In fact, it's not just about the work that
affects with you, Mr. Schroeder, but Mr. Ms. Migal. I keep
hearing from people that feel like these delays are
intentional, that it's meant to try to discourage the
consumers, the policy holders from continuing on. Did you feel
that way with how you were treated and just how the lack of
response and some of the delays were?
Ms. Migal. Yes, absolutely.
Senator Kim. Mr. Vertel, you were also talking about just
significant delays and lack of communication. Did you feel at
times that this was intentional?
Mr. Vertel. Absolutely. I feel it's a battle of attrition
at this point.
Senator Kim. Mr. Millikan, coming back to you with when you
are being told to change and adjust, do you feel pressure, or
did you feel fear that if you don't make changes, that maybe
you won't get future work from that insurance company before?
Mr. Millikan. Yes, sir. I do have that fear. I have had
that fear, but I am also a pretty stubborn person. It is
difficult for me to tell someone something that's not true. I
have battled that quite extensively.
Senator Kim. Mr. Schroeder, it seemed like you were kind of
nodding your head as well. Do you feel that there have been
times where you felt fear that, hey, look, if I do not make
these adjustments, or, they might be taken off that case, or
prevented--or, not given additional work by that company in the
future?
Mr. Schroeder. Yes, I certainly feel that way. I think
that's happened on this last deployment. I had multiple claims
that were at the end pulled, and reassigned due to an
explanation that to me just did not make sense. It was
coincidental with the timing of me having disagreements with
the virtual examiner that is just looking at a photo when I was
the only one, of the two of us actually present at the
inspection----
Senator Kim. There and seeing it with your own eyes.
Mr. Schroeder [continuing].There's a difference in a photo
compared--even if it's a great photo it's just a photo. When
you are there, you not only get a better look, but you have a
better perception of what's going on. Those disagreements, to
me, it did not make sense and it definitely was not true. Yes,
I disagreed and got pulled off a lot of those.
Senator Kim. Thank you. Mr. Quinn, you are hearing all
this. You hear all this constantly. I mean, you went through
this experience yourself. You are here in front of the U.S.
Senate. You are asking for the Federal Government to be able to
step in on something that traditionally has been sort of State
jurisdiction in terms of oversight.
Why is it that you think the Federal Government needs to
step in? What has been your experience engaging with the State
level, and how has that not satisfied the ability for policy
holders to be able to get the kind of justice they deserve?
Mr. Quinn. We have noticed a lack of action, Senator, on
the State level against criminal fraud. I meet prosecutors and
attorneys general (AGs) all over America. I routinely ask them,
have you ever prosecuted somebody from the carrier side for
cheating a consumer? The answer is invariably no. We see
literally no prosecutions on the State level of people from the
carrier side who are committing fraud to cheat consumers.
We feel there's an issue with regulatory capture. In some
cases, it's a limited capacity, budget strains, personnel
strains. But we do believe that the Federal Government should
be stepping in and investigating, and prosecuting cases where
the American consumer is getting cheated by their insurance
company.
Senator Kim. Thank you, Mr. Quinn. I yield back.
Senator Hawley. Senator Moody.
OPENING STATEMENT OF SENATOR MOODY
Senator Moody. Thank you so much, Chair. Florida is no
stranger to disasters. In fact, my State has suffered through
some incredibly serious damaging, tragic storms. All too often,
I find myself speaking to Floridians who are struggling to put
not just their homes back together, but their lives back
together because so much of our lives is embedded and built
within our homes.
Let me just thank you all for taking time to be here today
and talk to us. I know coming to a Senate hearing is no small
thing. I want to thank the chair for putting this together, and
for making sure that we have two panels so that we can talk to
a variety of people. We can only fit so many people here at the
table. Right now, I think making sure that we are paying
attention to the public discourse in terms of challenges in
recovery, and even some public stories about what is being
found underneath insurance companies and claims and helping
people recover.
I think the worst thing we could do right now is to not
have a hearing like this to address what is being said in the
broader conversation in America, especially in States where we
have suffered storms and people are still right now trying to
recover. Obviously, as attorney general, I even had to sue
representative of FEMA after the last storm.
We know that we cannot just leave everything to happen, and
trust that everybody is going to play according to the rules
without some sort of oversight. I think it is important that
you are here today to share your stories. I also think it's
important for our colleagues and for the Subcommittee to learn
more about what is going on just as we would expect insurance
companies to do the right thing and live up to the policies
that they have offered, and certainly have collected money and
payment on. We know that is in every industry. We have those
that are good faith players, and we have those that may seek to
do harm or take advantage of a tragic situation.
I wanted to ask you, Ms. Migal, I know that you have
specifically had a bad experience. I wondered, I think you
mentioned you had the one adjuster come out and then another
adjuster come out. Did anyone from Allstate ever call you and
walk through the specifics of why something may be covered by
your policy or not covered by your policy, or was it just an
adjuster coming out and communicating with you?
Ms. Migal. No. No one called me to walk me through the
details of the policy and how that would be applied. I was
called mostly regarding scheduling matters and the adjusters.
Senator Moody. Even after the multiple estimates, as they
gave you lower estimates than you had received, no one called
to tell you line by line why something may or may not have been
covered?
Ms. Migal. That is correct.
Senator Moody. Mr. Schroeder, I will ask you first, when
you submitted your estimate, when you had discussions, did
anyone go with you line by line why something might not be
worth what you estimated or might not be covered by the policy?
Mr. Schroeder. Are you asking when I submit an estimate to
the reviewers, do they go through--if there's something they
disagree with, they would say to remove it. There's typically
not an explanation for why and when. More often than not, it's
not what I would say legitimate, not according to the policy.
It's, that hail damage isn't hail damage, take it off, or that
is wear and tear and not hail damage, take it off. Those are
the answers I would get, but no, they would not go through my
entire estimate line by line with me. No.
Senator Moody. Ms. Migal, I am going to come back to you
for a moment. When you did not receive right away the money you
needed to repair the home, were you forced to come out of
pocket to repair the house?
Ms. Migal. We have done relatively minor repairs so far,
simply because we do not have any insight into the budget that
we might have at hand. So, only the most crucial repairs. For
example, putting a tarp up on the roof to prevent further
damage or rainfall has been done so far.
Senator Moody. You had to pay for that just out of your own
money. Money that was probably taxed on your income?
Ms. Migal. Yes, that's correct. Of course, engaging with
external experts such as the engineer was also out of pocket.
Senator Moody. Would that have been helpful to be able to
deduct from your taxes, the money you had to lay out to recover
for your roof with storm damage?
Ms. Migal. I have not deducted those expenses from my taxes
at this point.
Senator Moody. Would that have been helpful?
Ms. Migal. Would have been helpful? Likely, yes.
Senator Moody. Yes. I have been exploring with colleagues
and a bipartisan approach to trying to address money that
people are having to use from their own pocket. They get money
from their jobs, and then they have to outlay it to stop rain
from coming into their home, and then they still have to pay
taxes on that money. Would that have been helpful to you and
your family?
Ms. Migal. Absolutely. That would have been helpful.
Senator Moody. I do not want to go over time, but Mr.
Quinn, I would like to follow-up with you. I know that you have
been so focused on this, and I know a lot of your energy and
time and talent has been focused on this issue. Do you believe
it would be helpful?
I know many States are set up and structured different
ways, right? One agency may have statutory authority to
investigate these matters where another agency would not. If
that one is not moving fast enough or this one wants to
compliment it, sometimes that's not available and it looks
different in different States. Do you think it would be helpful
to have a cross section from different agencies being able to
within one State task force or even federally a task force
where the agents or the officers are specially trained in this
area?
Mr. Quinn. Yes, ma'am. I believe that would be very
helpful.
