Shelly Layne v. State Farm Fire and Casualty Company

IN THE DISTRICT COURT OF OKLAHOMA COUNTY STATE OF OKLAHOMA SHELLY LAYNE, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY; and MATT MCCOY. Defendants. PETITION I. INTRODUCTION 1. This Petition alleges a systematic and pervasive Scheme on the part of (a) Defendants State Farm Fire and Casualty Company ("State Farm") and (b) State Farm’s Agent Matt McCoy (referred to as "Agent").1 By and through their Scheme, Defendants have caused substantial harm to Plaintiff. 2. State Farm is a household name—it holds itself out as a premier provider of insurance products under the slogan "Like a good neighbor, State Farm is there." State Farm’s marketing lures insureds with customer-focused messaging designed to build trust among a diverse target audience. State Farm’s website brags about "keeping promises" and that its success "is built on a foundation of shared values—quality service and relationships, integrity and financial strength." 3. Despite its hollow "good neighbor" promises, Defendants employ a systematic and pervasive Scheme throughout Oklahoma, whereby State Farm wrongfully denies its insureds’ claims for damage to their covered property caused by wind and/or hail. State Farm’s claim denials on wind and hailstorm claims are unreasonable, lack true justification and are pre-determined. Defendants employ the Scheme intentionally, knowingly, and purposefully for profit and do so in bad faith. 4. Defendants’ wind and hailstorm scheme (the "Scheme") operates as follows: a. State Farm’s captive agents (including Agent) market, sell, procure, and bind (whether upon inception and/or at renewal)2 State Farm full replacement cost _________________________ 1 This Petition refers to both State Farm and Agent collectively as "Defendants." 2 Under Oklahoma law, each annual issuance of the policy at issue involves each of these acts, whether it be the inception of full replacement cost coverage in the first instance or the subsequent renewal thereof. Therefore, even an agent who renews full replacement cost coverage initially procured by another agent engages in these acts. insurance full replacement cost coverage to the insured at the insured’s behest to cover the insured’s home. In doing so, State Farm’s agent (like Agent here) expressly and/or impliedly represents (i) the property to be insured meets State Farm’s underwriting rules, guidelines, and requirements for the full replacement cost coverage purportedly bound, and (ii) the replacement cost value (and resultant full replacement cost coverage limit) State Farm’s agent calculated for the insured is an accurate reflection of (at least) 100% of the property’s insured value—that is, all components of the insured property are fully covered. b. The agent can only make these representations in good faith—with the requisite care, skill, and diligence required of the agent under Oklahoma law—if the agent verifies the quality and condition of the property to be insured. While this would require the agent’s physical inspection of the property to verify its condition, this inspection practically never occurs. Nevertheless, State Farm’s agents market, sell, procure, and bind State Farm full replacement cost coverage (just as Agent did for Plaintiff) nonetheless. While these acts inherently represent to the insured in each instance that the property in question qualifies for the insurance to be bound and meets the underwriting guidelines governing State Farm full replacement cost coverage, in almost every instance of the Scheme, the agent lacks all practical bases to make such an inherent representation in good faith. Here, Agent lacked all reasonable bases to represent to Plaintiff the Insured Property fully qualified for "full replacement cost coverage." c. Nevertheless, and almost always without verification, the captive agent effectively certifies to State Farm and to the insured that the property in question meets State Farm’s underwriting guidelines, criteria, and rules despite having no reasonable basis to do so and without knowing if the same is actually true. Here, Agent bound Plaintiff’s Policy without such a reasonable basis or knowledge. d. All the while, State Farm’s captive agents (like Agent) are aware of the Scheme. They are aware of the practical improbability that State Farm will pay a roof claim by the insured. They are aware that, pursuant to the Scheme, State Farm will drum up a justification for outright denial of the claim or for depressing the payment to an amount under the deductible. In fact, State Farm provides training to its captive agency personnel on key aspects of the Scheme. e. State Farm’s captive agents (like Agent) are aware State Farm achieves the goals of the Wind/Hail Focus Initiative and the resultant Scheme through an array of bad faith tactics. These include State Farm’s use of an undisclosed, narrow, and limited definition of what constitutes covered hail damage. This secret full replacement cost coverage limitation, which is derivative of the Wind/Hail Focus Initiative and inherent to the Scheme, is wholly absent from the insured’s policy and never otherwise disclosed to the insured. That is, the policy does not specifically define or limit when hail damage is covered under the policy, even though State Farm defines and limits the same internally for the purposes of claims handling. State Farm uses this definition to dictate whether an insured is entitled to payment under the policy upon the filing of a valid wind and/or hailstorm claim, yet it never discloses it to insureds. State Farm agents further the Scheme by refusing to disclose this material, narrow, and limited definition of hail damage when marketing, selling, procuring, and/or binding State Farm full replacement cost coverage—even though the limitation effectively undermines the “full replacement cost” nature of the full replacement cost coverage the insured believed they purchased. f. Further, State Farm agents (like Agent) are aware of (and fail to disclose) other bad faith claims handling tactics inherent to State Farm’s Scheme. These tactics are material to an insured when purchasing an insurance policy; they include State Farm’s pre-ordained attribution of covered damage to roofs to some non-covered cause (e.g., wear and tear, granular loss, deterioration, or defect). These non-covered causes, when actually present, either plague the roof from its installation or accrue progressively over time. For example, wear and tear does not accrue instantaneously. That is, when truly present, these defects should almost always be identifiable at the most recent renewal of the policy—a new contract through which the Agent and State Farm again represent the home to fully quality for full replacement cost coverage. So, if actually present, these defects should warrant some reduction in the full replacement cost coverage written on the home and its relative insurance-to-value OR the home remains fully insured despite them. g. Further, State Farm agents (like Agent) are aware of (and fail to disclose) the ways State Farm adjusters further the Scheme. This includes drafting sham estimates blaming patent wind- and hail-storm damage to non-covered causes to avoid paying for roof replacements. In other instances, State Farm adjusters further the Scheme by manipulating the insured’s date of loss to reflect dates on which no hail was detected in the area. State Farm’s agents (like Agent) are fully aware of these bad faith tactics (e.g., from repeated customer complaints and cross-agent back chatter), yet they fail to disclose this (and other) material information about State Farm’s Scheme in violation of duties owed to the insured. h. State Farm’s agents (like Agent) are motivated to further the Scheme by carrot and stick. On information and belief, the carrot lies in State Farm’s agents’ compensation, which is based in some part on the ratio of losses deriving from policies the specific agent marketed, procured, sold, bound, and renewed. Thus, any corporate initiative designed to improve that loss ratio—e.g., State Farm’s Wind/Hail Focus Initiative and the resultant Scheme to reduce roof spend—only serves to increase the captive agents’ compensation. To this end, State Farm provides its captive agents (like Agent) comprehensive training in skillsets that help them advance the Scheme. i. On the Agent’s certification that the property meets State Farm’s underwriting guidelines, State Farm issues a policy purporting to convey full replacement cost coverage for the insured’s home. State Farm, through both the policy itself and its captive agents, expressly and/or impliedly represents the policy covers loss arising from a wind or hailstorm. The policy language does not define or otherwise limit wind or hail damage full replacement cost coverage outside the policy monetary full replacement cost coverage limits and the loss triggering clause: “accidental direct physical loss.” j. In each instance, State Farm does whatever it can to avoid replacing the roof. It does so using an array of bad faith tactics rigged against the insured. It denies the claim vis-a-vis the roof either outright or, in many cases, by depressing the amount it agrees to pay below the policy deductible, thereby avoiding payment. In limited instances, it may pay for certain property damage that exceeds the deductible. But, in each case, to minimize its payments, State Farm manipulates its damage estimate to ignore patent wind and or hail damage to the insured property, ostensibly blaming it on some non-covered cause of loss. k. The Scheme is a byproduct of State Farm’s Wind/Hail Focus Initiative – its internal investigation into its indemnity losses vis-à-vis wind and hail claims and the recommendations it developed to curb that spend. The Initiative set out to reduce State Farm’s indemnity losses on wind and hailstorm claims—most critically, total roof replacements. Non-confidential documents in the public record, such as Exhibit 6 attached to the August 14, 2023 response pleading in CJ-2021-1741,\(^{3}\) evidence the Scheme in action. In that case, State Farm adjuster testified under oath to how the agent’s determination of the condition of the roof at inception or renewal and subsequent denial for “wear and tear” or pre-existing damage are essential in State Farm’s denial of full roof replacements. The captive agent is a critical player in the Scheme via its assessment of the property’s conformity to State Farm’s underwriting guidelines, inspection (or lack thereof) at policy inception and renewal, determination of eligibility for replacement cost, determination of the amount of such replacement cost, and the assessment of the condition of the roof and premises. That State Farm adjuster admitted under oath as follows: everyone on our team did not have any authority anymore to total roofs because we were paying for too many roof claims … when I was told that it is not hail or it’s not new hail, to call it wear and tear to deny a claim, I felt – I felt bad … I legitimately felt like there was some damage from hail, from new hail that I felt that the roof should be totaled, that I was told to deny the whole thing, and that – that was difficult. I. Discovery from State Farm filed in the public record reveals that State Farm captive agents are well aware of how hail claims are being adjusted. In Exhibit 6 to the June 14, 2023 pleading, a State Farm captive agent, David Hoffhines, sent the following email: I understand that you are not able to find hail on the date my insured has cell phone pics on? Can we discuss this please?? How do I tell my client that the hail damage marks that were uploaded to the file from contractor are invisible to claims reps and supervisors?? I \(^{3}\)Available at https://www.oscn.net/dockets/GetCaseInformation.aspx?db=oklahoma&number=CJ-2021-1741&cmid=3968060 (last visited Mar. 10, 2026). know the growing trend is for SF to deny hail claims, I’m just curious how do I word this?? m. State Fam’s Scheme is under national scrutiny. Recently, the Senate Homeland Security Committee held a hearing on the Insurance Industry’s Natural Disaster Practices.4 Other recent testimony provided to the Senate Homeland Security Committee further demonstrates the far-reaching impact State Farm’s pattern and practice of bad faith has had on insureds across the country.5 These testimonies further reveal the precise bad faith tactics described herein have been adopted by other heavy hitters in the insurance industry. State Farm and Allstate licensed adjuster Nick Schroeder testified to internal directives from Allstate which exemplify the exact bad faith claims handling practices alleged here (thereby demonstrating industry-wide knowledge and the pervasive, battle-tested nature of such practices): More commonly, these changes were simply excluding hail-damaged shingles due to age or wear. In one case involving policyholders Susan and Dennis Carter, I was instructed to deny shingle damage as wear and tear despite visible hail impact marks consistent with adjacent dented 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 hail damage. See id. (located at “Panel 1 NICK SCHROEDER.”). n. Plaintiff’s individual roof claim was denied as part of a larger pattern and practice Scheme implemented by State Farm of which Plaintiff has been a victim. There has been increased scrutiny on State Farm’s Scheme in the press recently due to the __________________________ 4 Available at https://www.youtube.com/watch?v=Qs2VKoQPvXyY (last visited Mar. 10, 2026). 5 “Examining the Insurance Industry’s Claims Practices Following Recent Natural Disasters - Committee on Homeland Security & Governmental Affairs,” available at https://www.hsgac.senate.gov/subcommittees/dmdcc/hearings/examining-the-insurance-industries-claims-practices-following-recent-natural-disasters/ (last visited Mar. 10, 2026). Oklahoma Attorney General filing a petition for intervention ("Attorney General’s Petition") in another of Plaintiff’s counsels’ cases against State Farm, CJ-2025-2626. See Exhibit 1, AG Pet. for Intervention. See also https://oklahomawatch.org/2025/12/04/ag-intervenes-in-state-farm-lawsuit/. The Attorney General’s Petition states, in relevant part, that: The Attorney General alleges that State Farm, acting through its officers, employees, computer systems, and a network of captive agents, and associated entities as unnamed co-conspirators, implemented an internal program, commonly referred to as the “Hail Focus Initiative” to drastically reduce aggregate roof indemnity payments in Oklahoma. Rather than adjust claims according to coverage language in its policies, State Farm secretly substituted restrictive, extra-contractual standards and used those hidden standards to deny or minimize payment of legitimate covered losses. Captive agents knew, or at minimum had reason to know, that State Farm was tightening internal claim standards and increasingly denying hail claims that would previously have been paid. Despite this knowledge or reason to know, captive agents continued to sell and renew policies without disclosing that State Farm was internally adopting extra-contractual restrictive hail-damage standards and limiting roof replacements. Agents remained silent about the internal Hail Focus Initiative and did not warn customers that their ability to obtain roof replacement coverage had materially changed. See Exhibit 1, AG Pet. for Intervention at ¶¶ 1, 8 (emphasis added). o. State Farm’s Property and Casualty Claims Department ("P&CCD") is State Farm’s homeowners insurance coverage division, which issued a memorandum identifying that State Farm’s goal was to lower indemnity payments related to roof payments: P&C Claims is focusing on what we can do to lower our indemnity payments related to Roofs. Last year we had an indemnity over $3.5 Billion dollars and a total of $16.6 Billion over the last 7 years for the Enterprise on roofing. Xactware has enhanced their Aerial Sketch tool to help our Claim partners in writing estimates for roofs. Listed below are some facts in supporting the 27.5 Service Pack. See Plaintiff’s Motion to Enforce Discovery Order of November 23, 2021 and Motion for Sanctions, Barnett v. State Farm, CJ-2020-141 (Grady Co. Okla. April 8, 2024) (Ex. 3 at p. 10) (citing production produced unprotected in Misner v. State Farm, CJ-2013-1050 (Cleveland County)). Barnett addressed the same Scheme at issue here. p. State Farm’s P&CCD began developing bad faith initiatives to reduce indemnity payments on roof claims to lower State Farm’s roof spend and pad its bottom line at the expense of Oklahoma first-party insureds. State Farm employed Accenture (formerly Andersen Consulting), a Fortune Global 500 international consulting firm with a market capitalization of over $150 billion, to develop ways to achieve this indemnity reduction. State Farm created its Wind & Hail Fire Model Enhancement Team (“WHMET”) to develop, implement, monitor, and assess the Scheme. The WHMET is a star chamber consisting of approximately ten internal State Farm property claims experts charged with executing the Wind/Hail Initiative. Nicole Manduca was the leader of the WHMET.6 q. The WHMET worked with Accenture at length, who provided State Farm with alleged “industry standards” on full roof replacements on Wind/Hail insurance claims nationwide. State Farm and the WHMET secretly worked with Accenture to develop its Wind/Hail Scheme to implement bad faith illegal tactics to reduce its internal