Cross-posted from Tort Deform
by Richard Pyorre
State Farm Insurance Companies have come under fire in Mississippi, Oklahoma and elsewhere recently because of denial of claims and or failure to pay what they owed. There has been documentation showing State Farm, or the engineering firm representing them, changed engineering reports in order to support State Farm's denial of claims in Mississippi. This same pattern with State Farm and the same engineering company also took place in Oklahoma and resulted in one jury award in May 2006 of $13 Million dollars with $10 million of that being punitive damages. The jury in that case found State Farm had "recklessly disregarded its duty to deal fairly with policyholders".
If you listen to the State Farm spin doctors they try to claim no knowledge of any changed documents and want to put blame on engineering companies. But I have information that puts the light on the real problem with what is happening at State Farm. I am a former agent of State Farm who has proof that State Farm has breached the contracts of its own agents. The information shows that a California Appellate Court has ruled that State Farm breached the contract and the California Supreme Court refused to hear State Farm's appeal making the Appellate Court decision final (Case#C050591 California Third Appellate District). What does this mean to the average policyholder? Well a policyholder who has a policy (contract) with State Farm expects State Farm to honor that policy (contract) if the policyholder has a loss. Now the question is if State Farm will not even honor their own contract with their own agents what chance does the average policyholder have? In addition to this State Farm has not even notified the agents of this decision by the California Courts.
I also have documentation proving State Farm has committed perjury to the IRS. State Farm has told the IRS that its agents are independent contractors and attend meetings at their option and there are no penalties for not attending meetings. But yet my contract as an agent, as well as 3 others, was terminated specifically for not attending a "mandatory meeting". After being terminated I filed an SS-8 (determination of employee or independent contractor) with the IRS and State Farm again told the IRS, under penalty of perjury, "attend meetings at their option" and "no penalties for not attending meetings". Now this may not seem very important to the average citizen until one realizes what State Farm is avoiding by this perjury. Because the IRS declares the State Farm Agent to be an independent contractor (based on what State Farm has told them) State Farm avoids state and federal payroll taxes on approximately $3 billion of annual payroll. This has been occurring since 1998 so the amount avoided thus far is approximately $30 billion! In addition to this State Farm has also avoided workmen's compensation and all of the other costs such as a retirement plan, vacation pay, sick leave and any other benefits employees would have. Now the contract of the agent states that he, or she, is an independent contractor but State Farm only recognizes them as independent contractors when it suits State Farm. State Farm uses the threat of termination at will for the agent who does not do as State Farm requires. As for State Farm telling the IRS (August of 2000) that agent's attend meetings at their option they (State Farm) are still requiring agents to attend mandatory meetings as of today. If you know a State Farm agent ask them if they have mandatory meetings they must attend and you will find State Farm has perjured itself and that is but one example.
When I was terminated on Feb 28, 1999 I had been representing State Farm for 27 years and had been recognized by State Farm for the quality of my agency for virtually every year as an agent. State Farm terminated me for not attending a "mandatory meeting" which was at least a two and a half hour drive (one way) from my home. What State Farm knew, but didn't care, was that I was going to physical therapy three times a week after being in a car accident and after having cancer surgery nine days before the accident. In addition to this the mandatory meeting was a self-study course which I told State Farm I would do but they insisted on the mandatory meeting and said it was not self-study. I happened to have the book for the class and it is exactly that, a self-study course.
Nineteen days after State Farm terminated my contract they sent me a letter telling me they would not be paying me my termination payments . Termination payments are also a part of the contract (are you starting to see a pattern?) which would have amounted to approximately $250,000. I then began selling other insurance policies to my former policyholders and offered them better prices for the same or better coverage. Approximately one year after my termination State Farm sued me for "theft of trade secrets" and "unfair competition" claiming I had breached my contract. State Farm filed the lawsuit in Federal Court in the ninth district (Case# C99-4668MJJ) and claimed they were a national company and the federal court was the correct venue. However I had documents showing State Farm General Insurance Company had become a "California only Company" and that State Farm was not giving the judge the correct information (see more of a pattern emerging). Eventually the judge had to dismiss the case "for lack of subject matter jurisdiction" as my information proved correct.
Now comes the interesting part, as I had been a policyholder of State Farm I filed a claim with State Farm when I was originally sued in federal Court. Apparently arrogance got the better of State Farm when they filed the federal lawsuit and they forgot their policy (contract) required them to provide a defense for the claims they made against me. After the federal judge dismissed the federal case State Farm re-filed the lawsuit in Mendocino County (Case#CV82819) and tried to plead around the coverage (altered the wording in an attempt to negate the defense coverage required by my policies). However State Farm was not able to get away with their attempt and was forced to pay defense costs of approximately $2,000,000 in addition to State Farm's own costs of approximately $4,000,000. These were cost up to near the end of the Mendocino County jury trial which lasted 6 weeks and ended on August 12, 2002. The jury awarded me and my fellow agent John Wier $12,600,000 in compensatory damages and punitive damages and nothing for State Farm. After the trial many of the jurors questioned why State Farm had even brought this case to trial as the jurors thought State Farm had no case. The judge thanked the jurors for their time and hard work and released the jury on August 12, 2002.