Senator Moody. Thank you, Chair.
Senator Hawley. Mr. Millikan, can I just come back to you
for a second? Can I just ask you, did you think that Allstate
might retaliate against you for your testimony here today? Did
it ever cross your mind?
Mr. Millikan. Yes, sir.
Senator Hawley. Why did you think that might happen?
Mr. Millikan. I mean, I got a phone call from Pilot
Management indicating that they were aware of it, and then got
word from people in the office that I was going to be on the
cutoff list, which has not happened in probably 6 years.
Senator Hawley. OK. Wait a minute. I just want to make sure
that I got this right, and I want to be sure everybody in the
room understands it. You are telling me that after you agreed
to testify here today, you got word that you were on a
blacklist, essentially from Allstate, and that you were going
to be penalized in some way?
Mr. Millikan. I have been told, yes, sir. I have been told
that I am going to be worked out of the storm in Georgia which
is 100 percent. I mean, it's cutting me off. It's eliminating
me. Guaranteed.
Senator Hawley. So, they are retaliating against you.
Sounds like they have already set it in motion.
Mr. Millikan. Yes, sir.
Senator Hawley. Is what you are telling me that's what you
have heard, because you testified as to what happened?
Mr. Millikan. Yes, because I was going to testify. Yes,
sir.
Senator Hawley. Yes. Even before you got here today, they
were doing this. I mean, that is really unbelievable.
Absolutely unbelievable. Why do you think they would do that?
Because they do not want the truth to be known. I mean, what
are they so afraid of in your testimony?
Mr. Millikan. I honestly could not tell you. I thought that
by telling the truth, I would not have any problem. Swear to
goodness. I had no idea that the company I work for would hold
a grudge about speaking the truth.
Senator Hawley. I just want to underline what you have said
today, and you too, Mr. Schroeder, because I want to be sure
people get it. What you have testified to is not only did
Allstate not do right by Ms. Migal, not only did they tell both
of you to alter your evaluations, they told you to alter your
findings to--they pushed down the estimate lower and lower and
lower. But you both have testified today that you saw this
happen over, and over, and over. Mr. Millikan, you have been
told multiple times to alter factual findings, to delete
information to lower your estimate. That that's happened
repeatedly. It's a pattern.
Mr. Millikan. Yes, sir.
Senator Hawley. You said the same thing, Mr. Schroeder.
It's a pattern over and over.
Mr. Schroeder. Yes.
Senator Hawley. It's a pattern, not just in this one
deployment, not just one little thing, not one little area. But
this has happened over and over again.
Mr. Schroeder. I have seen for years. I have seen this
trend for years.
Senator Hawley. I mean, that's extraordinary, I have to
say. I want to say thank you to all the witnesses. I want to
say thank you to the two of you, in particular, because you
have really risked a lot by being here today. I am sorry, Mr.
Millikan, that they are retaliating against you. Mr. Schroeder,
I know that they retaliated against you by yanking the case
right out from under you when you were working with Ms. Migal
to try to get a fair award for her under the policy. That's
just outrageous. It may be illegal. If it's not, it should be.
I just want to tell you, we are going to do everything we
can to make sure that you are done right by, and that people
like Ms. Migal across this country are done right by.
That brings me to you, Mr. Vertel. I want to give you the
chance just to say a little bit more about your story. We have
been talking about Allstate, but you were a policy holder of
State Farm. I think we have a picture of your house as well.
Let's take a look here just so people get a sense of it. This
is your home after Hurricane Helene. Is that right?
Mr. Vertel. That's correct.
Senator Hawley. That's a lot of damage right there. Now,
did you say that you had a small child at this time?
Mr. Vertel. Two years old, yes.
Senator Hawley. And your wife was pregnant?
Mr. Vertel. With our second, yes.
Senator Hawley. Wow. This was taken right after the
hurricane, back in September, about October, something like
that?
Mr. Vertel. Right after the storm. Yes.
Senator Hawley. Did you say Allstate now has fixed it all
up and it's all good?
Mr. Vertel. State Farm has not----
Senator Hawley. Oh, State Farm, I am sorry.
Mr. Vertel. The home sits untouched. Current condition is
uninhabitable.
Senator Hawley. So, they have done nothing in those--you
said the number of days----
Mr. Vertel. 228 days of our home being uninhabitable.
Senator Hawley. 228 days, and your wife has since had your
second child. Is that correct?
Mr. Vertel. Two and a half months ago. Yes.
Senator Hawley. OK, so you have a two-and-a-half-month-old,
you gave a 2-year-old--nobody gets any sleep in your house, I
suspect. I have little kids.
Mr. Vertel. This keeps us up more at night than they do.
Senator Hawley. I bet that's true. You are coming out of
pocket to pay for your own housing because you cannot live
here. Is that right?
Mr. Vertel. We have received drips of reimbursement, but we
have had to fight tooth and nail for every one of those.
Senator Hawley. I mean, just tell us what it's like to go
through this with this company. I mean, how long you'd had your
policy for a little while, I imagine. I mean, you didn't just
get the day before the storm.
Mr. Vertel. We have been State Farm customers probably for
the better part of a decade.
Senator Hawley. Wow. And so, you pay your premiums like
everybody else, right?
Mr. Vertel. Always.
Senator Hawley. Yet they won't work with you. They won't
give you. Your home still has not been touched. You have a
little kid, you have a little baby. They are not doing anything
for you. You decided ultimately that you needed to stand up for
yourself and actually try to fight State Farm on this. Is that
fair to say?
Mr. Vertel. That's correct.
Senator Hawley. What would have happened if you had not
have done that? What was the strategy here if you hadn't? You
still have not gotten the appropriate damage award? So, what
would have happened though if you had not have stood up and
started to demand your rights?
Mr. Vertel. I feel that we were perceived as an easy mark,
that we needed to be in our home quickly. We were going to take
this on ourselves. Right now, we simply have not received any
funds that would allow us to fix our home. If we had to come
out of pocket, it changes everything about our life, where we
live, if our kids can go to school, everything.
Senator Hawley. It's just extraordinary. You should never
have had to go through that. Mr. Vertel, I want to offer my
sympathies, my apologies to you, to your wife, to your little
ones. That's absolutely outrageous and the kind of behavior we
have heard testify to here today. It sounds like to me, you are
a victim of an another one of these massive insurance companies
who takes your money. They are happy to take your money, but
when this happened to you, they won't give you anything. It's
delay, delay, delay.
Mr. Quinn, let me just ask you. You have heard this
testimony today. You are very familiar with it. You hear it all
the time. Can I just ask you; you have heard testimony about
Allstate, and about, frankly, fraud that goes on there. In your
view, in your professional judgment, is that kind of fraud
limited to Allstate?
Mr. Quinn. No, sir, it is not. It is pretty much industry-
wide.
Senator Hawley. Tell us more about that. I mean, it's
industry-wide because why? Tell us what the industry looks
like, how it runs.
Mr. Quinn. We believe this goes back to the 1990s with
what's called the McKenzie Report. A consulting firm sort of
trained insurance companies to use their claims department as a
profit center. They actually trained their staff to come in and
short people on claims. They did it specifically starting out
with Allstate, and then they took it on the road for almost
every other insurance company. It is now basically industry
standard.
I will say there's nothing you are hearing that's unique.
The people that are speaking are unique because they had the
courage to do it. But I hear these stories every single day,
and they are the exact same stories over, and over, and over,
and working-class families getting taken advantage of by
insurance companies without any ability to fight back.
Senator Hawley. What you are telling us is these big
insurance companies went to a consulting firm, McKenzie, and
asked them to design a program to help rip off policy holders.
Mr. Quinn. That is correct, sir.