performance __________________________ 6 A copy of Manduca’s deposition taken in April 2024 along with exhibits was recently ordered to be produced by Judge Jeff Virgin in Cleveland County, State of Oklahoma, Case No. CJ-2024-183, Lyle v. State Farm. In Nida v. State Farm, CJ-2020-4453, State Farm produced a privilege log with multiple emails involving Manduca and the draft of the Wind/Hail playbook with in-house counsel. See Nida Plaintiffs’ Challenge to State Farm’s Privilege Log and Request for In Camera Review filed June 21, 2024. measures on percentages of full roof replacements to the alleged much lower industry standards. State Farm implemented claim handling practices which lowered claim payments on losses that had not yet occurred, which can never happen in good faith, because each insurance claim must be handled on its individual merits, considering the date of loss, the severity of the storm, and countless other individual factors. State Farm found its golden opportunity and determined (before claims occurred) it could substantially reduce its indemnity payouts by lowering its percentage of approval for full roof replacements on Wind/Hail claims. Thus, arbitrary lowering claim payments before losses even occurred became the main target of the WHMET in order to achieve its desired goal of lowering indemnity related to roofs and Plaintiff fell victim to said Scheme. r. State Farm implemented a Wind/Hail Playbook and developed bad faith tactics aimed at drastically reducing the number of full roof replacements, instead adjusting Wind/Hail claims by offering insureds much lower amounts for “repairs” to the roof, very often right below or above the policy deductible. State Farm expects its insureds to believe that the hail miraculously missed all the shingles and only hit the metals on the roof. State Farm primarily uses “age/condition” of the roof and alleged preexisting damage, wear and tear, and deterioration along with definitions of hail damage not located in the Policy to deny a full roof replacement. A primary Tactic used by State Farm to achieve this lowered metric of full roof replacements was taking away a field adjuster’s ability to total a roof on a wind/hail claim. State Farm implemented a policy that claims adjusters could not issue a full roof replacement without Team Manager approval but could deny a total roof replacement without Team Manager approval. s. Thus, the same adjusters who had previous authority to approve a roof replacement for decades were now robbed of their ability to approve a full roof replacement. The phycological impact of forcing an employee to ask a manager to approve a total roof replacement payment (the same manager who impacts your performance evaluations and bonus payments) means that adjusters will not fight for a claim payment to their detriment. The obvious ramifications of this tactic achieved immediate and significant results for State Farm. Plaintiff has requested discovery into tracking the percentages employed by State Farm’s Team Managers on full roof replacements, performance data and metrics, evaluation data, and similar measurements. t. The wealth of evidence here, as well as what Plaintiff knows will be revealed through discovery, establishes a sinister Scheme by State Farm to defraud insureds such as Plaintiff. u. When subjected to the Scheme, an insured has no choice but to file suit to recover benefits State Farm owes under the policy. To this end, part of State Farm’s Scheme includes forcing insureds to hire counsel to obtain benefits rightly owed under the Policy. State Farm’s treatment of Plaintiff (including bad faith claims handling tactics and material misrepresentations and/or omissions by State Farm and State Farm agents) exemplifies this Scheme in action, as the Petition sets forth in Section III, below. v. During the course of litigation, State Farm continually attempts to separate its captive agents’ conduct from the Scheme by asserting a blanket disclaimer of its captive agents’ underwriting duties and stating its agents are not required to inform insureds about the condition of their home and adjust their full replacement cost coverage accordingly. These assertions are wholly contradicted by State Farm’s own underwriting guidelines and corporate designees: The agent is our front line underwriter … the personal inspection is also the agent’s opportunity to obtain photographs required elsewhere in this guide to ensure the property is properly maintained and meets all property and liability insurance underwriting requirements. … Improperly maintained roofs increase the potential for loss. Risks with damaged or deteriorated roofs are unacceptable. A visual inspection will allow assessment of the roof condition.7 Before binding new coverage, an inspection of the property is necessary. Since our agents are the front line underwriters, an inspection provides an opportunity for the agent to see the property before we provide coverage. During the inspection, the agent should verify that the property meets our underwriting eligibility guideline Reinspections occur sometime after the Fire business has been on the books. Over time, some risks may become ineligible or there may become ineligible or there may be a change to the property due to remodeling and/or additions. Inspections and reinspections help State Farm stay current with the risks we insure. By properly inspecting each risk prior to binding coverage and by following the reinspection schedule of your zone, we can insure that each and every risk State Farm insures is properly insured.8 [Mr. Marr]: My question was simply, does State Farm consider its agents front line underwriters? [Mr. Hsiung]: Per se, yes. They are our front line underwriters.9 7 See Exhibit No. 2, Excerpts from Underwriting Guidance – Homeowners – Underwriting Basics at 1-2 (located in the public record as Exhibit 10 to the plaintiffs’ Motion to Remand in Vance v. State Farm, 24-CIV-449-SLP, ECF No. 7-10 (W.D. Okla. May 29, 2024) (emphasis added)); see also Inspection Process at 1-2 (“Before binding new Fire business, an inspection of the property is necessary. The inspection serves two purposes. Since our agents are the front line underwriters, an inspection provides an opportunity for the agent to see the property before we provide coverage. During the inspection, the agent should verify that the property meets our underwriting eligibility guidelines. The inspection also provides an opportunity to obtain or verify building characteristics used for estimating the replacement cost of the property.”). 8 See Exhibit No. 3, (located in the public record as Exhibit 13 to the plaintiffs’ Motion to Remand in Vance, 24-CIV-449-SLP, ECF No. 7-13 (W.D. Okla. May 29, 2024) (emphasis added)). 9 See Exhibit No. 4, Tr. Excerpt of August 9, 2022 Deposition of State Farm Corporate Designee Hsiung, at 66:17-21, from Stelling v. State Farm, et al., No. CJ-2020-329 (Rogers Cnty. Aug 9, [Lance Leffel]: I always talk about agents being frontline underwriters [for State Farm].10 [Mr. Marr]: Is that correct? Is that still State Farm’s position, that risks with damage or deteriorated roofs are unacceptable? [Mr. Hsiung]: Yes.11 [Mr. Kwok]: The agents do have a role in kind of what we consider to be a frontline underwriter, where they will take a look at the risks to see if there are any glaring issues. If the house is dilapidated and getting ready to fall over, we expect the agent to use their position with the company to not write that risk.12 w. State Farm’s own 2013 Underwriting Guidelines (Exhibit 2) specifically provides that agents are required to complete underwriting duties, such as personally inspecting the potential insured property because “the personal inspection is also the agent’s opportunity to obtain photographs required elsewhere in this guide and ensure the property is properly maintained and meets all property and liability insurance underwriting requirements.” See also Exhibit 3 (“Since our agents are the front line underwriters, an inspection provides an opportunity for the agent to see the property before we provide coverage.”). ______________________________ 2022) (located in the public record as Exhibit 2 to the plaintiffs’ Motion to Remand in Neph v. State Farm, 24-CIV-774-SLP, ECF No. 13-2 (W.D. Okla. August 8, 2025) (emphasis added)). 10 See Exhibit No. 5, Tr. Excerpt of August 2, 2022 Hearing, at 61:20-21 (emphasis added). Exhibit 5 can be found in the public record and is cited as Exhibit 4 to Plaintiffs’ Second Motion to Compel in Hosier v. State Farm Fire & Cas. Co., No. CJ-2021-1741 (Okla. Cnty. Dist. Ct.). The hearing transcript excerpt itself comes from Barnett v. State Farm, et al., No. CJ-2020-141 (Grady Cnty. Dist. Ct.). 11 See Exhibit No. 4, Hsiung Dep. at 185:20-24. 12 See Exhibit No. 6, Tr. Excerpt of July 2, 2015 Deposition of Corporate Representative Kwok, at 80:1-6, from Neill v. State Farm, et al., 13-CIV-627-D (W.D. Okla. July 2, 2015) (located in the public record as Exhibit 12 to the plaintiffs’ Motion to Remand in Vance, 24-CIV-449-SLP, ECF No. 7-12 (W.D. Okla. May 29, 2024) (emphasis added)). x. Thus, State Farm’s downplaying of agent underwriting responsibilities is a smokescreen. II. PARTIES 5. Plaintiff Shelly Layne owns the Insured Property located at 10603 E 33rd Court, Tulsa, Tulsa County, Oklahoma 74146. Plaintiff entered into a contract of insurance with State Farm to provide full replacement cost coverage for the Insured Property, dwelling insurance policy no. 36BWX0990 (the “Policy”) through Agent’s offices. The Policy was in force and effect at the time of the loss in question. The Insured Property was damaged on or about March 14, 2025, and potentially dates thereafter. Plaintiff timely filed a claim for indemnity under the Policy for damage to the Insured Property (Claim No. 3683J588D, referred to as the “Claim”). 6. Defendant State Farm Fire and Casualty Company (“State Farm”) is a foreign insurer licensed to do business in the State of Oklahoma. State Farm may be found and served via its statutory service agent the Oklahoma Insurance Department in Oklahoma County, Oklahoma. 7. Defendant Matt McCoy owns and operates a captive State Farm agency at 3520 W Houston St, Broken Arrow, Tulsa County, OK 74012. Agent was at all relevant times an agent and/or ostensible agent of Defendant State Farm. Agent may be served with process at place of business. 8. Agent is a properly joined defendant to this action, as held in thirty-eight remanded cases against State Farm alleging substantially the same claims and/or Scheme. See e.g., Gabel v. State Farm, 25-CIV-430-D, ECF No. 23 Order (W.D. Okla., Oct. 16, 2025) (DeGiusti, C.D.J.); Willard v. State Farm, 2025 WL 2419274 (W.D. Okla. Aug. 21, 2025) (Palk, D.J.) (order consolidating eleven cases, granting each motion to remand, and directing that each case be remanded to the appropriate State of Oklahoma district court); Maher v. State Farm, 2025 WL 1909507 (W.D. Okla. July 10, 2025) (Wyrick, D.J.); Adair v. State Farm, 2025 WL 1263128, at *1 (W.D. Okla. May 1, 2025) (Dishman, D.J.); Pruitt v. State Farm, 2025 WL 1030353 (W.D. Okla. April 7, 2025) (DeGiusti, C.D.J.). As Agent is a citizen of the forum-state, removal of this action would be improper. 9. Venue is proper pursuant to 12 O.S. § 137. III. FACTUAL BACKGROUND 10. Through State Farm’s Wind/Hail Focus Initiative, State Farm’s Property and Casualty Claims Division/Department (“P&CCD”) established State Farm’s corporate goal of reducing its indemnity payments by denying full roof replacements to policyholders like Plaintiff on valid wind and hail claims. Consequently, State Farm preordained the denial of its insureds’ valid claims for wind- and hailstorm damage. This decision reflects simple greed: maximizing profits for State Farm at the expense of its insureds. To achieve this end, State Farm assembled its Wind-Hail Model Enhancement Team (“WHMET”) under the leadership of Nichole Manduca (and with the endorsement and direction of high-ranking State Farm officials like Wensley Herbert, Tyrone Smith, Wendy Mazza, Scott Welsh, and Kathy Rees, to knowingly developed and implemented its enterprise-wide, pervasive, and systematic Scheme. In fact, Manduca’s Linked-in profile boasts her achievement in reducing State Farm’s spend on total roof replacements by “over 50%.”: Nicole Manduca, ChFC She/Her · 3rd Senior Leader / Director of P&C Operations, Insurance & Financial Services: Transformational Leader | Operations Excellence | Change Leadership | Innovation | Diversity-Equity-Inclusion | Executive Catastrophe Response Achievements: - Led enterprise effort in Fortune 50 company improving quality results by over 50% and significant reduction in operational expenses over 12 months This specifically refers to Manduca’s work on State Farm’s WHMET at the expense of policyholders like Plaintiff. 11. State Farm launched the Scheme with a test run in Texas and then continued to other hail-prone states like Oklahoma. State Farm implements the Scheme throughout Oklahoma using a variety of bad faith tactics and employees at every level of State Farm. State Farm captive agents anchor the Scheme on the front end of the transaction. State Farm reinforces the role of its captive agents (like Agent) through training, compensation, and other incentives. State Farm then utilizes biased third-party adjusters and/or engineers, who further the Scheme by consistently writing reports and estimates to deny full roof replacements on valid wind and hail claims. State Farm weaponizes these various undisclosed tactics against first-party insureds like Plaintiff. State Farm implements a series of rules (e.g., program and personal rules) in its Xactware software platforms that limit its adjusters’ ability to pay roof claims without approval. This allows State Farm team managers to override adjusters’ decisions to pay roof claims and then penalize or retrain them for failing to implement the Scheme. At all times, State Farm tracks in detail the impact of the Scheme—its reduction in State Farm’s indemnity losses on roofs by state and region, as well as its return on investment derived from the training and other tactics involved. This includes its ratios of replacement, repair, and other roof responses, as well as the financial impact thereof. 12. This case exemplifies the Scheme in action. State Farm’s treatment of Plaintiff demonstrates each step in the Scheme leading to State Farm’s intended outcome. 13 Linked-In Profile for Nicole Manduca, available at https://www.linkedin.com/in/nicolemanduca/ (last visited Mar. 10, 2026). A. State Farm’s Captive Agents Anchor the Scheme 13. In each instance, State Farm’s Scheme begins with its captive agents (including Agent), who sell a State Farm form insurance policy to the insured at the insured’s behest. 1. State Farm Agent’s Duties in Procuring Coverage 14. State Farm captive agents solicit and market what they tout as a replacement cost homeowners insurance coverage to prospective insureds. State Farm uses a form insurance policy to issue homeowner’s coverage in Oklahoma—while the amount of coverage (and premiums charged therefor) differ from insured to insured, the scope of full replacement cost coverage is in large part materially the same for all insureds subjected to the Scheme. 15. State Farm considers its agents to be the first line of its underwriting division. State Farm’s Agent plays a crucial role in the sale of State Farm’s insurance policy to the insured. This role creates key legal duties, which State Farm’s Agent owes to the insured:14 a. State Farm’s agents must use reasonable care, skill, and diligence to procure full replacement cost coverage as the insured requested that meets the insured’s stated needs; b. State Farm’s agents who undertake the calculation of replacement cost for the insured must use reasonable care, skill, and diligence to do so; and 14 Under Oklahoma law, a duty to speak may arise from a partial disclosure. Thrifty Rent-A-Car Sys., Inc. v. Brown Flight Rental One Corp., 24 F.3d 1190, 1195 (10th Cir. 1994) (the law imposes a duty to speak from a partial disclosure because “the speaker is under a duty to say nothing or to tell the whole truth” (citation and internal quotation marks omitted)); Uptrafft v. Dome Petroleum Corp., 764 P.2d 1350,1353-54 (Okla. 1988) (“Although a party may keep absolute silence and violate no rule of equity, yet, if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to disclose the whole truth.”); see also Ervin v. Herb Weaver Ins. Agency, Inc., 2022 WL 22839581 (W.D. Okla. Dec. 28, 2022) (Palk, D.J.) c. When State Farm’s agents speak, they owe a duty to do so accurately and truthfully. d. State Farm agents have a duty to speak and to fully disclose all material information to an insured about State Farm’s bad faith claims handling tactics, its reliance on undisclosed definitions and standards outside of the Policy, internal and external complaints about State Farm’s handling of wind and hailstorm claims, and other material information any insured would deem reasonable in making a purchasing decision. 16. Industry standards, as well as agents’ legal duty of reasonable skill, care, and diligence in the procurement of insurance, require State Farm’s agents to act in accordance with the training and contractual requirements State Farm imposes upon them. These requirements and training exist to ensure policyholders receive the specific full replacement cost coverage they request, and Agent binds such coverage in accordance with their representations to the insured and State Farm’s internal guidelines. 