Approximately 5 months later the Mendocino County Judge, Richard Henderson, ruled the "jurors may have been confused" and ordered a new trial. Judge Henderson was a newly elected judge and this case was one of his very first which he took over from a retiring judge. It was also very coincidental that during the discovery process of this case, prior to trial, that the lead counsel for State Farm, Steven Brick, was appointed to the bench in Alameda County. Since both Judge Henderson and Judge Brick were newly elected/appointed they were required to attend a two week judge school prior to taking the bench (there is only one judge school each year).
The judge's decision was appealed to the appellate court Case#A101791 where the appellate court ruled the trade secrets belonged to State Farm and quoted a portion of the State Farm contract. The problem with the quote by the Appellate Court was that they left twenty words right out of the middle of their quote and as you might imagine those twenty words were critical to the trade secret ruling.
The case was then appealed to the California Supreme Court who agreed to hear it (Case#S131445) but put it on hold until a lead case was heard. Once the lead case, which was considerably different than this one, was heard the Supreme Court took it off the docket and sent it back to the Appellate Court. The Appellate Court then sent it back to the trial court in Mendocino where it now awaits a new trial date that State Farm has requested.
During all of the appeals to the Appellate Court and Supreme Court State Farm refused to pay the defense costs for me as provided by my policy (contract) and even filed another lawsuit against me, this time in Sonoma County (Case#SCV234700) requesting the money State Farm had paid for the Mendocino County defense be reimbursed to them. State Farm filed this lawsuit while the Mendocino lawsuit was continuing and while they were refusing to abide by their own policy (contract).
State Farm filed a summary judgment motion in the Sonoma Case and provided the court a "true and correct copy" of my policy claiming they had no duty to defend. The problem with State Farm's "true and correct copy" was that it was neither true nor correct! State Farm left off coverage's that did in fact show coverage (more of a pattern like the Oklahoma and Mississippi cases?). State Farm calls themselves the "Good Neighbor" but if you had a neighbor like that you probably wouldn't refer to them as good or really wouldn't want them as a neighbor. The Sonoma County Judge ruled against State Farm' summary judgment and astonishingly State Farm filed another summary judgment which was also denied.
As of this date State Farm has still refused to reimburse the defense costs I have incurred after State Farm quit paying but yet they continue to go forward with both lawsuits in Mendocino and Sonoma County. In the meanwhile I keep asking why is the IRS ignoring the perjury committed by State Farm executives? Why is State Farm allowed to get away with this perjury when it is costing all US citizens billions in uncollected taxes? When is someone in government going to step forward and make State Farm Executives suffer the consequences of their actions? Why hasn't the press brought this to the attention of the public and/or government officials? My concern is not with the State Farm agent, who would like to be the independent contractor he or she is supposed to be, but with the executives of State Farm who have lied and continue to lie to get what they want while at the same time breaching the agent's contract.
I wanted to make sure all of State Farm's Board of Directors were made aware of this perjury by State Farm Executives so I sent registered, receipt requested, letters to all Board members as well as most of the top Executives. In my letter I sent documentation and told the officials I had more if they needed it. The Board hired an attorney who contacted me and asked if I was represented by legal counsel and requested more information. I forwarded the requested information to the Attorney and waited patiently for a response and when I received none I sent another registered letter advising the board they would be deemed culpable if they did nothing.
Coincidently I suddenly received a phone call from an IRS agent in New York who had been assigned to review my SS-8 filing. This agent told me she would review the file but she did not have it available. I told her the Austin Texas office should have the file but she told me they did not do that anymore and had probably destroyed it. I told her I could e-mail the information to her right away but she told me she could not accept e-mail and could only get it via fax or regular mail. This phone call was on June 30 and the IRS agent was in New York and I am in California, a three hour time difference. I printed out and faxed approximately 90 pages on the afternoon of June 30 to the IRS agent and on the cover page advised that I would fax and mail additional pages as soon as I could. On July 6 I faxed another approximately 45 pages to the IRS agent and advised if this documentation was not enough to let me know and I could send more.
You can imagine my surprise when I received a letter from this IRS agent dated July 2 telling me she had done a "thorough review" of the documentation and found no facts or legal arguments to change the determination of independent contractor! The IRS agent placed the word "final" in bold type and highlighted it with a yellow marker.
Coincidently, again, I received a letter, dated August 5, from W.H. Knight Jr., Chair of State Farm's Legal Affairs Committee, telling me the State Farm Board of Directors finds "no basis to recommend or direct that State Farm take any further action". The letter head used by Mr. Knight was that of "W. H. Gates Hall" in Seattle Washington which didn't mean much to me until I recently found Mr. Knight has been charged with "ethics violations" at Washington for using the schools computer for State Farm business. Apparently my letter is now some proof of Mr. Knight's use of the school computer while working at his position as a member of State Farm's Board of Directors.
I have the documentation for all of the statements I have made above and am willing to testify to those facts. I would ask those of you reading this to ask your Congressman and Senators to look into this matter of why the IRS has allowed perjury by State Farm to go unpunished? If it didn't matter if State Farm had mandatory meetings for their agents why would State Farm lie about it? Do you think it is fair that State Farm, who happens to sell workmen's compensation, should be able to lie and avoid paying their fair share? Isn't it time someone looked into the management of State Farm and ask why the Rust family should be able to operate the company like a family business, handing it down from father to son to grandson, when they have no ownership in the company? Isn't it time large corporations be made to tell the truth or pay the consequences?