Senator Hawley. And has that been successful? I mean, has
their program been successful in ripping off policy holders?
Mr. Quinn. It has been incredibly successful, sir. It is
actually part of this systemic fraud that's occurring every day
now.
Senator Hawley. That's extraordinary. Senator Kim.
Senator Kim. Thank you, Mr. Chair. Mr. Millikan, Mr.
Schroeder, I wanted to just kind of zoom out a little bit. We
talked about major disasters, but Mr. Millikan, you were
talking about--just, in general, there's a lot more higher
volume in your work. You, in particular, said that that has
increased use of people that are just kind of relying on
photographs, right? Is that correct in terms of just trying to
get out there? People that might not have the skillset that you
and Mr. Schroeder have, but they are out there taking
photographs. Can you tell us a little bit more about that?
Mr. Millikan. Yes, sir. When I first started photographs,
you never adjusted an estimate by photographs. You went out and
put eyes on. Now, the whole process is set up on photographs.
The reviewers are reviewing pictures that I took at my
inspection where I identified hail damage to a roof.
This reviewer, who's never been to this house, tells me
that that's not hail. I go back out to the house, I take more
pictures with a phone and a camera. I submit these pictures,
and this reviewer tells me this is not hail. I am 100 percent
certain this is hail, but yet, this is still the process. This
is not just one time, this is multiple times.
The same thing goes with mislabeling material. If I go out,
and I identify a certain material pre-engineered flooring
versus finished in place flooring, and they tell me that it's
not what I say it is. I mean, I know that's what it is. It's
100 percent factual, and they are making me write something
that's not factual and submit this to the homeowner. So, yes,
that happens on a regular basis.
Senator Kim. With this reliance on photographs to try to
determine, what the level of damage is, do you think that that
is sort of predisposed? Is that something that seems to be when
you are relying upon photographs does that seem to be something
where you are more likely to underestimate the damage or
overestimate the damage?
Mr. Millikan. 100 percent underestimate damage. I think
that the whole process is designed to miss damage.
Senator Kim. Mr. Chair, I just kind of raised this because
it's not just about the major disasters. We are certainly
catching that because we are seeing and hearing some incredibly
powerful stories.
But, I think this Committee should be thinking through just
the systemically, like certain types of steps, like what you
are saying, that seem to just always kind of tip the balance
toward away from the consumers, away from the policy holders
and kind of always geared toward, underestimating. I think that
that's something that becomes much more clear to me when I hear
from you on this front.
Mr. Quinn, I wanted to turn to you because, the devil's
advocate, the argument on the other side is saying, hey, look,
we have very low rates of complaints, you know some percentage,
1 percent, or whatnot. I guess I just wanted to just hear from
you, what is your response to that type of argument in terms of
saying like, satisfaction's high, these problems are outliers
rather than systemic.
Mr. Quinn. I assure you, Senator, satisfaction is not high.
We hear the complaints regularly. What we understand is most
consumers when they complain, they are dealing with their
insurance company, so they will complain to the insurer. We
believe those statistics get buried. Most people do not
understand how to complain to their insurance department, how
to complain to the National Association of Insurance
Commissioners (NAIC). They do not get it. They do not
understand how to do that.
Whatever the companies are claiming are their complaints
are not representative of the amount of extreme dissatisfaction
amongst our policy holders.
Senator Kim. Ms. Migal, Mr. Vertel, when you were going
through that difficult process, probably for the first time
where you had to kind of engage with claims of that magnitude,
is it right that you have a hard time understanding that time
all the different tools at your disposal, the process that you
need to go through.
Am I right in kind of assuming that, you were going through
a lot of trauma as well, just emotionally, and trying to figure
out how to file an official complaint or that might be more
opaque to the average person? Is that right, Ms. Migal?
Ms. Migal. I would say that is correct. It is not very user
friendly. It's not very intuitive.
Senator Kim. Because, I mean, you were talking about how
you had to go to bring in an outside adjuster, right? That was
probably not something that you knew you could do right away.
Is that correct?
Ms. Migal. That's correct. It took us months to learn
enough about the environment with which we are working in,
about the situation, and how it works to even recognize that
that was an option for us.
Senator Kim. Mr. Vertel, could you imagine policy holders
that are going through this, they are frustrated, but they
might not know that there are ways to file official complaints,
or take other actions to be able to raise some of their
concerns, or see if there are outside entities that might be
able to help take another look?
Mr. Vertel. Yes, I am not sure exactly what a complaint
would have done in this scenario.
Senator Kim. Mr. Quinn, I just want to go back to something
I asked you at the end of the last round. You were talking
about the States versus this Federal approach. Certainly, I am
more familiar with this in terms of New Jersey, but I think
part of what I am hearing as well from you, as you are hearing
this from a lot of people is: Yes, States are often not meeting
the bar.
But am I also correct that part of the problem is that
every single State probably does this differently, has
different levels of engagement. Some States maybe do better
than others, but without that sense of level playing field,
it's very difficult for the American people and the policy
holders to be able to have a chance of fairness. Is that an
accurate way to be able to describe it?
Mr. Quinn. That is correct, sir. Every State has their own
procedure, and there's not necessarily consistency between one
State and the next.
Senator Kim. Mr. Millikan, Mr. Schroeder, you know, Mr.
Quinn earlier was saying that he felt that this was kind of
across the industry. We have certainly talked about certain
insurance companies here, but is that your understanding as
well, from your experience? Did you feel like there was some
that were abiding very differently and very much focused on the
consumer? Or do you feel like this is a problem that you see
across the industry no matter which insurance company that you
are working with? Mr. Schroeder?
Mr. Schroeder. I would say, and I work for many different
insurance companies, I kind of spread myself out that way for
the purpose of getting different exposure and experience. I do
see this as a like a systematic general consensus, a standard
for practice amongst all insurance companies. Some though are
better than others. There's a couple standouts that I would say
are really fair and for the most part, all the rest are in the
same group of consistently denying unfairly claims where
there's owed damage.
Senator Kim. Mr. Millikan, anything to add here?
Mr. Millikan. No, sir. I have worked exclusively for
Allstate for the most part, so I only can speak to that.
Senator Kim. OK. Thank you. I just want to say, first of
all, what you were saying, both Mr. Schroeder, Mr. Millikan,
about the risk that you are taking when it comes to your
career, your work, I just want you to know that's incredibly
powerful to hear, and it just lends added gravity to your
testimony, to your answers today. I want you to know this is
not some just check the box thing that the Chairman and I are
engaged on. We want to make sure that we are invested in the
follow-up to make sure that it's worth the risk that you took.
To Ms. Migal, Mr. Quinn, Mr. Vertel, you know, just hearing
about the impacts this has had on you all your family, your
kids, as a father of a 7-year-old and 9-year-old, and hearing
from families across New Jersey that years later, still they
were saying that--you may very well agree, but people I talked
to in New Jersey, they were saying like the storm was in some
ways the easier part, that they thought that was going to be
the worst of it. They did not expect all the, you know, and I
will exclude the words that, that people used, but all the
other stuff that comes later, they did not expect that that
would be so damn difficult.
I just think that that's something the American people
really need to understand. Like, why is it that, in your time
of greatest need, not only are you not able to rely upon those
that are supposed to help you, but they are actually making
things worse. I think that that's something that just eats
away. I mean, it just hurts so much to hear your stories. I am
sorry for what you all have gone through, and the fact that you
are sharing it, it's for the betterment. Hopefully, we can save
this to help fix and make it easier for other families in the
future to be able to go through this.
Senator Hawley. I want to thank all of the witnesses for
being here today on this panel. Thank you. Thank you for your
testimony. Thank you for being willing to share with us your
stories, your expertise, your knowledge of this industry.