17. Agent markets as much on Agent’s website: Homeowners Insurance Protect your largest investment from unexpected events life may throw your way with State Farm* Homeowners Insurance in Broken Arrow, OK. So, what’s covered?1 Your home insurance ensures you can repair or replace your home, as well as the items you value. Personal property is covered even if you’re on vacation, running errands or holding items in storage. More homeowners choose State Farm as their home insurance company over any other insurer.2 Matt McCoy in Broken Arrow, OK will help you get started after you complete a homeowners insurance online quote. It’s fast and easy! 15 18. State Farm agents should meet these duties by inter alia performing an in-person inspection of the Insured Property prior to the inception of coverage and routinely thereafter to verify the condition and attributes of the Insured Property for the purposes of (a) the agent’s accurate calculation of replacement cost and (b) the agent’s accurate representation that the Insured _____________________ 15 Available at https://www.statefarm.com/agent/us/ok/broken-arrow/matt-mccoy-7cfkl2tf000 (last visited Mar. 10, 2026). Property qualifies for full replacement cost coverage under State Farm’s guidelines. Indeed, not all homes automatically qualify for State Farm’s homeowners’ policies—only those which meet its internal guidelines and thus constitute a “good risk” for State Farm to insure. 19. The policy is a contract—one that obligates State Farm to indemnify its insured upon the occurrence of a covered loss. State Farm’s issuance of an insurance policy to an insured contains certain critical representations: namely, that the property identified in the policy declarations meets the criteria for the full replacement cost coverage prescribed at the time of inception or renewal.16 The agent further expressly and/or inherently represents that no condition, pre-existing damage, deterioration, wear-and-tear, or other defect negates the property’s eligibility for full replacement cost coverage under the policy. 20. State Farm’s agent must inspect the property to determine this eligibility for full replacement cost coverage under State Farm’s internal underwriting requirements. There is no other way for the agent to gather the information it needs to accurately relay to State Farm (and the insured) whether the property rightfully meets the criteria for full replacement cost coverage. 21. Most captive State Farm agents have binding authority. That means they instruct State Farm to issue the full replacement cost coverage. In doing so, the agent represents to both State Farm and the insured that the property meets certain criteria and is eligible for full replacement cost coverage. This representation is repeated each time the policy renews, such that the agent represents the property’s eligibility (and, thereby, the absence of any condition that would negate that eligibility), each policy year upon renewal. 16 This must be true, for the issuance of full replacement cost coverage upon a property that does not qualify at the time would constitute an illusory coverage violation. 22. In the event State Farm's agent finds the property fails to qualify for full replacement cost coverage (e.g., the roof is too old, too worn, in poor condition, or otherwise affected by pre-existing conditions), State Farm's agent owes an independent duty to report the same to both the insured and to State Farm. This should result in reduction, denial, or cancellation of coverage. Of course, this determination would first require a physical inspection of the roof. 23. Ultimately, State Farm's agent binds coverage for the property on behalf of State Farm. State Farm then issues a resultant homeowners insurance policy only when all binding criteria are met. Remarkably, State Farm's agents almost never perform or acquire an in-person inspection of the property to be insured. This means they represent the property's eligibility to both State Farm and the insured recklessly and blindly, without ever verifying whether that representation is true, in almost every instance of the Scheme. 24. This consistent misrepresentation is a necessary furtherance of the Scheme in each instance; State Farm's agents cannot bind a policy without first representing the property qualifies for full replacement cost coverage. Agent thus relies on the same training to make the same or similar representations that each Insured Property is eligible for the full replacement cost coverage sought under the same underwriting guidelines. This uniformity allows State Farm to effectuate its Scheme with consistency. 2. Agent's Treatment Exemplifies the Scheme. 25. Agent's treatment of Plaintiff exemplifies the Scheme in action: a. Plaintiff contacted Agent to procure full replacement cost homeowners insurance coverage from State Farm. Plaintiff visited the office of the Agent and requested Agent obtain a replacement cost policy that would provide full replacement cost coverage17 for the Insured Property in the event of a loss. b. In doing so, Plaintiff expressly and implicitly communicated her insurance concerns and coverage needs to the Agent. Plaintiff recalls the Agent representing that the Agent could save her money while providing the same or better coverage than she had with her previous insurance carrier. Plaintiff recalls being assured that, in the event of a weather-related loss affecting her roof or property, the damage would be fully covered by State Farm other than her fence. a. Agent made specific promises, which turned out to be false: i. The Agent assured Plaintiff that she was in good hands with State Farm, a major insurance company, and that the company would take good care of her in the event of a loss to her property. ii. That Plaintiff would have as good or better coverage than Plaintiff did with her current insurance company at a much better price. iii. The Agent represented that claims would be fully covered and that the process was simple, explaining that Plaintiff would only need to report the loss through the app and someone would contact her to handle the damage to her property. 17 See Rains v. CSAA Fire & Cas. Ins. Co., 2020 WL 6729085, at *6 (N.D. Okla. Nov. 16, 2020) ("Unlike requests for "full" or "adequate" coverage, a specific request for "replacement" coverage could qualify as a "need[ ] ... disclosed by the insureds" that would trigger an agent's duty to provide such coverage if promised. Rotan, 83 P.3d at 895. The term "replacement coverage" is a term that connotes a specific type of coverage.). iv. The Agent represented that Plaintiff had full replacement cost coverage and that, in the event of loss or damage to the Insured's Property, she would be fully covered and taken care of for any resulting losses to Plaintiff's roof and property. c. By virtue of the act of marketing, selling, procuring, and binding full replacement cost coverage under the Policy (whether at inception or renewal, and without any limitation for wind- or hailstorm damage), Agent independently established, calculated, and set the Policy's replacement cost value and resultant policy full replacement cost coverage limits. Neither Agent nor State Farm required or otherwise asked Plaintiff to calculate or request a specific amount of full replacement cost coverage for the Insured Property. Instead, Agent took on that responsibility and thereby incurred the duty to do so accurately and with the requisite skill, knowledge, and expertise. Given Agent's touted expertise, he should have first verified the condition of the home, via survey/inspection or otherwise. d. By virtue of the act of marketing, procuring, selling, and binding purported full replacement cost coverage under the Policy (without limitation), Agent independently selected and calculated full replacement cost coverage and expressly and/or inherently conveyed that such coverage and corresponding policy limits were accurate, correct, commensurate with actual reconstruction costs, and represented at least 100% of the Insured Property's insurance to value. Agent thereby represented to Plaintiff that the property met State Farm's underwriting guidelines and qualified for the full replacement cost coverage Agent bound. e. Both Agent and State Farm thereby either knew or should have known of any material defect, pre-existing damage, or other condition(s) that would exclude the Insured Property from full replacement cost coverage in violation of State Farm’s underwriting guidelines, rules, and criteria. f. Both Agent and State Farm knew State Farm purposefully uses hidden definitions of wind- and/or hailstorm damage to deny claims, along with other bad faith tactics described herein, but failed to disclose these to insureds in the Policy or at any point prior to claims adjustment. 26. In furtherance of the Scheme, Agent committed the following strategic and material omissions: a. On information and belief, neither Agent nor State Farm ever inspected the Insured Property or procured such an inspection from a third party. b. On information and belief, neither Agent nor State Farm ever verified the Insured Property’s condition, characteristics, attributes, etc. – whether at Policy inception or upon each subsequent annual renewal of the Policy. c. Regardless of whether an inspection occurred, neither Agent nor State Farm ever disclosed to Plaintiff that the Insured Property was ineligible under State Farm’s underwriting guidelines for the requested full replacement cost coverage for any reason. d. Regardless of whether an inspection occurred, neither Agent nor State Farm took reasonable care, skill, and diligence in maintaining a current understanding of the Insured Property’s condition throughout the course of renewal. e. Neither Agent nor State Farm ever advised Plaintiff that the Insured Property had any defect, pre-existing damage, or other conditions that would preclude it from full replacement cost coverage.18 Critically, such a defect was the basis for State Farm’s denial of coverage. f. Neither Agent nor State Farm ever advised Plaintiff of State Farm’s Scheme, including but not limited to State Farm’s internal and clandestine definitions of “hail damage,” “wear and tear,” “granular loss,” “functional damage,” etc. g. Neither Agent nor State Farm required or otherwise asked Plaintiff to calculate or request a specific amount of full replacement cost coverage for the Insured Property—rather, Agent assumed this duty and thereby assumed the duty to do so accurately, with requisite skill, knowledge, and expertise, and in a way commensurate with his duties. These obligations necessitated a physical inspection of the Insured Property, which would have disclosed any defect, pre-existing damage, or full replacement cost coverage-negating condition. h. Neither Agent nor State Farm disclosed to Plaintiff that the value Agent calculated for the Insured Property and resultant full replacement cost coverage limits did not in fact represent 100% insurance to value because State Farm had already pre-ordained the denial of any claim for roof damage. i. Neither Agent nor State Farm disclosed to Plaintiff the existence of the Scheme, the Wind/Hail Focus Initiative, or any aspects thereof. 27. Nevertheless, and under the cover of Agent’s strategic and material omissions, Agent marketed, sold, procured, and bound full replacement cost coverage without limitation. 18 As explained above, had Agent identified any such condition, Agent would have been required to report the same to both Plaintiff and State Farm and adjust full replacement cost coverage accordingly. State Farm issued the Policy. Agent, by virtue of these acts, represented that Plaintiff was covered under the Policy for all fortuitous losses, including all weather-related damage. 28. Given Agent’s purported expertise and specialized knowledge of insurance policies, Plaintiff reasonably relied on Agent for the same. B. State Farm Uses a Form Policy to Perpetuate the Scheme 29. State Farm uses a form replacement cost policy to issue homeowners insurance coverage in Oklahoma.19 This form policy is integral to the Scheme: the scope of coverage for each insured State Farm subjects to its Scheme is effectively and materially the same, notwithstanding differences in coverage amounts or premiums paid or endorsements added to bolster or strip away full replacement cost coverage. 30. State Farm and its agents (like Agent) represent the form policy to be a replacement cost policy. Just as with any subject property insured under a form policy, the coverage limit for the Insured Property is keyed to its replacement cost value, such that the Policy should afford an amount of coverage that represents the full amount needed to replace the Insured Property in the event of a loss. State Farm, through its agents, voluntarily assumes the responsibility of calculating both the replacement cost value and the resultant coverage limit for the insured. 31. State Farm’s replacement cost policy functions like an “all risk” policy: that is, if the policy does not expressly exclude a loss, then the policy should afford full replacement cost coverage for the loss pursuant to the loss clause. Thus, State Farm’s policy affords full replacement cost coverage for the property in question for damage resulting from hail because hail damage is 19 Plaintiff does not assail the rates State Farm charges (i.e., premiums) for full replacement cost coverage. Plaintiff does not allege the terms of State Farm’s form policy to be unlawful, but rather that State Farm and Agent’s conduct is an unlawful breach that is inconsistent with the four corners of the Policy and Agent’s representations thereto. Plaintiff disclaims any invocation of the filed rate doctrine. not expressly excluded from full replacement cost coverage. The policy speaks only to “accidental direct physical loss” therefrom, with no other limitation or definition disclosed. COVERAGE A – DWELLING We will pay for accidental direct physical loss to the property described in Coverage A, unless the loss is excluded or limited in SECTION I – LOSSES NOT INSURED or otherwise excluded or limited in this policy. However, loss does not include and we will not pay for, any diminution in value. 32. The policy does not define, limit, or otherwise mitigate full replacement cost coverage for tornado, wind- and/or hail-storm damage outside of “accidental direct physical loss” therefrom. The policy does not provide any limitations on how or when such full replacement cost coverage will apply to a roof. It does not specify, condition, define, or limit that full replacement cost coverage in any way, e.g., minimum windspeeds, the type of roof damage, a minimum number of hail strikes per square foot, a minimum size of hail, etc. Rather, all of these very real limitations exist in State Farm claims handling procedures, which lie obscured beyond the view and understanding of the insured until the insured files a claim and confronts the Scheme. 33. On its face, State Farm’s policy merely purports to provide the insured the broadest form of full replacement cost coverage available today. State Farm’s policy cover page (and, therefore, Plaintiff’s Policy’s cover page) states as follows: StateFarm This policy is one of the broadest forms available today, and provides you with outstanding value for your insurance dollars. However, we want to point out that every policy contains limitations and exclusions. Please read your policy carefully, especially "Losses Not Insured" and all exclusions. State Farm® Homeowners Policy C. State Farm Employs an Array of Bad Fath Claims Handling Tactics to Perpetuate the Scheme 34. State Farm’s Scheme then turns on a series of bad-faith claims handling tactics, which help State Farm justify its denial of valid claims. These tactics, along with State Farm’s agent’s complicity (described above), are all part of State Farm’s Wind/Hail Focus Initiative—an enterprise-wide program State Farm implemented through its property and casualty claims department to reduce its indemnity losses related to roof damage from wind, hail, and tornado. Importantly, tornado losses also often bring severe hail damage, which State Farm uses to deny valid tornado damage claims as well. According to the National Weather Service, “[h]ail is very commonly found very close to the tornadoes, as the strongest thunderstorms that spawn tornadoes are formed under the atmospheric conditions that are also highly likely to make hail.”20 The Wind/Hail Focus Initiative included an array of claims handling practices that are wholly absent from the policy and any disclosures made to the insured (until, of course, State Farm ambushes the insured with a denial). 35. State Farm employs a narrow and limited definition (as well as restrictive claims handling protocols) for hail damage. This allows State Farm adjusters to deny claims even when their loss inspection clearly shows hail damage to the insured roof. State Farm’s narrow and limited definition is absent from the four corners of the policy and hidden from the insured until State Farm uses it to deny a valid claim. State Farm’s captive agents (including Agent here) are fully aware of the narrow and limited definition, this critical disclosure is concealed and State Farm’s insureds are wholly unaware of coverage limitations until they suffer a loss, file a claim, and receive a denial. It is only when the insured becomes the latest victim of State Farm’s Scheme ______________________________ 20 https://www.weather.gov/phi/tornadodefinition#:~:text=Strong%20downburst%20(straight%2Dline),highly%20likely%20to%20make%20hail. (last visited Mar. 10, 2026). that the insured learns of State Farm’s internal limitations to its coverage regarding hail damage. This is precisely what happened to Plaintiff. 36. State Farm’s adjusters misattribute damage to non-covered causes of loss. State Farm’s adjusters find damage to the insured property but attribute that damage to a non-covered cause of loss—most commonly, “wear and tear,” “pre-existing damage,” or “manufacturer defect.” With regard to roof shingles, State Farm often misclassifies shingle damage as “granular loss.” This finding flies in the face of Defendants’ representations and/or material omissions, which are inherent to the act of procuring, binding, and renewing full replacement cost coverage. In many instances, this is stated plainly on State Farm’s denial letter. In other instances, the adjuster simply fails to acknowledge the damage at all. Yet there is, indeed, patent wind- and/or hailstorm damage, such that the insured was compelled to file the claim. The adjuster simply fails to record it as a covered cause of loss—thereby implying that the damage was caused by some other, non-covered cause. Critically, Defendants expressly and/or impliedly represent that the Insured Property qualifies for the full replacement cost coverage bound by virtue of the act of binding the full replacement cost coverage. Thus, if the roof suffered from a manufacturer defect, pre-existing damage, or substantial wear and tear, the roof may not qualify for full replacement cost coverage (whether at inception or annual renewal). This should be detected by the Agent’s inspection and inform some change in full replacement cost coverage. These defects cannot accrue or appear by fiat in the mere months between the most recent policy renewal and the date of loss. It is, at best, duplicitous for Defendants to, on one hand, tell the insured that the property fully qualifies under State Farm’s underwriting rules for the full replacement cost coverage bound and then, with the other, tell the insured that it in fact did not. This is exemplary ambush claims-handling and prima facie bad faith. 37. State Farm adjusters misstate the date of loss. If the insured is unable to pinpoint the exact date of loss, State Farm’s adjuster uses the opportunity to further the Scheme and justify State Farm’s pre-ordained denial of the claim. In these instances, State Farm adjusters review the Accuweather data and choose a date of loss that either (a) falls outside its hidden one-year limitation or (b) shows insufficient hail occurred to constitute a covered claim under its clandestine rules. If the insured pinpoints a date certain for the date of loss, State Farm may still use Accuweather to justify its wrongful denial of the insured’s hail damage claim. 38. In addition, State Farm subjects its insureds to arbitrary limits on the time to file claims, manipulates damage findings to ensure losses fall under the policy deductible, and even employs its hand-chosen engineering firms (who are dependent on State Farm for business) to drum up sham reports that rubber-stamp its adjusters’ misrepresentations. 39. Each of these aforementioned bad-faith claims handling tactics perpetuates the Scheme and allows State Farm to deny valid property insurance claims. State Farm trains its claims handling personnel to implement these tactics. State Farm trains its captive agents (like Agent) to market, sell, and bind full replacement cost coverage in a way that allows the Scheme to carry forward undetected. D. Defendants Subjected Plaintiff to the Scheme 40. The manner in which State Farm handled the Claims illustrates State Farm’s Scheme and clearly demonstrates State Farm’s bad faith: a. The Insured Property was damaged during a significant wind and hailstorm, which ravaged numerous properties throughout Tulsa County and the wider Northeastern Oklahoma region on or about March 14, 2025, and/or the surrounding dates. The Insured Property sustained substantial wind and possible hail damage across the entirety of its roof such that the roof was rendered totaled and required full replacement. b. The National Oceanic and Atmospheric Administration reported that, "Low pressure rapidly deepened over the central High Plains on the 14th, with the approach of a strong upper level disturbance, which resulted in a very strong pressure gradient across much of eastern Oklahoma. West and southwest wind increased to over 40 mph, with gusts as high as 68 mph across much of northeastern and east central Oklahoma. These strong winds continued for several hours into the evening. The strong wind blew down power lines and large tree limbs, damaged homes and outbuildings, and resulted in areas of blowing dust."21 c. Plaintiff properly and timely submitted the Claim to State Farm for the storm damage after discovering extensive damage to the roof of the home and other areas of the property. d. Thereafter, State Farm arranged for an inspection to be performed by an adjuster. On May 19, 2025, the State Farm inspector performed an inadequate inspection, and at its completion indicated that the damage was not sufficient to warrant a full replacement. e. On May 19, 2025, State Farm used this biased inspection to generate an estimate for damages to the Insured Property totaling $556.94. After applying $16.04 in depreciation and the policy deductible of $2,125, State Farm’s estimate indicated that no payment would be made on the Claim. 21 Available at https://www.ncei.noaa.gov/stormevents/eventdetails.jsp?id=1245160 (last visited Mar. 10, 2026). f. On or about May 19, 2025, State Farm sent a letter to Plaintiff, stating that the damage to the Insured Property was did not meet her $2,150 deductible, and therefore Plaintiff would not receive payment on the claim. Moreover, State Farm stated that the damage to the insured property was caused by “wear and tear or age and deterioration.” g. After this unfair and biased evaluation by State Farm, Plaintiff implored and appealed to State Farm to adjudicate the Claim in a fair manner, but State Farm elected not to perform additional inspections or make any adjustments to its evaluation of the claim. h. Plaintiff requested that the roofers at Farnsworth Quality Roofing inspect the Insured Property and provide a quote for replacement of the roof. Following an inspection, Superior Roofing recommended a full roof replacement, with a cost of $7,000. i. State Farm offered no evidence of the “Wear and tear” and “deterioration,” which were cited as the bases for their limited offer. Rather, State Farm’s position is a presumption of wear and tear/deterioration. j. Plaintiff’s Insured Property, especially its roof, remains in disrepair and in desperate need of replacement. Plaintiff is being placed into a position to incur substantial out-of-pocket expenses in order to obtain proper repairs for the insured property, and lives in constant worry about the state of their home. Defendants’ Failures k. On information and belief, in furtherance of the Scheme, Agent never properly inspected the Insured Property and otherwise failed to verify the condition of the Insured Property at any time, yet Agent sold and renewed full replacement cost coverage recklessly and blindly. See ¶¶ 22-23, supra. This signaled to Plaintiff that the Insured Property continually satisfied State Farm’s underwriting guidelines and qualified for 100% full replacement cost coverage without any adjustments or depreciation for age, condition, etc. However, this turned out to be untrue once State Farm wrongfully denied Plaintiff’s Claim based on pre-existing damage that negated Plaintiff’s full replacement cost coverage. Indeed, Agent failed to disclose to Plaintiff any roof defects and pre-existing damage (i.e., “[w]ear, tear, decay, marring, scratching, deterioration, inherent vice, latent defect, or mechanical breakdown,” etc.) that would preclude full replacement cost coverage despite being required to in accordance with State Farm’s underwriting guidelines. 1. Pre-existing damage to the roof should have been identified by Agent at Policy inception and renewals and disclosed to Plaintiff and State Farm as such that would disqualify Plaintiff from full replacement cost coverage. Instead, Agent failed to verify whether any roof defects or other pre-existing damage, such as wear, tear, age, deterioration, granule loss, inherent vice, latent defect, mechanical breakdown, existed. Agent’s failed underwriting duties and failure to disclose crucial information affecting the Insured Property’s eligibility for replacement cost coverage allowed State Farm to ambush Plaintiff with a Claim denial based wholly on pre-existing damage. Plaintiff was subjected to the Wind/Hail Focus Initiative. See ¶¶ 4, 10, 13-28, 34-36, supra. m. To date, State Farm wrongfully withheld the full replacement cost benefits to which Plaintiff is rightfully entitled to under the Policy. State Farm left Plaintiff with no other option but to file the present lawsuit in order to recover the full replacement cost benefits rightfully owed to them. State Farm’s conduct constitutes a violation of the Unfair Claims Settlement Practices Act, 36 O.S. §§1250.1-1250.16 and has wrongfully forced Plaintiff to retain counsel to recover insurance benefits owed under the terms and conditions of the Policy. See 36 O.S. §1250.5(13) ("Compelling, without just cause, policyholders to institute suits to recover amounts due under its insurance policies or insurance contracts by offering substantially less than the amounts ultimately recovered in suits brought by them, when the policyholders have made claims for amounts reasonably similar to the amounts ultimately recovered.") (emphasis added). n. State Farm has established a pattern and practice of forcing insureds to file lawsuits to obtain their full replacement cost benefits, including but not limited to the payment for a full roof replacement. This is due to State Farm's cost-benefit analysis that led to its decision to create the Wind/Hail Focus Initiative and resultant Scheme. The Scheme is premised on the notion that most insureds will simply accept State Farm's bad faith investigation and evaluation of the claim and will not pursue a lawsuit because they are unaware of the Scheme. This is bad faith and any post-litigation claim payments should have been issued early on in the claim when it was evident that full roof replacement was required pursuant to the Policy. IV. FRAUDULENT CONCEALMENT 41. All allegations in the preceding paragraphs of this Petition are fully incorporated as if each were fully set forth herein. 42. At all relevant times, Defendants concealed material facts about State Farm's Scheme from Plaintiff. This concealment protected and perpetuated the Scheme, such that Plaintiff had no way of ascertaining the Scheme or the accrual of any cause of action against Defendants. 43. The Scheme is an artifice, which State Farm designed to be hidden from its insureds' discovery. To wit, the inherent nature of State Farm's "good neighbor" promises—the duty of good faith and fair dealing State Farm owes its insureds—makes the artifice appear reliable. Insureds of ordinary prudence have no means of discovering the Scheme or their right to pursue recovery under the law. 44. Defendants’ fraudulent concealment tolls the running of any applicable statute of limitations. V. COUNTS COUNT ONE: BREACH OF CONTRACT Against Defendant State Farm 45. All allegations in the preceding paragraphs of this Petition are fully incorporated as if each were fully set forth herein. 46. Plaintiff entered into a contract of insurance (the “Policy”) with State Farm to provide homeowner’s insurance for the Insured Property. The Policy was in full force and effect at all material times hereto. 47. Plaintiff provided proper and timely notice to State Farm of the Claims for substantial damage to the Insured Property arising from wind and/or hail. 48. The Policy coverage includes all fortuitous losses—which necessarily includes damage sustained by wind and/or hail. The Policy language does not define, distinguish, or limit wind and/or hail damage in any fashion. 49. Plaintiff complied in all material ways with the terms and conditions of the Policy. 50. State Farm breached its contractual obligations under the terms and conditions of Policy by failing to pay Plaintiff all benefits owed under the terms and conditions of the Policy and for wrongfully underpaying and denying the Claims. 51. Consistent with State Farm’s pervasive, state-wide fraudulent Scheme described in detail throughout this Petition, State Farm actively, intentionally, and fraudulently concealed its Scheme to deny and/or underpay valid hail damage claims from Plaintiff. This concealment is an inherent and important aspect of State Farm’s Scheme; as State Farm knew its Scheme would work only if it was kept secret. 52. As a result of State Farm’s breach of contract and other wrongful conduct, Plaintiff incurred damages. COUNT II: BREACH OF THE DUTY OF GOOD FAITH AND FAIR DEALING ("Bad Faith") Against Defendant State Farm 53. All allegations in the preceding paragraphs of this Petition are fully incorporated as if each were fully set forth herein. 54. At all relevant times hereto, State Farm owed Plaintiff a duty of good faith and fair dealing. 55. State Farm knowingly, intentionally, purposefully, wrongfully, and repeatedly breached its duty to deal fairly and in good faith by engaging in at least the following acts and omissions: a. knowingly engaging in a pattern and practice of i. denial-oriented investigations and claims-handling practices; ii. arbitrary and capricious claims handling; iii. denying and or underpaying indemnity payments owed to its first-party insureds on valid hail claims, including Plaintiff; iv. withholding pertinent benefits, coverages, and other provisions due to Plaintiff under the terms and conditions of the Policy in violation of the Unfair Claims Settlement Practices Act, 36 O.S. §§1250.1-1250.16; v. limiting and/or denying rights inherent to Plaintiff; vi. recklessly disregarding said rights; vii. forcing Plaintiff to retain counsel to recover insurance benefits owed under the terms and conditions of the Policy; viii. manipulating claims to ensure damages fall below the policy deductible; ix. ignoring covered hail and windstorm damage; x. engaging in the pattern and practice of denying full roof replacement claims by asserting pre-existing damages and faulty installation without a pre-inception property inspection and/or without reasonably updated knowledge of the pre-loss condition of the subject property; xi. implementing the Hail Focus initiative with the goal of reducing indemnity payments and deny full roof replacements to policyholders like the Plaintiff on valid wind and hail claims; xii. utilizing biased third-party adjusters and/or engineers who further implement the Scheme outlined herein by consistently writing reports and estimates to deny full roof replacements on valid wind and hail claims; b. knowingly and purposely failing to i. inspect the Insured Property prior to inception of the Policy and/or maintain current information as to the condition of the Insured Property prior to the loss; ii. notify Plaintiff, both prior to and at the inception and renewal of the Policy, of any pre-existing damage and other conditions that, if a claim were made, would limit full replacement cost coverage; iii. communicate all coverages and benefits applicable to the Claims; iv. perform a proper, timely, fair, and objective investigation of the Claims; v. pay the full and fair amount for the hail damage sustained to the Insured Property in accordance with the Policy’s terms and conditions; vi. base its denial of the Claims on valid, accurate, and reasonable grounds; vii. disclose the Scheme to Plaintiff; and viii. disclose State Farm’s lack of compliance with its own underwriting guidelines, policies, and procedures in denying full replacement cost coverage to Plaintiff. 56. State Farm’s conduct, as described above, constitutes bad faith and is a material breach of the terms and conditions of the Policy and its underlying insurance contract between the parties. State Farm has no reasonable basis in its refusal to recognize and pay Plaintiff the agreed replacement cost as per the Policy for damages caused by the wind and hail damage to the Insured Property. 57. As a consequence of State Farm’s breach of the duty of good faith and fair dealing, Plaintiff sustained damages, including deprivation of monies rightfully belonging to Plaintiff, and ordinary or garden variety harm of anger, stress, worry, physical and emotional suffering that naturally results from an insurance failure. 