I want to say again, I am sorry for what you have had to go
through, particularly you, Ms. Migal, you, Mr. Vertel, and we
will continue to do everything we can on this Committee to get
the facts. You have helped us a lot with that today, and to get
some accountability.
We are going to take a 5-minute break here, and the
Committee will stand to recess while we change the panels, and
we will reconvene at about 5 minutes, subject to the call of
the chair.
[Recess.]
The Committee will return to order. We now will welcome our
second panel of the day. As I said to the first panel, it's our
practice in this Committee and in the Subcommittee to swear our
witnesses before we begin.
Let me ask you to rise and raise your right hand and repeat
after me, if you would. Do you swear that the testimony you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you, God?
[Witnesses answer in the affirmative.]
Very good. Now we will hear from each of the witnesses in
an opening statement. We will start with Mr. Michael Keating.
Mr. Keating is the Operations Vice President at State Farm. Mr.
Keating, floor is yours.
TESTIMONY OF MICHAEL KEATING,\1\ OPERATIONS VICE PRESIDENT,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Mr. Keating. Chair Hawley, Ranking Member Kim,
distinguished Members of the Subcommittee, thank you for the
invitation to appear before you today. I appreciate the
Subcommittee's interest in insurance claim handling, and I am
grateful for the opportunity to provide insight regarding State
Farm's approach to helping our policy holders after disaster
strikes.
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\1\ The prepared statement of Mr. Keating appears in the Appendix
on page 58.
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But before I begin my formal statement, I do want to
address the difficult situation I heard with Mr. Vertel's
testimony. State Farm is made up of 66,000 employees. We are
human beings, we make mistakes. I listened to Mr. Vertel's
testimony, and it, quite frankly, was difficult to hear. We
made mistakes in the handling of this claim.
As a 30-year employee of this company, I know the actions
did not reflect the values of State Farm. On behalf of State
Farm. I want to sincerely apologize to Mr. and Mrs. Vertel,
their family. Again, we are not satisfied with how this claim
was handled, and we are going to work hard with them, and are
already working hard with them to get this resolved.
If I may, I would like to acknowledge Mr. Vertel.
Senator Hawley. Please.
Mr. Keating. I will continue. State Farm is the largest
provider of personal, home, and auto insurance in the United
States. Headquartered in Bloomington, Illinois, our mission for
over 100 years has been to help our policy holders manage the
risk of everyday life and recover from the unexpected.
As a mutual insurance company, State Farm operates for the
benefit of our policy holders. State Farm has no shareholders
seeking a quarterly return, so our organization is able to
focus on the long-term interests of our policy holder group as
a whole and deliver on the promises we make to them.
I joined State Farm nearly 32 years ago as a homeowners
claim representative. Currently, I serve in the role of
operations vice-president, where I help lead State Farm's claim
process. How I work, and how I lead my team are direct
reflections on those experiences over three decades. The values
of customer service integrity, they are what we hold dear at
State Farm.
From my first day at State Farm, I have had the privilege
of helping people put their lives back together after the
unexpected. It has shaped my role in how I lead others to
fulfill State Farm's commitment to our policy holders to ensure
that we pay policy holders what we owe under the terms of their
policy properly, courteously, and efficiently.
Our commitment to our policy holders navigate some of the
most difficult moments of their lives is especially critical in
light of the recent devastation caused by natural disasters
across the country. We share the Subcommittee's concern for the
families and communities impacted by these events.
At State Farm, our policy holders are also often our
neighbors, and as the largest claims force in the industry, we
take seriously our role to help communities recover and
rebuild. In the southeast, damage from Hurricanes Helene and
Milton resulted in approximately 129,600 property claims, and
State Farm has already paid out nearly $1.28 billion under
those claims. Of these claims, less than 1 percent have
received one or more policy holder complaints.
In California, as of May 6th of this year, State Farm
companies have handled approximately 12,600 wildfire-related
claims, and have paid out more than $3.4 billion in the wake of
these natural disasters. State Farm is hard at work on the
ground so policyholders can return to their communities and to
their homes.
To put this into further context, State Farm receives
approximately 30,000 claims every single day. We understand
behind every claim is a person, a family, or a small business
who needs our help. No two disasters are the same, and each
claim is different, just as each individual submitting that
claim is different. Our goal in claims handling is to
understand the scope of the damage, identify the cause, and
determine what we may owe.
This is how I have instructed my teams to approach claims.
Listen carefully, show empathy, investigate thoroughly, and pay
what is owed under the terms of the policy. Now, we try to
respond to most of the claims handling work ourselves, but
sometimes we need to work with external independent adjusters
to help us process a large volume of claims in a timely way.
Similarly, when a claim is particularly complex or requires
special expertise, we may use engineers to help us resolve it.
In such cases, we require that engineers are appropriately
licensed, independent, objective, and base their analysis on
facts.
Thank you, again, to the Subcommittee for having me here
today, and I do look forward to answering your questions.
Senator Hawley. Thank you very much. Our next witness is
Mike Fiato of Allstate. Mr. Fiato is the Executive Vice
President and Chief Claims Officer of the Allstate Corporation.
Mr. Fiato, the floor is yours.
TESTIMONY OF MIKE FIATO,\1\ EXECUTIVE VICE PRESIDENT AND CHIEF
CLAIMS OFFICER, ALLSTATE CORPORATION
Mr. Fiato. Chairman Hawley, Ranking Member Kim, and Members
of the Subcommittee, thank you for inviting Allstate to share
how we help customers recover when disaster strikes.
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\1\ The prepared statement of Mr. Fiato appears in the Appendix on
page 60.
---------------------------------------------------------------------------
My name is Mike Fiato, I am the Executive Vice President
for Claims at Allstate, leading a team of 23,000 claims
professionals who help customers when they have fender benders
or when their home burns to the ground. I joined Allstate about
a year and a half ago after having spent more than three
decades leading claims organizations at several other leading
insurers.
In my opinion, Allstate is among the finest in the industry
and is exceptional when it comes to helping customers after
natural disasters. Allstate's purpose is to serve customers
from small setbacks to large scale disasters. We help customers
recover from life's toughest moments so that they can move
forward with confidence. I like to tell our team that our
customer's worst day needs to be our best.
My written testimony discusses in detail Allstate's claims
process. Allstate responds with urgency to get accurate
payments to customers for their recovery. Last year, Allstate
paid customers over $100 million dollars a day, on average,
enough to rebuild an entire community every day. This adds up
to more than $37 billion in claims payments, and includes $57
million following Hurricane Milton, and $527 million after
Hurricane Helene, where I personally visited damaged areas and
witnessed widespread destruction that our customers lived
through.
Given the nature of this hearing, I would like to address
the testimony of the preceding panel and to provide the
Subcommittee with a more complete picture of what happened with
Ms. Migal's claims of September 2024.
Let me start by saying that on behalf of Allstate, I regret
that Ms. Migal is unhappy with the settlement of her claims.
Our business is to help customers during some of their toughest
times. We are willing to work with our customers when new
information is presented to ensure that claims are settled
fairly and accurately. Some of what you heard in the first
panel is just not accurate, and it's important that the record
is correct.
I will focus on a few key points. First, our adjuster
performed a comprehensive in-person evaluation of Ms. Migal's
home after the storm, completed a thorough estimate of the
damage covered, and Ms. Migal settled the claim for
approximately $100,000. This covered structural damage and
repair or replacement of aesthetic damage.
Allstate provided for all remediation under the policy.
Second, roughly 70 percent of the difference in estimates
was attributable not to structural damage, which Allstate
covered in full, but to cosmetic damage such as the appearance
of undamaged bricks. Mr. Millikan's estimate included replacing
the bricks on an entire side of the house for aesthetic
reasons. Allstate's policy in Georgia law does not provide for
such coverage when there is no damage.
Third, an estimate of five times that amount by a public
adjuster must include undamaged or uncovered items and is
simply not credible. Fourth, Mr. Millikan did not agree with
the public adjuster's estimate of $500,000, and in fact, noted
that the public adjuster demanded excessive roof repairs.
Fifth, Mr. Millikan's original estimate totaled roughly
$200,000, and Allstate adjusters sought clarification on some
of the areas. Mr. Millikan updated his estimate and came back
with an estimate of approximately $100,000, which is where the
claim settled. We have reached out to Ms. Migal's public
adjuster to see if there's new information related to the claim
that we can review and consider.
Given my extensive experience in the claims business, I can
speak confidently that Allstate pays claims with precision and
fairness. At Allstate, we have robust internal risk oversight
and compliance protocols to ensure our customers claims are
paid accurately and efficiently. Additionally, as part of our
commitment to quality, consistency, and customer experience, we
have a separate quality department that reviews oversight
standards for consistent application.
Claims like most components of the property casualty
business are also heavily regulated through our State
departments of insurance. 51 regulators oversee and regulate
everything from pricing and underwriting, to policies and
claims, where we are routinely subject to market conduct exams,
including following large catastrophe events like hurricanes.
Let me close with four key points. Allstate's claims
practices are fair, fast, and have high customer satisfaction.
Allstate helps millions of homeowners rebuild after severe
weather events paying over $17 billion over the last 5 years.
For catastrophe events alone, Allstate helps 1 in 10 homeowners
protect one of their most important assets with affordable,
simple, and connected insurance. Allstate is constantly
investing innovation to better serve customers, leveraging
technology, connectivity, and industry-leading analytics.
I look forward to discussing the role of our claim's
organization with you today. Thank you.
Senator Hawley. Thank you very much, to both of the
witnesses. We will now have 5-minute rounds of questions. We
will do a couple of rounds here, and I will start.
Let me just start with you, Mr. Fiato. I take it from your
statement just now that you do not have any regrets about Ms.
Migal's case. Mr. Keating apologized to Mr. Vertel and promised
to work with him to resolve his case. Thank you for that, Mr.
Keating. I did not hear anything to that extent from you, Mr.
Fiato. You think Allstate handled it just fine?
Mr. Fiato. No. I stated in my statement that I regret that
Ms. Migal is unhappy with the----
Senator Hawley. Yes, well, that's like saying I am sorry
you are unhappy. Right? That's I apologize, but I do not
apologize. Would you like to apologize to her now? Maybe I just
misunderstood.
Mr. Fiato. I would like to say--is Ms. Migal here?
Senator Hawley. Go ahead. I am sure she's watching.
Mr. Fiato. Hi, Ms. Migal. I would like to say I want to
make sure that we get your claim resolved to your satisfaction,
and if there's additional information or things that we can do
to continue to work with you, we will do that.
Senator Hawley. I noticed that you said in your written
testimony, you just repeated it here, let me make sure I get
this right. I am going to quote you now, ``We live and breathe
our motto; Our customer's worst day needs to be our best.''
I have to tell you, Mr. Fiato, based on the testimony I
have heard today, based on the witness statements I have taken
for witnesses, it sounds like to me that it really ought to be
amended to say that, ``Our customer's worst day is your big
profit opportunity.'' I mean, we have just heard testimony
here, sworn testimony, from multiple adjusters that your
company ordered them to delete or alter damage estimates to
reduce payouts and to make you profits. It sounds to me like
you are running a system of institutionalized fraud.
Mr. Fiato. Yes, that would be incorrect, Senator. That's
not what we do.
Senator Hawley. Allstate has never asked an adjuster to
change an assessment on their report?
Mr. Fiato. When we review an adjuster's estimate, most
often for authority requests, so most adjusters have an amount
of financial authority that they can settle claims up to
without having to----
Senator Hawley. Now, wait a minute. That's not what they
testified to. That's not what they just testified to. You just
heard sworn testimony from multiple adjusters and they said it
happened. One adjuster had only ever worked for you over years
in the industry, and he said he was repeatedly directed by your
company, Allstate, to change factual findings, to delete
material in his reports, to alter his reports, to make them
factually incorrect, all with the purpose of driving down the
award and padding your profits.
Mr. Fiato. I disagree with this statement.
Senator Hawley. I have to notice that--I mean, your profits
have never been better. They are really quite extraordinary.
Fiscal Year (FY) 2024, Allstate had $64 billion in revenue.
That's 12 percent above the previous year. You made $4.6
billion in profits, and your Chief Executive Officer (CEO) Tom
Wilson last year was paid $26 million.
Now, Ms. Migal cannot get her claim paid out, but Tom
Wilson, whoever the heck he is, gets $26 million. I mean,
that's really extraordinary. Do you not have the money to pay
people like Ms. Migal? Why is she not a priority but Tom
Wilson's salary is?
Mr. Fiato. We have paid Ms. Migal's claim.
Senator Hawley. No, you did not. You have given her a
poultry sum, your own adjusters. You said in your testimony
just a second ago, you sent out an adjuster. In fact, you sent
out three, and two of those adjusters testified just now under
oath that your company ordered them to alter their reports
against their will, contrary to their advice, and in fact, to
render them factually inaccurate.
Mr. Fiato. I disagree.
Senator Hawley. That's extraordinary.
Mr. Fiato. I disagree with their statements.
Senator Hawley. You disagree that's what they said?
Mr. Fiato. I disagree that that's our process of----
Senator Hawley. So, they are lying. That's what you are
saying?
Mr. Fiato. I can tell you that, for example, Mr. Schroeder
wrote 15 estimates for us. None of those were reviewed by
Allstate.
Senator Hawley. Listen to another piece of testimony from
another witness. This is a whistleblower report that has come
in to us. This person says, ``I have dedicated my entire adult
life to the claims adjusting world in numerous roles. I worked
for Pilot on Allstate for 12 years as an independent adjuster.
I have worked claims all over the country regularly throughout
the years, and I have watched the progression and controlling
nature of claims worsen progressively.
Allstate created an internal review team with the sole
purpose of making sure claims were paid as low as possible.
Allstate reviewers instructed adjusters to alter and delete
factual findings in their estimates to drive down the cost of
the claim. The alterations and deletions were often factually
wrong. During Hurricane Isaac in 2012, an email was sent out
that no adjuster could buy a roof no matter the damage
present.''
This looks like a pattern. This is someone who's not even
involved in this case in Hurricane Helene. We have heard from
person after person. All this testimony is on the record. It
sounds to me like your company is running a racket and you are
making more than you ever have.
Mr. Fiato. Those are not our processes, Senator.
Senator Hawley. But multiple people have testified that
they are. In fact, this really all goes back to a strategy that
your company pioneered with the McKinsey company back in the
1990s. Isn't that right? Let's just take a look here at what
McKinsey advised Allstate as early as the 1990s. You went to
McKinsey and asked them; how can we get rich? And McKinsey gave
you this advice; sit and wait. They said delay, delay, delay.
It's a zero-sum economic game. There can only be one winner,
and the winner's going to be Allstate. It's not going to be the
policy holders.
And then, good hands are boxing gloves. Mckenzie suggests
Allstate make a low offer on a claim like you did to Ms. Migal.
Then, if the policy owner has the temerity to protest, you go
after them hard, just like you did to her. Her home has not had
one lick of work done on it, not one lick. Yet you sit here
today and say you are sorry she feels badly about it. I mean,
this is really your strategy, is it not? It's made your company
just filthy rich.