58. State Farm’s conduct was intentional, willful, malicious, and/or in reckless disregard of the rights of others. State Farm’s actions during the handling of the Claims demonstrate it acted intentionally and with malice and breached its duty to deal fairly and in good faith. State Farm’s actions were consistent with an overall collective corporate goal of decreasing indemnity losses and thereby increasing profits through the systematic underpayment and denial of claims. The Scheme is sufficiently egregious in nature so as to warrant the imposition of punitive damages. State Farm’s Scheme demonstrates an enterprise-wide “pattern” theory of bad-faith conduct, liability for which is cognizable under Oklahoma law. See 12 Okla. Stat. § 2406; Vining v. Enter. Fin. Group, 148 F.3d 1206, 1218 (10th Cir. 1998) (where Plaintiffs sought to prove insured’s pattern and practice of bad faith conduct, evidence regarding other insureds was relevant to show defendant “acted in this case under Federal Rule of Evidence 406 (habit)”); see also Metzger v. Am. Fid. Assur. Co., 2007 WL 4342082, at *1 (W.D. Okla. Dec. 7, 2007); Markham v. National States Ins. Co., 122 Fed. Appx. 392 (10th Cir. 2004) (evidence of nation-wide rescission practice supported bad faith); Barnes v. Okla. Farm Bur. Mut. Ins. Co., 2000 OK 55, 11 P.3d 162, 170 (“insurer’s unreasonable treatment of Barnes was not an isolated incident, but the same or similar tactic was used by insurer repeatedly with other insureds”; awarding actual and punitive damages); Copeland v. Tela Corp., 2003 OK Civ APP 98, ¶ 3, 79 P.3d 1128 (confirming no abuse of discretion in allowing evidence of habit evidence under 12 O.S. § 2406 to show pattern and practice conduct.); Jones v. Farmers Ins. Co., Inc., 2012 WL 12863976 (W.D. Okla) (court holds that similar claims are relevant to Plaintiffs’ contract claim and the claim of bad faith in that they may show a pattern and practice). 59. State Farm enjoyed increased financial benefits and ill-gotten gains as a direct result of the wrongful conduct described above herein, which resulted in the injury to Plaintiff. COUNT III: NEGLIGENT PROCUREMENT OF INSURANCE Against Agent 60. All allegations in the preceding paragraphs of this Petition are fully incorporated as if each were fully set forth herein. 61. At all material times hereto, Agent acted as State Farm’s agent and/or employee. State Farm is thereby vicariously liable for the Agent’s conduct. 62. In procuring the Policy, Agent had a duty to: a. use reasonable care, skill, and diligence to procure full replacement cost coverage as the insured requested that meets the insured’s stated needs; b. use reasonable care, skill, and diligence in undertaking the calculation of replacement cost for the insured; c. speak accurately and truthfully by informing Plaintiff of all full replacement cost coverages, advising Plaintiff of the benefits, risks, limitations and exclusions thereof, and perform a reasonable inspection of the Insured Property prior to procuring the full replacement cost coverage and thereafter upon renewal to ensure no changes to the Policy were necessary or required; and d. Disclose all material facts with respect to the Scheme as outlined within this Petition. 63. Agent breached Agent’s duty owed to Plaintiff by: a. Knowingly and purposefully procuring and renewing i. illegitimate full replacement cost coverage (in that all fortuitous losses are not covered under the Policy); ii. a policy which deviated substantially and materially from the full replacement cost coverage Plaintiff requested; iii. a Policy that did not accurately reflect the replacement cost of the Insured Property (i.e., an amount that was 100% insurance to value as represented); iv. a Policy that, as written, did not provide full replacement cost coverage to fully restore the Insured Property back to its pre-loss condition; b. Failing to i. follow and abide by State Farm’s underwriting policies/guidelines; ii. perform all necessary inspections of the Insured Property; iii. confirm the accuracy of the pre-filled information provided by State Farm’s replacement cost estimating tool; iv. disclose pre-existing damage to the Insured Property; v. verify whether its inherent representation to State Farm and Plaintiff that the Insured Property (including the roof) was in good condition was accurate; vi. procure and renew a policy that provided the requested full replacement cost coverage for all fortuitous losses; and vii. disclose all material facts of the Scheme as outlined within this Petition. 64. Plaintiff relied on Agent’s representations and omissions to their substantial detriment. 65. As a result of Defendants’ conduct, Plaintiff sustained damages, including deprivation of monies rightfully belonging to Plaintiff, and ordinary or garden variety harm of anger, stress, worry, physical and emotional suffering. 66. Defendants’ conduct was intentional, willful, malicious and in reckless disregard of the rights of others and is sufficiently egregious in nature so as to warrant the imposition of punitive damages. Defendants acted intentionally, and with malice and, breached duties owed to Plaintiff. Defendants’ actions were consistent with their overall collective corporate goal of increasing profits through the systematic underpayment and denial of claims. COUNT IV: CONSTRUCTIVE FRAUD AND NEGLIGENT MISREPRESENTATION Against All Defendants 67. All allegations in the preceding paragraphs of this Petition are fully incorporated as if each were fully set forth herein. 68. Defendants owed Plaintiff a legal and/or equitable duty to disclose all material facts that may arise out of their relationship as insurer and insured. Croslin v. Enerlex, Inc., 2013 OK 34, ¶17, 308 P.3d 1041. 69. The concealment of a material fact which substantially affects another person constitutes fraud. Patel v. OMH Medical Center, Inc., 1999 OK 33, ¶ 34; Sutton v. David Stanley Chevrolet, 2020 OK 87, 475 P.3d 847. Fraudulent representations may consist of half-truths calculated to deceive, and a representation literally true is actionable if used to create an impression substantially false. Sutton, 475 P.3d at 15. Where the peculiar circumstances give rise to a duty on the part of one of the parties to a contract **to disclose material facts and the party remains silent to his or her benefit and to the other party's detriment**, the failure to speak constitutes fraud. Id. (citing Croslin, ¶17) (emphasis added). 70. "[A] variety of facts and circumstances [] will give rise to a duty to disclose material facts." The Sutton Court reiterated that it has "consistently found the existence of the requisite circumstances, i.e., that which is necessary to create a duty to disclose, when the offending party created a false impression concerning material facts that was relied upon by the other party to his detriment and to the benefit of the offending party." Id. at 15. 71. A negligent or innocent misrepresentation or concealment for constructive fraud occurs when one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Negligent misrepresentation can also be based on a material omission. See Lopez v. Rollins, 2013 OK CIV APP 43, 303 P.3d 911; Sutton v. David Stanley Chevrolet, 2020 OK 87; Stroud v. Arthur Andersen & Co., 2001 OK 76, 37 P.3d 783; Ragland v. Shattuck Nat'l Bank, 36 F.3d 983, 992 (10th Cir. 1994) (applying Oklahoma law). 72. Defendants owed specific duties to Plaintiff. These duties are encompassed in State Farm’s duty of good faith and fair dealing owed to its insureds, as well as specific duties Agent owed Plaintiff—a duty to exercise reasonable diligence and skill in obtaining and accurately notifying of the nature and character of the insurance procured, the duty in undertaking the calculation of replacement cost for the insured to use reasonable care, skill, and diligence to do so, the duty to speak accurately and truthfully, and the duty to disclose all material facts relating to the Scheme as outlined within this Petition. 73. Defendants breached this duty by misrepresenting, concealing, or omitting pertinent material facts from Plaintiff, including (but not limited to) the following: a. Defendants misrepresented the Insured Property met all underwriting requirements, that all property inspections had occurred, and that the replacement cost values it calculated were accurate and commensurate with reconstruction costs such that the full replacement cost coverage would fully restore, replace and/or repair the Insured Property (including its roof) in the event of a loss by a covered event. b. Defendants misrepresented that the Insured Property (and, specifically, its roof) was eligible for the comprehensive full replacement cost coverage (rather than ACV). c. Defendants failed to disclose that pre-existing issues with the Insured Property would either prevent issuance of or limit the full replacement cost coverage for any damage during the Policy period. d. Agent misrepresented the procurement of the comprehensive full replacement cost coverage Plaintiff requested. e. Defendants misrepresented that the Policy covered all fortuitous losses and that weather-related damage (even cosmetic)—big or small—was fully covered under the Policy. f. Defendants failed to disclose all material information to an insured about State Farm’s bad faith claims handling tactics, its reliance on undisclosed definitions and standards outside of the Policy, internal and external complaints about State Farm’s handling of wind and hailstorm claims, and other material information any insured would deem reasonable in making a purchasing decision. g. Defendants failed to disclose to Plaintiff any of the above misrepresentations and/or omissions, any facts underlying these misrepresentations, or any material facts regarding the Scheme, including the Wind/Hail Focus Initiative, implemented with the goal of reducing indemnity payments to policyholders like the Plaintiff on valid wind and hail claims or State Farm’s use of biased third-party adjusters and/or engineers who further implement the Scheme outlined herein by consistently writing reports and estimates to deny full roof replacements on valid wind and hail claims. 74. Nevertheless, Agent procured, bound, sold, and, together with State Farm, renewed, illusory full replacement cost coverage to Plaintiff knowing such representations were untrue. 75. As a result of both State Farm and Agent’s breach of duty, each gained an advantage by misleading Plaintiff to substantial detriment and prejudice. These breaches of duty induced Plaintiff to accept, purchase, and renew the State Farm replacement cost policy. 76. State Farm and Agent’s misrepresentations constitute constructive fraud. 77. At all relevant times, Agent was State Farm’s employee and/or agent. 78. As a result of the Defendants’ constructive fraud, Plaintiff sustained damages, including deprivation of monies rightfully belonging to Plaintiff, and ordinary or garden variety harm of anger, stress, worry, physical and emotional suffering. 79. Defendants’ conduct was intentional, willful, malicious, and in reckless disregard of the rights of others, and/or was grossly negligent, and is sufficiently egregious in nature so as to warrant the imposition of punitive damages. VI. PRAYER FOR RELIEF WHEREFORE, this Court should enter judgment on behalf of Plaintiff against all Defendants for: (a) Actual damages in an amount in excess of $250,000; (b) Punitive damages under Oklahoma law; (c) Disgorgement of the increased financial benefits derived by any and/or all of the Defendants as a direct result of the Defendants’ wrongful conduct; and (d) Prejudgment interest, costs, and attorneys' fees. Respectfully submitted, Reggie N. Whitten Michael Burrage, OBA No. 1350 Blake Sonne, OBA No. 20341 Hannah Whitten, OBA No. 35261 John S. Sanders, OBA No. 34990 Jake Denne, OBA No. 35097 WHITTEN BURRAGE 512 North Broadway Avenue, Suite 300 Oklahoma City, OK 73102 Office: 405.516.7800 Facsimile: 405.516.7859 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] -AND- Noble McIntyre, OBA #16359 Jeremy Thurman, OBA # 19586 Jordan Klingler, OBA #31233 Payson Ramirez, OBA #36767 MCINTYRE LAW, P.C. 8601 S. Western Avenue Oklahoma City, Oklahoma 73139 T: (405) 917-5250 F: (405) 917-5405 [email protected] [email protected] [email protected] [email protected] ATTORNEYS FOR PLAINTIFF ATTORNEYS’ LIEN CLAIMED JURY TRIAL DEMANDED IN THE DISTRICT OF OKLAHOMA COUNTY STATE OF OKLAHOMA BILLY HURSH and LACY HURSH Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, MARK D. WELTY, and MARK D. WELTY INSURANCE AGENCY, INC. Defendants, and STATE OF OKLAHOMA, EX REL. GENTNER DRUMMOND, OKLAHOMA ATTORNEY GENERAL Intervenor Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant. FILED IN DISTRICT COURT OKLAHOMA COUNTY JAN - 8 2026 RICK WARREN COURT CLERK CASE NO. CJ-2025-2626 STATE OF OKLAHOMA'S PETITION FOR INTERVENTION Intervenor-Plaintiff State of Oklahoma, ex rel. Gentner Drummond, Attorney General ("Attorney General"), for its causes of action against Defendant State Farm Fire and Casualty Company ("State Farm"), alleges and states as follows: I. NATURE OF THE ACTION 1. The Attorney General alleges that State Farm, acting through its officers, employees, computer systems, and a network of captive agents and associated entities as unnamed co-conspirators, implemented an internal program, commonly referred to as the "Hail Focus Initiative" to drastically reduce aggregate roof indemnity payments in Oklahoma. Rather than adjust claims according to coverage language in its policies, State Farm secretly substituted restrictive, extra-contractual standards and used those hidden standards to deny or minimize payment of legitimate covered losses. 2. At the point of sale and renewal, State Farm and its captive agents, as frontline underwriters, marketed and sold homeowners policies as providing "full replacement cost" coverage for storm-related roof damage, including wind and hail, and cultivated a "good neighbor" image designed to induce reliance and trust. In reality, rather than evaluating each claim on its merits, State Farm adopted internal directives requiring reduced roof replacement approvals, effectively predetermining outcomes to satisfy a corporate objective of lowering indemnity payments for roof claims. 3. The Attorney General brings this action to: (a) vindicate the authority of the State of Oklahoma to regulate the business of insurance; (b) obtain civil penalties and other relief authorized by the Oklahoma Consumer Protection Act ("OCPA") and Oklahoma Racketeer-Influenced and Corrupt Organizations Act ("ORICO"); (c) obtain structural injunctive relief to dismantle the Hail Focus Initiative; (d) compel the disgorgement of illicit profits, which may be distributed as restitution as an ancillary remedy, to prevent State Farm's unjust enrichment. II. PARTIES 4. State Farm is a foreign insurance corporation licensed to do business in Oklahoma. At all relevant times, State Farm has marketed, sold, underwritten, and adjusted homeowners insurance policies in Oklahoma, including policies providing replacement cost coverage for dwellings and roofs for covered losses. State Farm acts through its officers, employees, and adjusters and is legally responsible for their acts and omissions within the scope of their authority. 5. Numerous State Farm captive agents and their incorporated agencies are non-party co-conspirators and associated persons for purposes of the enterprise and civil conspiracy alleged herein. These agents and agencies are legally distinct entities from State Farm, generally organized as separate corporations or business entities under Oklahoma law, but contractually obligated to sell State Farm insurance products. State Farm created underwriting duties which must be followed by its agents to properly determine the risk of insuring a property. 6. The Attorney General is the chief legal officer of the State of Oklahoma, authorized by law to enforce the ORICO, 22 O.S. §§ 1401–1419, and the OCPA, 15 O.S. §§ 751–764.1, including by seeking injunctive relief, civil penalties, disgorgement, damages, and restitution on behalf of Oklahoma consumers. 7. Moreover, this public enforcement action is brought by the Attorney General to protect Oklahoma homeowners and the integrity of the Oklahoma insurance marketplace. The Attorney General brings this action in his official capacity to enforce public rights and protect the health, safety, and economic well-being of Oklahoma residents who purchased State Farm homeowners policies and were subjected to State Farm's systematic misrepresentations and unfair claim denials. The injuries alleged are not confined to a handful of private disputes; they are widespread, market-wide harms that individual lawsuits cannot adequately address. III. JURISDICTION, VENUE, AUTHORITY, AND PUBLIC INTEREST 8. This Court has jurisdiction over this civil enforcement proceeding pursuant to 22 O.S. § 1409(A), which authorizes the Attorney General to institute civil proceedings in an appropriate district court against any person for relief from conduct constituting a violation of ORICO. 9. This Court also has jurisdiction under the OCPA, including for actions brought pursuant to 15 O.S. § 761.1, which authorizes the Attorney General to bring actions in district court to enjoin unlawful practices, obtain restitution, and damages, and recover civil penalties and costs. 10. Venue is proper in Oklahoma County because at least one act of racketeering activity and multiple deceptive practices alleged herein occurred in this County, homeowners policies were marketed and sold here, and the wrongful denial and underpayment of covered claims caused economic harm within this County. ORICO expressly permits venue in any county where at least one act of racketeering activity has occurred, allowing a single district court to exercise jurisdiction over the enterprise and the pattern of conduct. 11. The pattern of racketeering and deceptive conduct alleged herein continues to the present. The Attorney General brings this action to enforce public rights and exercises the State's sovereign police powers. The Attorney General brings this enforcement action not to vindicate individualized private claims, but to restrain an ongoing fraudulent scheme that threatens the integrity of Oklahoma's insurance market and the economic welfare of a substantial portion of the State's population. Moreover, Defendant's affirmative misrepresentations and concealment of its internal Hail Focus standards and related claims-handling practices tolled any applicable limitations periods by fraudulent concealment until such time as the existence and nature of the scheme could reasonably be discovered. IV. FACTUAL ALLEGATIONS A. Background: Hail Storms and State Farm’s Concern About Roof Claim 12. Oklahoma experiences severe hail and wind storms that damage residential roofs and exteriors. In the years leading up to the events at issue, State Farm faced a significant volume of hail and wind claims from Oklahoma homeowners, many involving full roof replacement. 13. By 2022, State Farm management became concerned about the aggregate cost of roof replacements and the perceived severity of its hail and wind losses. Internal communications show that State Farm believed it was approving "too many" roof claims. 14. In response, State Farm made a corporate decision to change its approach to roof claims, with the express purpose of reducing the total number and dollar amount of roof indemnity payments in Oklahoma and other markets, rather than simply improving accuracy or fraud detection. State Farm determined, before reviewing any individual claim or making any individual coverage determination, that it would reduce overall indemnity payments for roof claims, and then implemented and tracked the scheme alleged herein in order to meet its predetermined savings targets down to the dollar. 15. Under its new approach, State Farm adjusters were instructed that they no longer had authority to authorize total roof replacements, because State Farm was paying for too many roof claims. In addition, without the knowledge of policyholders, regulators, or the public, State Farm changed its internal claim standards with the express purpose of reduce claim payments. Policies continued to be sold and renewed with State Farm continuing to offer the same written language promising coverage for losses caused by perils such as hail and wind. B. The Hail Focus Initiative and Internal Claim-Handing Changes 16. As part of its effort to reduce roof indemnity payments, State Farm developed and implemented an internal program known as the Hail Focus Initiative. The precise internal name, dates of rollout, and written directives are within State Farm's exclusive possession, custody, and control. 17. Upon information and belief, State Farm stripped or sharply curtailed the authority of field adjusters to approve full roof replacements. Under prior procedures, experienced adjusters in the field could determine a total roof replacement was appropriate when they observed sufficient hail or wind damage. Under the Hail Focus Initiative, State Farm required higher-level managers to approve full roof replacements, thereby creating additional layers of scrutiny and opportunities to deny, delay, and limit claims. 18. Upon information and belief, State Farm in conjunction with co-conspirator engineering firms, created and internally adopted undisclosed, extra-contractual definitions of key claims concepts, including "hail damage," "functional damage," and "direct physical loss." These internal standards were systematically more restrictive than the policy language and secretly and fraudulently withheld from policyholders. 19. Upon information and belief, State Farm formulated, implemented, and enforced claim-handling practices and policies under which adjusters, independent inspectors, engineers, and other personnel were instructed, trained, encouraged, and otherwise induced to treat hail strikes under restrictive internal and undisclosed definitions which resulted in the increased denial of claims. 20. Upon information and belief, State Farm formulated, implemented, and enforced claim-handling practices and policies under which adjusters, independent inspectors, engineers, and other personnel were instructed, trained, encouraged, and otherwise induced to treat hail strikes as attributed to "wear and tear," "installation error," "cosmetic damage," "manufacturing defect," or other purportedly excluded causes, even when the timing and pattern of damage indicated a recent hail event and at times without inspection of the roof prior to the covered event. 21. Upon information and belief, State Farm required or strongly encouraged the use of third-party engineering or inspection firms known to provide reports favorable to denial or minimization of hail claims. Engineers were often deployed after a contractor, independent adjuster, or field employee observed significant hail impacts. The resulting reports frequently discounted hail as the cause of the damage and emphasized non-covered factors, thereby providing a pretext for denial. 22. Upon information and belief, State Farm used computer-based software, systems, and platforms in the contracting, adjusting and denying of Oklahoma's homeowners insurance claims. This includes the use of computer-generated and disseminated forms and policies, the use of computer systems to submit, adjust, track, and deny claims, the use of computer systems to communicate and/or achieve communications with policyholders and State Farm's co-conspirators and use of computer systems to conceal the enterprise. 23. The Hail Focus Initiative and associated claims-handling changes were motivated by financial considerations: reducing State Farm's loss ratios and indemnity costs for hail and wind claims, especially total roof replacements. This initiative was designed and executed not to more faithfully apply existing policy terms, but to avoid paying claims that State Farm knew or should have known were covered under those terms. C. Role of Captive Agents and Other Participants 24. State Farm distributes its homeowners' policies in Oklahoma through captive agents and their separate agencies. These agents and agencies are non-party co-conspirators and associated persons for purposes of the enterprise and conspiracy alleged herein. 25. At policy inception and renewal, captive agents are the local face of State Farm, marketing policies to homeowners and fostering trust through branding such as "Like a good neighbor, State Farm is there." Agents assure customers that State Farm will take care of them if their home is damaged by hail or wind in a covered loss and emphasize that replacement cost coverage will restore the home to its pre-loss condition. 26. State Farm's captive agents possess authority to bind coverage and issue policies on State Farm's behalf. In many instances the agents represent to State Farm and the insured that the property meets underwriting guidelines. In some cases, agents may inspect the roof or rely on representations about its condition. In other cases, agents fail to inspect the roof entirely, failing to meet State Farm's own underwriting requirements. 27. Captive agents knew, or at minimum had reason to know, that State Farm was tightening internal claim standards and increasingly denying hail claims that would previously have been paid. Despite this knowledge or reason to know, captive agents continued to sell and renew policies without disclosing that State Farm was internally adopting extra-contractual restrictive hail-damage standards and limiting roof replacements. Agents remained silent about the internal Hail Focus Initiative and did not warn customers that their ability to obtain roof replacement coverage had materially changed. 28. Third-party engineering firms and independent adjusting firms likewise participated by providing outcome-oriented reports and estimates that supported pre-determined denials or underpayments. These entities functioned as part of the same de facto enterprise, even though they are not named as defendants in this civil action. D. Misrepresentations and Deceptive Practices at Sale and Renewal 29. Throughout the relevant period, State Farm marketed homeowners' policies as providing full replacement cost coverage for dwelling damage, including hail and wind damage to roofs. Advertising materials and agent sales presentations created the clear impression that if a hail storm damaged a roof in a covered loss, State Farm would pay to repair or replace the roof, minus any applicable deductible, so the home could be restored to its prior condition. 30. These marketing representations did not inform consumers that State Farm would internally redefine damage much more narrowly than the policy language, or that State Farm would treat many forms of hail impact as non-qualifying damage contrary to the purchased policy. 31. State Farm failed to disclose to consumers that its adjusters and managers would apply internal damage-assessment standards not contained in the policy and that exclusions for pre-existing conditions, wear and tear, or cosmetic damage would be invoked aggressively to limit coverage, even when the roof had performed properly until a specific hail event. 32. In some cases, State Farm allegedly covered homes and collected premiums without identifying any pre-existing roof conditions, only to later deny hail claims on the ground that the damage was pre-existing or due to age and wear. If the roof had truly been in such defective or worn condition at inception, State Farm would have declined the risk. This pattern reflects a post-hoc use of exclusions to avoid paying for hail damage that manifestly arose after policy inception. 33. By promising full replacement cost coverage while internally planning not to honor full roof replacement claims in many circumstances, State Farm effectively sold illusory or materially impaired coverage. Policyholders paid premiums based on one understanding of coverage, while State Farm secretly intended to apply a much narrower, self-serving standard. E. Fraudulent Claim Denials and Underpayments 34. The Attorney General identifies the harm to numerous Oklahoma policyholders as proof of the "pattern of racketeering activity" required by ORICO. Their experiences demonstrate the scope and magnitude of State Farm's enterprise-wide scheme. 35. After hail and wind storms, Oklahoma homeowners who purchased State Farm policies submitted claims for roof and related damage. As part of the Hail Focus Initiative, State Farm handled many such claims through a common set of deceptive tactics. These tactics included re-characterizing hail impacts as wear and tear, blistering, granular loss, or other non-covered conditions despite clear temporal and physical evidence of a recent storm; invoking pre-existing damage or the age of the roof to deny claims, even where the roof had not leaked or shown problems before the storm and had been treated as insurable when the policy was issued or renewed; and limiting repair scopes or estimates to minor components (such as spot repairs, vents, or gutters) while ignoring widespread damage that would require full replacement. 36. Claim denials and underpayments were communicated to policyholders in letters and estimates transmitted by mail or electronic means. Those communications often stated or implied that the denial was required by the policy terms or based on an objective lack of hail damage, when in truth the outcome was driven by undisclosed internal standards and financial targets. F. The Enterprise 37. At all times relevant to this Petition, State Farm, its captive insurance agents, and co-conspirator engineering firms, were members of an organization (the "Denial Enterprise") whose members and associates engaged in, among other activities, fraud, false representation, and unfair and deceptive trade practices. 38. The Denial Enterprise, including its leadership, its captive agencies, and its hired vendors, constituted an "enterprise," as defined by 22 O.S. § 1402(6) and related Oklahoma statutes, that is, a group of individuals and entities associated in fact, although not a single legal entity. The Denial Enterprise constituted an ongoing organization whose members and associates functioned as a continuing unit for a common purpose of achieving the objectives of the Enterprise. 39. State Farm was the leader of the Denial Enterprise, and directed other members and associates of the Denial Enterprise, including individual agents and distinct legal entities serving as captive agencies in carrying out unlawful and other activities in furtherance of the conduct of the Denial Enterprise's affairs. State Farm developed definitions designed to reduce indemnity claims, specifically the Hail Focus Initiative, and directed the implementation of these restrictive definitions through the Denial Enterprise. G. Purpose of the Denial Enterprise 40. The purpose of the Denial Enterprise was the enrichment of the members and associates of the Denial Enterprise through, among other things, the sale of insurance policies under false pretenses and the retention of premiums that should have been paid out as indemnity. The Denial Enterprise aimed to grow, protect, and preserve the power, profits, and market share of its members and associates through the systematic denial of valid claims and the underpayment of losses. The Denial Enterprise sought to promote and enhance the activities of its members and associates by marketing coverage to consumers while internally utilizing claims-handling practices designed to minimize payouts on valid claims. H. Means and Methods of the Denial Enterprise 41. Members and associates of the Denial Enterprise employed numerous means and methods to conduct and participate in the affairs of the Enterprise. First, they committed, conspired, and attempted to commit acts of fraud and false representation to protect and expand the Enterprise’s financial operations, including marketing homeowners insurance policies that State Farm did not intend to honor as represented. Members and associates of the Denial Enterprise committed, conspired, and attempted to commit acts of fraud and false representation to protect and expand the Denial Enterprise's financial operations, including the marketing of policies State Farm did not intend to honor as represented. 42. Members and associates of the Enterprise functioned as distinct legal persons who ensured policy placement and consumer engagement, thereby facilitating the scheme by marketing and renewing policies under false pretenses. These actors knowingly promoted full replacement coverage while concealing that State Farm had internally adopted restrictive, undisclosed standards that would dramatically limit claim payments. 43. In furtherance of the scheme, members and associates of the Enterprise also utilized co-conspirator engineering firms to produce outcome-oriented reports and redefined damage criteria designed to justify the denial or reduction of indemnity claims under the "Hail Focus Initiative." These engineered assessments provided the pretext necessary to label hail impacts as non-covered conditions such as wear, blistering, or installation defects. 44. Finally, members and associates of the Enterprise systematically denied or underpaid hail and wind claims to curtail roof claim payments regardless of actual coverage or loss. Through this coordinated course of conduct, the Denial Enterprise defrauded Oklahoma consumers, deprived them of the insurance benefits for which they paid, and generated substantial unlawful financial gains for State Farm. I. The Racketeering Violation 45. From at least in or about 2020, up to and including the present, in the State of Oklahoma and elsewhere, State Farm, being a person employed by and associated with the Enterprise, engaged in, directly and indirectly, the conduct of the affairs of that enterprise through a pattern of racketeering activity. 46. The pattern of racketeering activity, as defined in 22 O.S. § 1402(5), consisted of multiple and interrelated instances of OCPA violations and violations of the Oklahoma Computer Crimes Act, 21 O.S. § 1951. et seq., including but not limited to: a. On two or more occasions, knowingly made or caused false representations or promises regarding insurance coverage, with intent not to sell or provide it as advertised which constitutes an unlawful, chargeable, and/or indictable felony acts under 15 O.S. § 753(9); and b. On two or more occasions, committed unfair and deceptive acts which are unlawful, chargeable and/or indictable felony acts as defined in 15 O.S. § 752(13) and prohibited under 15 O.S. § 753(21). c. On two or more occasions used of a computer, computer system, and/or computer network for the purpose of devising and executing a scheme to defraud or deceive by means of false or fraudulent pretense or representation which constitutes an unlawful, chargeable, and/or indictable felony act under 21 O.S. 1953(A). 47. These acts share the same or similar purposes, results, participants, victims, and methods of commission, and are not isolated events. As a direct result of the Enterprise operation, victims have suffered substantial economic harm, including unpaid insurance benefits and consequential property damage. J. Public Harm and Market Impact 48. The Denial Enterprise has caused significant public harm to individual homeowners having been deprived of the insurance benefits for which they paid, leaving them to shoulder the cost of roof replacements and related repairs or to live under damaged, leaking roofs. 