Mr. Fiato. That report is over 25 years old.
Senator Hawley. And you have implemented it to the T in
those 25 years.
Mr. Fiato. We have had multiple departments of insurance
indicate that this is not an issue or we are doing anything
untoward.
Senator Hawley. What do you mean it's not an issue? You are
saying that you do not follow Mackenzie's advice.
Mr. Fiato. That's not the way we handle claims.
Senator Hawley. You have never done it this way. You did
not go and seek their advice?
Mr. Fiato. I have been at Allstate for about a year and a
half. I cannot speak to what happened 25 years ago interrupted.
Senator Hawley. Oh, I see. This all predates you. You don't
know anything about it.
Mr. Fiato. I do not know anything about the McKinsey
report.
Senator Hawley. Oh, of course. Right? Deny, delay, right?
It's the same tactics over and over. Let me ask you, do you
ever engage in retaliation for employees who come before
Committees like this one or who raise objections to what you
are doing, to the fraud that you are engaged in? Would you ever
retaliate?
Mr. Fiato. It's a hypothetical question, but the answer
would be no.
Senator Hawley. It's not hypothetical, but go ahead. What's
the answer?
Mr. Fiato. The answer would be of course not.
Senator Hawley. We just heard sworn testimony from Mr.
Millikan that you have retaliated against him. That he has been
informed by Allstate that he is not going to be doing any
further work. I see your suits behind you are shaking your
heads, no, no.
Mr. Fiato. Allstate did not have any communication with----
Senator Hawley. You have never had any communication with
Mr. Millikan on this subject. You are under oath now.
Mr. Fiato. Of this specific situation, we have communicated
with Mr. Millikan many times. He's worked for Pilot for 8
years.
Senator Hawley. Oh, it sounds like now we are
prevaricating.
Mr. Fiato. No, we're not.
Senator Hawley. Now we're prevaricating. So, my question is
have you retaliated against Mr. Millikan?
Mr. Fiato. Of course not.
Senator Hawley. Did you tell Mr. Millikan that he won't be
doing any further cases with Allstate?
Mr. Fiato. Not that I am aware of.
Senator Hawley. Not that you are aware of.
Mr. Fiato. Of course not.
Senator Hawley. Have you taken any or Allstate taken any
adverse action against Mr. Millikan ever at all?
Mr. Fiato. No.
Senator Hawley. Has Allstate ever done that against any
other employee?
Mr. Fiato. Mr. Millikan was an employee of Pilot, not
Allstate. I can't answer that question. I can only answer what
I have done.
Senator Hawley. In fact, you have been sued multiple times
in court, after court, after court for retaliation. You have
been sued for fraud successfully time, after time after time.
Mr. Fiato, I have to tell you, I find your testimony
absolutely stunning here today. I can't believe after what we
have heard, I cannot believe after what Ms. Migal has been
through, that you would sit here and insist that everything is
fine and above board. I cannot believe this pattern of fraud
that you would have nothing to say about and these outrageous
profits. I mean, don't you think that your policy holders
deserve better than this?
Mr. Fiato. I am not sure what the question is, Senator.
Senator Hawley. Don't you think they deserve better than
what you are giving them? That's my question.
Mr. Fiato. I think we do our best to service our policy
holders every day.
Senator Hawley. Oh, I think you do your best to make
profits, and I think you are very good at it. I think your
policy holders are getting the shaft. Senator Kim.
Senator Kim. In the previous panel, we continued to hear
from adjusters talking about how they send forward their
numbers and it goes to the insurance company, and then they are
being told to change it. So, you know, Mr. Keating, I guess I
just wanted to get a sense from you, what is your response to
that type of claim? Who is it going to? What expertise do they
have? Why is it that they are saying constantly it seems--like,
the number's too high?
Mr. Keating. Thank you, Senator Kim, and appreciate that
question. It's an important one. The process that was described
by the first panel is something that's different from what
State Farm does. We do not have that inside review, I think, as
they were describing it. That's just not part of the process
when we are using independent adjusters. We provide them with
authority and they go out and inspect losses all in an effort
to pay what we owe in accordance with the policy that the
customer has. And so, that review from in-office perspective
that's not part of our process.
Senator Kim. You are saying from your company's standpoint,
there isn't that practice that was talked about in terms of
saying change this part of the estimate, or that's too high, or
that's not the right material?
Mr. Keating. That's correct. That's not one of the
processes we use at State Farm.
Senator Kim. Mr. Fiato, can you explain the process on
yours? And would you mind pulling the microphone up closer?
Mr. Fiato. Sure. Could you repeat the question for me?
Senator Kim. Yes. I guess I am just trying to get a sense--
in the previous panel, we hear them talk about the adjusters
talking about--how they come up with their number, they send it
forward to the insurance company, and then they are being told
that's too high. Or they are being said, oh, maybe this part
needs to be changed, or this needs to be changed. And they are
saying that it seems like a constant effort to try to bring the
number down in terms of what the policy holders are owed.
Mr. Fiato. Most often, when we review an adjuster's work,
it's for authority purposes. So, most adjusters have a set
level of financial authority in which they can resolve a claim
without having to have anybody else look at that work. That
could be dependent upon whether or not they are tenured, how
many estimates they may have written for us, a bunch of things
that would qualify them for different levels of authority.
When they submit a claim to us for review, it goes to a
senior technical reviewer who's going to look at a number of
things. They are going to look at the documentation that was
presented to support the decisions that the adjuster made. It's
also going to be a technical review of did you estimate
according to the standards that we set forth.
Senator Kim. What expertise do these senior technical
reviewers have? Are they adjusters themselves?
Mr. Fiato. They are senior technical adjusters. They are
very tenured adjusters, probably for the most part have written
a lot of highly complex losses. Home differs from auto in this
respect, Senator, if you write an auto estimate and you go
into--we use a software to do that. It's going to give you
every part. It's going to be the part--it's going to have a
number, it's going to have a price, it's going to have the
number of hours it takes to put that part on a car. When you
write an estimate for a home----
Senator Kim. So, I just want to make clear here. You are
saying you would disagree with what you heard, that there's a
pattern of trying to bring that number down? Is that what you
are saying?
Mr. Fiato. I would, yes.
Senator Kim. I guess I am just trying to think through
here. If there are these senior technical reviewers, why does
it always seem like what's being reviewed brings the number
down, not up. I mean, are there circumstances in which you can
think of? Are there reviews or data that you have that show
that actually in some cases, the senior technical reviewer will
say that, no, actually the amount for the claim should be
higher, not lower?
Mr. Fiato. The data that I have seen would tell me that we
reduce an estimate, generally, 27 percent of the time we review
it, and 9 percent of the time we increase the estimate, and the
rest of the time we do not change the estimate at all.
Senator Kim. Is there a practice in your company, Mr.
Fiato, of removing adjusters just in general when they are on a
claim or on a particular case? Are there reasons why an
adjuster would be removed from that case?
Mr. Fiato. There are reasons why.
Senator Kim. Can you explain them?
Mr. Fiato. If you think about particular--let's use
catastrophes, as an example. If you think about the logistics
of managing a catastrophe event, an event happens, we assign
adjusters and another event will happen a few days later, and
then another event. As that happens, logistically we try to
ensure that when somebody is getting close to finishing a
deployment, which means, working for a period of time on a
catastrophe', that we want to move them to a new catastrophe
and give them a new set of files. If they have one or two files
remaining, we will reassign them to somebody who is not as far
along so that we can ensure that we are being efficient and
getting to as many customers as quickly as we can.
Senator Kim. But does not that just start the process over?
Mr. Fiato. It does not start the process over because we
document our work and people should be able to pick up where
that adjuster's left off.