49. The Denial Enterprise has caused significant harm to the aggregate Oklahoma economy as funds that should have been injected into repairs and construction were retained by State Farm instead. 50. The Attorney General alleges that the pattern of conduct is ongoing and likely to continue absent judicial intervention, particularly in future hail and wind seasons. 51. The Attorney General brings this action on behalf of the general public and the State of Oklahoma itself, not on behalf of any individual insured, group of insureds, or putative class of private claimants. The Attorney General brings this action in the general public's interest seeking to address violations of consumer laws for the benefit of the general public and the protection of the Oklahoma insurance marketplace. The State has a sovereign interest in the economic well-being of its residents and in the integrity and stability of its homeowners' insurance markets. V. CAUSES OF ACTION Count I: Violations of the Oklahoma Consumer Protection Act 52. The Attorney General re-alleges and incorporates by reference the preceding paragraphs as though fully set forth herein. 53. State Farm is a "person" engaged in commerce within the meaning of 15 O.S. § 752(1). Oklahoma homeowners who purchased State Farm homeowners policies for personal, family, or household purposes are "consumers" under 15 O.S. § 752(2). The marketing, sale, and administration of homeowners insurance policies constitute "consumer transactions" within the meaning of § 752(2). 54. In the course of these consumer transactions, State Farm engaged in multiple unlawful practices in violation of the Oklahoma Consumer Protection Act, as detailed above. These practices include advertising or offering the subject of a consumer transaction with the intent not to sell or furnish it as advertised, in violation of 15 O.S. § 753(9). State Farm marketed and sold homeowners policies as providing full replacement cost coverage for hail and wind damage while internally intending not to provide such coverage and instead relying on undisclosed internal standards to deny or limit claims. 55. State Farm also committed unfair or deceptive trade practices as defined in 15 O.S. § 752(13) and prohibited by 15 O.S. § 753(21). Its conduct included deception, fraud, false pretenses, false promises, misrepresentations, and the knowing concealment and omission of material facts in connection with both the sale of insurance and the processing of claims. This deceptive conduct consisted of concealing the existence and effect of the Hail Focus Initiative and the use of extra-contractual internal criteria; misrepresenting to policyholders that hail-damaged roofs exhibited only wear and tear or other uncovered causes despite knowing or having reason to know that hail caused the loss; failing to disclose material limitations and internal standards at the time of sale and renewal while relying on those undisclosed standards to deny claims; and using outcome-oriented engineering or inspection reports to manufacture a pretext for denial or underpayment of valid claims. 56. State Farm's unfair, deceptive, and unlawful practices were willful or, at minimum, committed with knowledge or reason to know of their deceptive nature. Management deliberately designed the Hail Focus Initiative to mislead policyholders about the scope of coverage and to reduce claim payments. 57. These unlawful practices occurred in trade or commerce and affected the public interest. They were not isolated incidents but part of a company-wide and ongoing scheme impacting numerous Oklahoma residents. 58. As a result of State Farm's unlawful practices, Oklahoma consumers have suffered ascertainable losses of money and property, including but not limited to: premiums paid for coverage not delivered as represented, the cost of roof repairs and replacements that should have been covered, diminished property values, and consequential damages. 59. The Attorney General brings this claim under his enforcement authority, including the authority to act under the OCPA, to obtain injunctive relief, restitution, damages, civil penalties, and costs and attorneys' fees. Count II: Violations of the Oklahoma Racketeer-Influenced and Corrupt Organization Act 60. The Attorney General re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein. 61. At all times relevant to this Petition, State Farm, together with captive agents, their agencies, third-party engineering firms, and related vendors formed an "association-in-fact" enterprise within the meaning of 22 O.S. § 1402(6) referred to as the Denial Enterprise. The members of the Denial Enterprise can be defined apart from the predicate acts as separate individuals or operating entities. 62. The common purpose of the Denial Enterprise is to maximize profits for State Farm by systematically denying or underpaying valid property damage claims through the implementation of the Hail Focus Initiative. This purpose is achieved by collecting premiums for coverage while adjudicating claims under restrictive, undisclosed standards, thereby depriving Oklahoma policyholders of the benefits of their insurance contracts. 63. Under 22 O.S. § 1403(A), it is unlawful for any person employed by or associated with an enterprise to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity. State Farm violated this provision. 64. State Farm is a “person” for the purpose of Oklahoma Racketeer-Influence and Corrupt Practices Act because State Farm is a corporate entity within the meaning as defined by 22 O.S. § 1402(7). 65. State Farm and other members of the Denial Enterprise conducted the affairs of the Denial Enterprise through a “pattern of racketeering activity” as defined in 22 O.S. § 1402(10), engaging in at least two acts of racketeering activity within the requisite time period. These acts are related by their common purpose, reducing indemnity severity, and method of commission, fraudulent denial of hail claims and include: willful false representations in violation of 15 O.S. § 753(9); willful unfair and deceptive practices in violation of 15 O.S. § 753(21); and knowingly and willfully used a computer, computer system, and computer network for the purpose of devising and executing the fraudulent scheme described herein, in violation of 21 O.S. § 1953(A)(2). 66. As a direct and proximate result of State Farm’s racketeering acts, numerous Oklahoma consumers have been injured in their business or property. Policyholders suffered monetary losses when valid claims were wrongfully denied or underpaid and were forced either to fund roof repairs and related damage out-of-pocket or to endure diminution in property value due to unrepaired damage. Consumers also paid premiums for coverage materially more robust than what State Farm actually intended to provide, thereby overpaying for illusory or substantially impaired coverage. 67. State Farm agreed and combined with these co-conspirators to implement the Hail Focus Initiative and related practices. Count III: Violations of the Oklahoma Deceptive Trade Practices Act 68. The Attorney General re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein. 69. In the course of its business, State Farm knowingly made false or deceptive representations as to the characteristics, uses, and benefits of its homeowners’ policies. 70. In the course of its business, State Farm advertised goods or services which differ from those offered for sale in the advertisements. 71. As a corporation, State Farm is a “person” within the meaning of the Oklahoma Deceptive Trade Practices Act. 72. The Attorney General brings this claim under his authority to enforce public rights and protect the health, safety, and economic well-being of Oklahoma residents who purchased State Farm homeowners policies and were subjected to State Farm’s systematic misrepresentations and widespread, market-wide harms that individual lawsuits cannot adequately address. Count IV: Civil Conspiracy 73. The Attorney General re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein. 74. State Farm knowingly entered into an agreement and combination with non-party captive agents, their agencies, and other associated entities to accomplish unlawful objectives or to accomplish ostensibly lawful objectives by unlawful means, including violating the OCPA through deceptive marketing and claims practices; and engaging in fraudulent claim-handling practices to avoid paying covered hail and wind claims. 75. The conspirators formed and executed this agreement by, among other things, adopting and implementing the Hail Focus Initiative, concealing internal standards, misrepresenting coverage at sale and renewal, and coordinating claim denials based on pretextual rationales. 76. Numerous overt acts were committed in furtherance of the conspiracy, including each sale or renewal of a policy under false pretenses, each application of undisclosed internal standards to deny or diminish claims, and each specific claim denial or underpayment premised on false statements or material omissions. 77. State Farm is liable for the full extent of damages and equitable relief caused by the conspiracy, regardless of the degree of participation by any individual co-conspirator. Count V: Unjust Enrichment 78. The Attorney General re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein. 79. By virtue of the conduct described herein, State Farm has been unjustly enriched at the expense of the Oklahoma economy and the Oklahoma homeowners insurance market. State Farm collected and retained substantial premiums for homeowners insurance policies marketed as providing full replacement cost coverage for hail and wind damage, while internally intending to restrict or deny such coverage and thereafter wrongfully denying or underpaying valid claims. 80. State Farm also retained the financial benefits affecting the Oklahoma homeowners insurance market and Oklahoma economy by reducing claim payments achieved through its deceptive Hail Focus Initiative and related claims-handling practices, including the savings from roof replacements and related repairs that should have been paid but were not. 81. Under principles of equity, State Farm should not be permitted to retain these ill-gotten gains. Equity requires that State Farm disgorge the value of improperly retained premiums and unpaid benefits attributable to the scheme and that such funds be restored to remedy the public harm. VI. PRAYER FOR RELIEF WHEREFORE, Intervenor-Plaintiff, State of Oklahoma ex rel. Oklahoma Attorney General, prays for judgment in its favor and against State Farm as follows: a. A declaration that Defendant's conduct as alleged herein violates the Oklahoma Racketeer-Influenced and Corrupt Organizations Act (22 O.S. §§ 1401-1419) and the Oklahoma Consumer Protection Act (15 O.S. §§ 751-764.1), and that such conduct constitutes fraud and deceit upon Oklahoma consumers. b. A permanent injunction restraining Defendant, its officers, agents, employees, and all persons acting in concert with them from engaging in the unlawful practices described above. c. All appropriate orders under 22 O.S. § 1409 to dismantle the racketeering enterprise and prevent its re-occurrence. d. An award of restitution for the harm caused to the Oklahoma public and disgorgement of State Farm's ill-gotten gains. e. An award of statutory damages as permitted by ORICO and/or OCPA. f. Imposition of civil penalties. g. An award of reasonable attorney's fees, investigative costs, and litigation costs incurred in this action. h. Awarding pre-judgment and post-judgment interest on all monetary awards as permitted by law. i. Such other and further relief as this Court deems just and proper. Respectfully submitted, GENTNER DRUMMOND OKLAHOMA ATTORNEY GENERAL Christopher J. Campbell Cameron R. Capps, OBA No. 32742 Deputy Attorney General Christopher J. Campbell, OBA No. 33649 Assistant Attorney General 313 NE 21st Street Oklahoma City, Oklahoma 73105 Telephone: (405) 522-3060 Facsimile: (405) 521-3921 Email: [email protected] [email protected] Underwriting Basics Underwriting Philosophy To assure continued financial stability and competitive rates, the agent and underwriter must carefully select the business we write. The business must be properly insured to value, have an acceptable loss history, be well maintained, have a roof in good repair, and must meet all the requirements outlined in this guide. In addition, the Residential Lines Insurance Risk Model (RLIRM) is a risk-measuring tool developed by the company to aid in the selection of quality new business. See the reference section of this guide for additional information regarding this underwriting tool. Recognizing that terms such as "properly," "well," "excellent," and "good" are subjective, specific guidance relative to the requirements exist throughout the following material. To the extent that any guideline in this manual is in conflict with the applicable state law, the law of the state will apply. Principles Supported As a matter of company policy, State Farm fully supports these principles: (1) No request for Homeowners insurance will be denied and no policy canceled or non-renewed solely because of age of a residence, location of a residence (unless in an area of inadequate fire protection or an area of excessive risk of loss including losses from a catastrophic event such as a hurricane or earthquake), type of construction (brick or frame), because another insurer declined, canceled, or non-renewed insurance, or because the applicant was insured by a FAIR Plan or other residual plan; (2) In no case will Homeowners insurance be denied because of age, sex, race, color, religion, sexual orientation, handicap or disability, national origin or familial or marital status of the owner or residents of the dwelling; (3) In all cases, eligible business will be offered with terms most favorable (broadest coverage and lowest premium) to the policyholder. Personal Inspection The agent or authorized staff is required to inspect all new dwelling business, including new dwellings for current customers. If Xactware's Insurance to Value system is being used to assist a customer with an estimate of the dwelling's replacement cost, the inspection should be used to obtain or verify information about the size and features of the home. The agent is our front line underwriter. In addition to assisting the agent with gathering information for use of the Xactware tool, the personal inspection is also the agent's opportunity to obtain photographs required elsewhere in this guide and ensure the property is properly maintained and meets all property and liability insurance underwriting requirements. C. The dog demonstrates high levels of anxiety of temperament (e.g. the dog growls, takes an aggressive posture, has to be restrained, etc.). D. Your underwriter may require evaluation by a professional dog trainer or behavioral specialist. Note: Some governmental entities require that the entity be named as an additional insured. It is unacceptable to name these entities as additional insureds because of the ownership of a certain type of dog. A Certificate of Insurance indicating liability insurance is in force covering ownership of a dog may be acceptable. If the applicant owns a dog for which a certificate is required, send the request to the Operations Center with bite history, temperament, training and breed of the dog. Other Animals Do not bind if: A. The animal is a wild animal. B. The animal is not kept in a secured enclosure. C. The animal comes from outside the United States and was brought into the country illegally without proper permits, inspection and quarantine period. Peril Based Underwriting Standards Water Water leaks and the mold and fungus that may ensue can cause serious damage to the exterior and interior of dwelling structures and personal property. Any evidence of prior or ongoing water damage or excess moisture, especially in the interior of the dwelling, indicates the need for a thorough inspection of the dwelling, inside and out. Timely, ongoing maintenance of the structure and utility systems is essential to reducing the potential for loss. Any risk with evidence that one or more of the following conditions are present must be submitted on a non-binding basis. When possible, mitigation or elimination of a hazard is preferred. If a condition exists but has been eliminated or mitigated, coverage may be bound. Please provide details. Exterior Roofs Improperly maintained roofs increase the potential for loss. Risks with damaged or deteriorated roofs are unacceptable. A visual inspection will allow assessment of the roof condition. A physical inspection by a licensed contractor may be required by Underwriting. Areas of concern include: A. Composition shingles that are worn, curling, cracked, damaged, missing, or have significant granule loss, blisters or nail pops. B. Wood roofing products with mold/decay; splitting or curling shingles. C. Flat roof exhibiting tears, blisters, patches, ponding, or deterioration. D. Algae, moss, mildew, fungus/mold or other growths on any type of roof. E. Clogged gutters, downspouts damaged, missing, deteriorated or not directed away from the structure. F. Flashing or singles missing, damaged, torn or buckling around roof penetrations. G. Soffits and fascia that are damaged, decayed, or stained. H. Lack of attic ventilation (no roof vents, gable end or soffit vents). Damaged or clogged soffit