Senator Kim. Mr. Keating, is this a practice that your
company uses in terms of removing adjusters?
Mr. Keating. There are instances where in catastrophes, if
one of the--either independent or even one of our deployed
claim specialists, you could have some turnover. You could have
someone go out on a medical leave, or if we redeploy them to a
new event, you do have a scenario where if that claim is not
closed, we will reassign it to a next adjuster.
In that case, we have a warm transfer process that should
ensure good clarity as to what has been done on the claim,
what's still outstanding, and ultimately, what are the next
steps that need to take place to make sure that that customer
gets their claim resolved.
Senator Kim. Just one more question this round. Mr.
Keating, is there a blacklist? Is there some list where, if
there's an adjuster that you did not like the previous work,
that other sorts of complaints, you might have that, you will
say that person's not going to work for us anymore?
Mr. Keating. Senator, we do have the ability to request the
removal of an independent adjuster through that firm. If they
had customer experience issues or lack of technical
capabilities, whatever it may be, we do have that ability. Yes.
Senator Kim. Mr. Fiato?
Mr. Fiato. I don't have anything to add to that part of----
Senator Kim. Similar type process----
Mr. Fiato. Same process.
Senator Kim [continuing]. Is what you are saying?
Mr. Fiato. Same general process.
Senator Kim. OK. With that, I yield back.
Senator Hawley. Mr. Fiato, just to come back to you. If an
Allstate supervisor, manager, employee directed an adjuster to
delete, or to alter, or to falsify a report, that would be
fraud, wouldn't it? Would you agree with that?
Mr. Fiato. I would.
Senator Hawley. And your testimony is that that does not
happen at Allstate, however?
Mr. Fiato. That's not our procedures, correct.
Senator Hawley. Yes. Your testimony is that the people who
testified today under oath that they are wrong or lying, that
you do not do that. Is that correct?
Mr. Fiato. I just have a different view. My view of the
work is different than what they believe happened.
Senator Hawley. Let's take a little trip down memory lane.
As early as 1998, Allstate was sued because adjusters had
multiple times reported changes to policies. This is as back,
far back as the 1998 earthquake. Allstate was sued because
reports have been changed to indicate the damage was unrelated
to the earthquake and thus not reimbursable by the homeowner's
policy. That was in 1998.
Or how about Hurricane Katrina in 2007? In 2007, a Federal
grand jury found that Allstate had altered adjustment and
engineering reports to defraud homeowners and the Federal
Government. Exact same thing that these gentlemen testified to
here today. They also found, a judge also found that Allstate
had paid $3 million, $2.8 to be exact, to hire a forensic
company that falsified engineering reports. Exact same type of
behavior that these gentlemen testified to today.
Then there was Superstorm Sandy, where Allstate was accused
of engaging in widespread falsifying of engineering reports to
benefit insurers. I mean, it just goes on, and on, and on.
What's amazing is it's exactly what these two gentlemen said is
still happening in your company. Now, your testimony is that
none of this ever happened?
Mr. Fiato. My testimony is that I was not involved with
that.
Senator Hawley. But you are responsible for it now.
Mr. Fiato. Correct.
Senator Hawley You are here before this Committee.
Mr. Fiato. Correct.
Senator Hawley. So, this happened. You acknowledge that
this has been a pattern and practice of your company since the
1990s.
Mr. Fiato. It's not a pattern in practice today.
Senator Hawley. What? You have changed it? You are saying
that you rooted this out at some point?
Mr. Fiato. That's not the way we handle claims.
Senator Hawley. It has been the way you have handled
claims, historically. We have seen it from the 1990s through
the 2000s, and then we had today two additional witnesses here
under oath. We have multiple whistleblowers and written
testimony who say it's exactly the same thing. You have not
changed a lick. We have your word against everybody else's. Why
should we believe you?
Mr. Fiato. Because I am telling the truth, Senator.
Senator Hawley. Right. Just like you apologized to Ms.
Migal. Right? I mean, it's really extraordinary. You are asking
us to look at all the evidence and do not believe our lying
eyes, right? Just ignore the fact that your company has over,
and over, and over again been sanctioned, lost lawsuits, paid
out multimillion dollar verdicts, all for this exact same
thing, falsifying reports interfering with adjusters' reports,
hiring firms to send in false estimates, all to pad your
profits. You are just sitting here saying it never happens,
don't believe it, it's an alternate reality, isn't it?
Mr. Fiato. I don't believe so. No.
Senator Hawley. On what basis? What world do you live in?
Mr. Fiato. On the basis that I lead this organization every
day.
Senator Hawley. Right. Which means you are responsible for
it, which is why I can't believe you wouldn't come in here and
take responsibility for what your company is doing. I cannot
believe you would not turn around and say to Ms. Migal, we will
make this right no matter what. I cannot believe you won't take
responsibility for the fact that your company, as we have heard
from sworn testimony, is continuing to engage in this behavior,
and now is also engaging in retaliation. It's a pattern in
practice, if I have ever seen one, Mr. Fiato. It's
unbelievable. Do you have anything else that you would like to
say in defense of Allstate?
Mr. Fiato. It's not our pattern and practice.
Senator Hawley. But we have just seen the record. It is a
hellscape of fraudulent behavior to punish your policy holders,
rip off the public, rip off the Federal Government, too, by the
way, which you did multiple times in past years when you moved
over funding and claims to the Federal Government so FEMA would
have to pay more, the taxpayer would have to pay more, and you
would have to pay less. I have to tell you, it's worked great
for you. I mean, your profits are unbelievable. What do you
make?
Mr. Fiato. I would be happy to discuss that after the
hearing.
Senator Hawley. You can tell us.
What do you make a year? Your CEO makes $26 million a year.
What do you make?
Mr. Fiato. I am not comfortable discussing that in this
forum.
Senator Hawley. Why not? I would not be comfortable either
if I represented a company like this. You won't tell us?
Mr. Fiato. I won't.
Senator Hawley. It's amazing. Mr. Fiato, all I can say is I
think your testimony here today is pretty shameful. Just like I
think your company's behavior is pretty shameful.
Mr. Keating, let me just ask you, does State Farm
deliberately underpay claims? Do you engage in that behavior?
Mr. Keating. No, Senator, we do not.
Senator Hawley. Let me read to you a letter from a
whistleblower who's a longtime State Farm employee adjuster.
And without objection, I will have this entered now into the
record.\1\
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\1\ The letter from a whistleblower appears in the Appendix on page
72.
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The whistleblower says the following, ``I observed routine
and deliberate underpayment of claims, including the consistent
removal or alteration of essential line items. These were not
occasional discrepancies, but part of a broader and consistent
pattern of low-balling estimates.'' What's your response to
that?
Mr. Keating. That's not consistent with the State Farm I
know, and I am certainly not familiar with the individual
that's making those allegations.
Senator Hawley. Would you ever alter factual findings from
an inspection report like Allstate does?
Mr. Keating. No. We would not do that, nor do we direct
anyone to do that.
Senator Hawley. Well, this same whistleblower says, and I
quote, ``More concerning was the alteration and deletion of
factual findings in my reports. In many cases, I documented
legitimate damage to vinyl siding that warranted full elevation
replacement, only to have the estimate changed to reflect
piecemeal spot repairs, contrary to manufacturer specifications
and professional standards.''
Mr. Keating. Respectfully, Senator, I am unaware of the
details surrounding these allegations. But we certainly follow
the recommendations based on the standards as that person
referenced.
Senator Hawley. Do you retaliate against whistleblowers?
Mr. Keating. No, we do not.
Senator Hawley. This witness says, and I quote, ``It is
also my professional concern that whistleblower retaliation is
a very real threat within the State Farm system. Others before
me have experienced severe consequences for speaking out, and I
have reason to believe similar retaliation could result in the
end of my ability to work in this industry.'' What's your
response to that?
Mr. Keating. Again, I can't speak to the specifics because
the individual is not here, or I do not know of those
specifics. But it's inconsistent with the State Farm that I
know and that I have experienced for 32 years.
Senator Hawley. It's amazing to me that both of your
testimonies are very consistent in one respect, which is that
it's a sudden case of amnesia before this Committee. You have
never heard of any of this stuff that's happened. You are
unfamiliar with your own company. In your case, Mr. Fiato,
before, like yesterday, there's no knowledge whatsoever. I have
to say it's awfully convenient. That witness, that sworn
testimony, that oath, it's amazing how often it produces
amnesia at these hearings. Sadly, your policy holders do not
have it, and they are suffering because of it. Senator Kim.
Senator Kim. I want to pick up where I left off when it
came to, is there a blacklist or some type of list in which is
being kept track, who is able to work with your company or not?
I heard your explanation of certain types of behavior such that
you would want to remove, but would you both agree that a
practice of removing people from working for your company or as
a third-party contractor within because they are not agreeing
to change or lower cost estimates, that that should not happen?
Would you both agree that that is not a practice that you think
would merit being put on that kind of list, Mr. Fiato?
Mr. Fiato. That's correct.
Senator Kim. Mr. Keating?
Mr. Keating. I would agree as well, but it's not part of
our process as I stated earlier.
Senator Kim. Mr. Fiato, do you have a rule on the books
within your company that prohibits that type of potential
retaliatory action?
Mr. Fiato. We do.
Senator Kim. Would you mind afterwards sharing that with us
today?
Mr. Fiato. My pleasure.
Senator Kim. Can you both assure us that those who
testified here today will not be retaliated against Mr. Fiato?
Mr. Fiato. Absolutely.
Senator Kim. Mr. Keating?
Mr. Keating. Those individuals have not worked for State
Farm, but we certainly would not retaliate against them.
Senator Kim. I wanted to just raise an issue that the Chair
kind of pointed out with that slide that you had about
McKinsey. I think regardless of that, having not seen that
slide before, we have heard numerous witnesses today raise the
concerns about delays. That's something that I just wanted to
hear your side of this.
I will be honest with you, I get it, some high-volume
disasters and circumstances on which that can happen, but also
just some really excruciating circumstances in which people and
families are wading through. Having a wife that is expecting, a
child, little kids at home, other types of circumstances. Like,
how do you respond to that, and how do you get better at this,
especially when there are such challenges facing these families
at that point? Mr. Keating?
Mr. Keating. Thank you, Senator Kim. Yes, as you
referenced, resourcing something like Hurricane Helene and
Hurricane Milton shortly thereafter, is eally challenging. In
our case, we had close to 130,000 claims. And so, what we do is
really, we look to resource it locally with people that we have
that work in those territories initially; we deploy our
resources so, folks that their job is to deploy to
catastrophes--so, again, these are State Farm representatives.
Then, that third layer really is the need for independent
adjusters if we do not have that internal resourcing first. The
goal is always to serve our customers, and do this promptly and
efficiently. It gets back to the heart of your question, it
does become challenging when you have--so not only did
Hurricane Helene provide a lot of claims, but it also stretched
across the entire Southeast. So, resourcing becomes an issue
for us.
We continue to look at ways to improve that resourcing
piece. How can we increase our overall staffing, internal
staffing, so that we can deploy more and more resources more
effectively, provide more oversight so that in the scenario of
Mr. Vertel's issue, that those type of gaps do not exist.
That's what we always----
Senator Kim. Do you have guidelines or certain types of
performance indicators in terms of how quickly you should be
responding to these types of cases?
Mr. Keating. We certainly track that. Every storm is
unique, and again, Hurricanes Helene and Milton being really
unique from a standpoint of just the overall geography that it
impacted the volume of claims we had. We track the cycle times
that we have with those claims. What we are trying to do is
certainly handle these claims promptly so the customers are not
impacted the way that Mr. Vertel described.
Senator Kim. Look, I mean, this will always be something
that we try to dive into more because I do think that, as you
said, these are the moments of such crisis and challenge for
these families. I get it. Both of you are a part of wildly
successful insurance companies, but perhaps we see a situation
in which the level of resourcing, the level of trying to meet
that moment is not keeping up with just the level of intensity
that we are experiencing when it comes to these crises that are
out there.
I wanted to just sort of raise one more issue here: Do
either of your companies continue to do work with third-party
contractors that have been found guilty of fraud? Mr. Fiato?
Mr. Fiato. I do not believe we do.
Senator Kim. Mr. Keating?
Mr. Keating. I am not aware of any of those companies that
have been found guilty, so I do not believe we do either.
Senator Kim. We will make sure we follow-up with you. In
one of the testimonies here by Mr. Quinn, raising these
concerns that insurance companies continuing to work with
companies, and organizations, or individuals that have been
known to commit fraud. The concerns that we saw when it came to
my home State when it came to Superstorm Sandy and other issues
of that nature.
I just want to kind of ask you. Do you commit to not
contracting with these third-party firms when you have the
review process of who you are working with? Do you have in
there a review that would weed out and ensure that those that
have been found guilty of fraud cannot work with your company
again? Is that something that you have that on the books as
part of the process?
Mr. Keating. I can certainly commit. I will go back and
look at if they are in the contracts. I am unaware of the
specifics around that, but we will certainly look into that.
Senator Kim. Mr. Fiato?
Mr. Fiato. I agree. We will do the same. We do our best to
vet every vendor that we use to ensure that we are making a
good selection in that regard.
Senator Kim. If you do not mind, we will follow-up with
that after this. I just ask that the two of you come back to us
with that kind of assurance of what is your policy when it
comes to your company.
Thank you. With that, I yield back.
Senator Hawley. I am sorry, is your testimony that neither
of you do not do business with U.S. Forensic? Go ahead, Mr.
Keating?
Mr. Keating. I am unaware of that firm that you are
referring to.
Senator Hawley. You are not familiar with it, Mr. Fiato?
Mr. Fiato. Same. I am unaware
Senator Hawley. You are not familiar with U.S. Forensic?
Mr. Fiato. I am not familiar with U.S. Forensic.
Senator Hawley. U.S. Forensic, which has been sued multiple
times was found civilly liable for widespread fraud in
Hurricane Katrina and Superstorm Sandy, both of your companies
have contracted with U.S. Forensic for years, for decades. But
your testimony is today that you are--what I think you just
said to the Ranking Member, you no longer contract with U.S.
Forensic. Is that right? I want to be clear on this. Is that
right, Mr. Fiato?
Mr. Fiato. I don't know if we do.
Senator Hawley. OK. Mr. Keating?
Mr. Keating. Same thing. I am unaware.
Senator Hawley. OK. In other words, the testimony is,
Senator Kim, that maybe they continue to contract the
fraudsters. I think they can't recall, which is I think the
theme of today's testimony.
I will just end by saying, in Missouri, 2 months ago, we
lost 12 people to tornadoes. A lot more people than that lost
their homes. That happens in my State, sadly, every year, every
tornado season, every flooding season. In those times of
crisis, these good folks look to you for help. I am sad to say
that more often not, they are disappointed, and it should not
be that way.
They should not be victims of fraud and abuse. They should
not be treated the way that Mr. Vertel and his wife were
treated, Ms. Migal and her husband were treated. The people in
Missouri and the people in the country deserve better. Given
the profits you are making, I certainly think you can afford
it.
With that, we will conclude today's hearing.
[Whereupon, at 4:51 p.m., the hearing was adjourned.]
A P P E N D I X
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