and ridge vents. I. Stains or peeling paint at cornices and overhangs (possible evidence of ice dam damage). Siding and foundation: Evidence of exterior water damage or building damage or deterioration that increases the potential for loss. A. Damaged, decayed, stained or missing exterior siding. Cracks or other openings in the exterior cladding (brick veneer, stucco, siding, etc.) that could allow moisture to accumulate behind cladding and cause damage. B. Cracks or missing/damaged seals around doors including garage doors, windows and other exterior wall openings. C. Inadequate clearance between bottom of exterior siding and foundation grading. Grading not sloped away from the foundation. D. Inadequate clearance between the dwelling and landscaping or other materials that attract insects or cause the exterior to deteriorate. E. Landscaping irrigation or sprinkler system not directed away from the dwelling and foundation. F. Cracks in foundation bricks or mortar or non-continuous foundation that permit moisture, insects, or vermin entry into the structure. Interior Plumbing system Inspection Process Use this job aid to inspect property before binding coverage. Overview Before binding new Fire business, an inspection of the property is necessary. The inspection serves two purposes. Since our agents are the front line underwriters, an inspection provides an opportunity for the agent to see the property before we provide coverage. During the inspection, the agent should verify that the property meets our underwriting eligibility guidelines. The inspection also provides an opportunity to obtain or verify building characteristics used for estimating the replacement cost of the property. As you will learn in your Insurance to Value (I.V.) readings, information necessary to estimate the replacement cost of the property is best obtained during the personal inspection of the risk. Using information directly from a real estate listing, county tax records, etc. may result in an inaccurate estimate. Inspection Times At State Farm, we typically inspect risks at one of two different times: • When written as New Business. • When completing a Reinspection. New Business Inspections New Business should always be inspected at the time of the original application for insurance prior to binding coverage. Reinspections Reinspections occur sometime after the Fire business has been on the books. Over time, some risks may become ineligible or there may be a change to the property due to remodeling and/or additions. The reinspection process is also a great opportunity to keep in touch with our customers and provide "added value" service by reviewing their insurance needs. Tools Available for Fire Inspections Following is a list of tools needed for an inspection: • Estimating (I.V.) tool • Camera • Tape Measure or Roto-Rule • Inspection/Reinspection Worksheets • Solid Fuel Checklist Inspection Process Inspection Process When completing an inspection, it is important to inspect the interior of a risk as well as the exterior. There are several things to keep in mind. Two critical ones follow: • Correct square footage – Using the tape measure or Roto-Rule, measure the total square footage of the home. • Roof Inspections – Evaluate the potential for future roof problems due to old wood and/or worn roofs. Prior unrepaired damage or deterioration are serious concerns. This can impact future loss payments. Interior Inspection An interior inspection can provide you with good information about the customer and their personal property values (a possible need for a Personal Articles Policy) as well as allow you an opportunity to complete the "utility" inspection of wiring, plumbing, and heating systems. The interior inspection is also the best way to identify 'specialty rooms' and the other interior features of the home, such as hardwood or marble floors and masonry fireplaces. 'Specialty rooms' are rooms intended, designed, and constructed for a specific purpose or function, such as a den, great room, library, or sunroom. Just remember, 'specialty rooms' are one of the important items used to establish the proper Residence Type of the home. Missing or incorrectly identifying 'specialty rooms' will lead to inaccurate replacement cost estimates. Property Surveys It is important for the agent to personally survey the insured property. This survey determines if the prospect qualifies for State Farm insurance as well as proper Insurance to Value (I.V.) information and other coverage needs. Coverage should not be bound until the agent has surveyed the premises and verified that the prospect does qualify. When the agent makes a premises survey: • Note the overall appearance and maintenance of the property. • Take a front and rear photograph of the property to help the Operations Center underwriter evaluate the property. • Check for proper fusing. Make sure the wiring, heating, and plumbing are in good condition and properly maintained. • If a wood stove has been installed, it must meet our underwriting criteria. A Solid Fuel checklist needs to be completed and photographs of the wood stove need to be submitted with the application. Refer to PLM for information regarding wood stoves. • Accurately measure the building so adequate I.V. can be determined. • Point out any hazards that make the property unacceptable for State Farm Insurance. • Suggest proper locks, smoke alarms, and fire extinguishers not only for loss prevention but also to obtain additional premium credits for the customer. Inspection Process Potential Concerns While inspecting the property, keep an eye out for potential liability exposures. Following is a list of some common liability exposures: • Swimming pools not properly fenced or secured • Gutters, downspouts, chimneys, or retaining walls that are loose • Broken or missing siding, roofing, or doors • Broken, sagging, or unsupported stairs or steps • Cracked sidewalks or holes in driveways (possible tripping hazard) • Dead trees which may fall and cause damage to property of others • Debris in yard (lack of pride of ownership) • Over-fused wiring, frayed insulation, improper splicing or excessive use of extension cords • Improperly installed or improperly maintained heating system • No central heating system in the building • Wood burning stoves • Unrepaired damage • Inoperable vehicles • Animals Other Concerns Some other concerns you may identify are: • Illegal business conducted on the premises (not insurable) • Legal business conducted on the premises (may require an endorsement or additional policy) • Homes now occupied by tenants as rental property • Multiple-family occupancy • Signs of vacancy or non-occupancy • Adjacent exposure concerns • Located more than ten miles from a fire department (The specified number of miles varies from state to state.) • Located on unpaved or inaccessible roads • Isolated, with no other homes visible from the dwelling • Hazardous storage of such things as flammable or waste materials Summary Inspections and reinspections help State Farm stay current with the risks we insure. By properly inspecting each risk prior to binding coverage and by following the reinspection schedule of your zone, we can insure that each and every risk State Farm insures is properly insured. IN THE DISTRICT COURT OF ROGERS COUNTY STATE OF OKLAHOMA DONNIE STELLING AND ) LINDSEY STELLING, husband ) and wife, ) ) Plaintiffs, ) vs. ) ) CASE NUMBER ) CJ-2020-329 GRANT GINGERICH, an ) individual, and STATE FARM ) FIRE AND CASUALTY COMPANY, ) Defendants. ) * * * * * VIDEOCONFERENCE DEPOSITION OF RICHARD HSIUNG TAKEN ON BEHALF OF THE PLAINTIFFS ON AUGUST 9, 2022 IN RICHARDSON, TEXAS * * * * * (VIA ZOOM) REPORTED BY: MELINDA R. NIEVEZ, CSR, RPR, CRR issuance, by a vendor. Agents may be asked to follow up for compliance with the requirements after the policy is issued. So as a front line underwriter, you know, they're -- they're obtaining the information. And, for example, if the insured says they have 20 claims, as a front line underwriter, I mean, they can, you know, let them know, you know, what the concerns are regarding their -- their claims. Or if they were -- you know, the insured says, yeah, I had a water claim. There was unrepaired damage. You know, that is information that the agent may ask more questions and, you know, provide the company with additional information regarding the underwriting criteria when they submit the application. Q Okay. Now back to my question. My question was simply, does State Farm consider its agents their front line underwriters? A Per se, yes. They are our front line underwriters. Q And then you went on in your answer and you read from an Agent Role paragraph, did you not, in Exhibit 3? A The first paragraph, yes. A I do recall seeing the Underwriting Philosophy before. Q And this would be in the timeframe that was responsive to what the Court ordered for you to be on, wouldn't it? A (No response.) Q Wouldn't it? January 1, 2017? A Hold on one second. Q Is January 1, 2017, within the timeframe that the Court allowed, five years to when the policy was incepted in 2019? A Yes. That would be in the timeframe from 2014 to -- Q And according to this document, under "Underwriting Basics." So I guess this is just the basics of underwriting -- State Farm's Underwriting Philosophy, it states, quote, "To assure continued financial stability and competitive rates, the agent and underwriter" -- that's you -- "must carefully select the business we write." Is that a true statement? A (No response.) Q Is that a true statement? A That's stated in the Underwriting Guidelines. Q I know that. I'm asking you, as the corporate designee, if that's a true statement in your opinion. A Yes. Q "The business must be properly insured to value." Is that a true statement? A Yes. Q "Must have an acceptable loss history, be well-maintained, have a roof in good repair." Are those true statements? A In general, yes. Q "And must meet all the requirements outlined in this guide." "In addition, the Residential Lines Insurance Risk Model (RLIRM) is a risk-measuring tool developed by the company to aid in the selection of quality new business." Did I read that correctly? A Yes. Q Do you still use RLIRM? A I don't -- I don't know. Q But you're the corporate designee on underwriting. How could you not know? MS. McNEER: Object to the form. THE WITNESS: I don't know. Q (BY MR. MARR) Have you stopped at State Farm using the Residential Lines Insurance Risk Model? MS. McNEER: Object to the form. THE WITNESS: Yes. I mean, being that it's no longer in our guidelines, I would assume that it is no longer being used. Q (BY MR. MARR) Okay. Well, I don't want you to assume. I want you to tell me, as State Farm, whether or not you still use the Residential Lines Insurance Risk Model. A I don't know. Q Why didn't you mention it before? MS. McNEER: Object to the form. THE WITNESS: I don't know. I don't know. Q (BY MR. MARR) Turn to Bates 365. It specifically talks about exterior roofs. Quote, "Improperly maintained roofs increase the potential for loss." Is that a true statement? A Can you make it a little bit larger, so I can see it? Q Absolutely. Can you see it now? A Yes. Q Is it a true statement here that State Farm contends that "Improperly maintained 1 roofs increase the potential for loss"? 2 A Yes. 3 Q From an underwriting standpoint, as the 4 corporate designee on underwriting, is it true that 5 risks with damage or deteriorated roofs are 6 unacceptable? 7 MS. McNEER: Object to the form. 8 THE WITNESS: Yes. That's what it states 9 in the Underwriting Guideline. 10 Q (BY MR. MARR) Well, is that a true 11 statement? Do you agree with that, as the corporate 12 designee on underwriting for State Farm? 13 A I believe it's a statement, "risks with 14 damage or deteriorated roofs are unacceptable." So 15 it's saying that it is unacceptable to State Farm. 16 Q And as the corporate designee on 17 underwriting, is that correct? 18 A That is the guideline of -- that is 19 stated, yes. 20 Q No. Is that correct? Is that still 21 State Farm's position, that risks with damage or 22 deteriorated roofs are unacceptable? 23 MS. McNEER: Object to the form. 24 THE WITNESS: Yes. 25 Q (BY MR. MARR) Is it State Farm's IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA NATHANIEL NEILL and ) ALICIA NEILL, ) Plaintiffs, VS. ) STATE FARM AND CASUALTY COMPANY, et al., ) Defendants. CASE NUMBER: CIV-13-627-D ********************************************** ORAL/VIDEO DEPOSITION OF KENNETH KWOK JULY 2, 2015 ********************************************** CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER ORAL DEPOSITION OF KENNETH KWOK, produced as a witness at the instance of the Plaintiffs, was duly sworn, was taken in the above-styled and numbered cause on the JULY 2, 2105, from 9:48 a.m. to 2:38 p.m., before Chris Carpenter, CSR, in and for the State of Texas, reported by machine shorthand, at the offices of Regus USA, 7000 N. MoPac Expressway, 2nd Floor, Austin, Texas 78731, pursuant to the Federal Rules of Civil Procedure and the provisions stated on the record or attached hereto. Exhibit 11 A. The agents do have a role in kind of what we consider to be a front-line underwriter, where they will take a look at the risks to see if there are any glaring issues. If the house is dilapidated and getting ready to fall over, we expect the agent to use their position with the company to not write that risk. Q. Does the underwriting department have the -- the ability and the opportunity to do any inspection above and beyond what the agent does with the two photos? A. I think that's outside of what we're here to discuss. Q. Go ahead and answer my question. A. I think -- Q. You are the underwriting designee, are you not? A. I am, but I'm only here to talk about the calculation of the replacement cost coverage of this policy and this method of determining replacement cost valuation for homes in Oklahoma in that time frame. Q. All right. Go ahead and answer my question, your interpretation notwithstanding. MR. JONES: I'm going to instruct you not to answer the question as posed. I think it's beyond the order. MR. MARR: Okay. You understand -- Q. (By Mr. Marr) So there's not really a need to reinspect them every year? A. From what I can see, there's not a need for us to inspect the homes every single year. Q. Okay. All right. The -- you have here that the premises was inspected on September 1st, 2006. I guess that's prior to the policy being underwritten? A. That's right. Q. And that's -- that's normal protocol? A. It is. It's normal protocol for the agents to go out to the premises -- well, agent or their team members to go out to the premises, take some photos and take a look at the exterior. Q. Okay. And why do you ask about -- why was the decision made to include a section in here on roof history and unrepaired damage? I mean, it seems self-explanatory, but since you're the underwriting designee, I'd like for you to confirm. A. As we discussed a little bit earlier, you know, a roof is a large part of the house. And a roof, if it is damaged, will likely continue to see damage. So we are concerned if the roof or any piece of the property is not at its utmost condition before coming to State Farm. Q. Okay. And the unrepaired damage question? A. Yeah. Yeah. If damage has not been completed on a home or completely repaired, it will continue to deteriorate at a much quicker pace than something that is already repaired and in good shape. Q. Okay. So that's something that you want to look out for because that's not the kind of risk State Farm wants to get into? A. Yeah, yeah. We are very careful about the condition issues and concerns of a home before writing the home itself. IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA NATHANIEL NEILL and ALICIA NEILL, ) ) Plaintiffs, v. ) Case No. CIV-13-627-D STATE FARM FIRE AND CASUALTY COMPANY, ) Defendant. ORDER Before the Court is Plaintiffs’ Motion to Strike the Designation of Deposition Transcript of Kenneth Kwok as Confidential [Doc. No. 115]. Plaintiffs challenge the blanket designation by Defendant State Farm Fire and Casualty Company ("State Farm") of the entire transcript of the deposition of its corporate representative, Kenneth Kwok, as confidential pursuant to the Agreed Protective Order [Doc. No. 57]. State Farm has filed a response brief [Doc. No. 119], and Plaintiffs have replied [Doc. No. 120]. The Motion is fully briefed and ripe for decision.1 Upon a joint motion of the parties, the Court entered a protective order pursuant to Fed. R. Civ. P. 26(c)(1) to govern the disclosure of documents and information that the parties later designated in good faith as constituting: a trade secret as defined by Okla. Stat. tit. 78, § 86(4); "confidential research, development, or commercial information," meaning 1 After the briefing was completed, the Court granted State Farm’s request for a stay of further discovery, including a ruling on the instant Motion, pending the disposition of State Farm’s motion for summary judgment. See Order 12/14/15 [Doc. No. 122]. The Court has now issued its summary judgment ruling. See Order 8/16/16 [Doc. No. 124]. "information that is maintained in secrecy from third parties and which would result in substantial competitive harm if publicly disclosed;" or “personal confidential information” as further defined in the order. See Agreed Protective Order [Doc. No. 57], ¶¶ 1-2. State Farm’s concern regarding the scope of the Rule 30(b)(6) deposition noticed by Plaintiffs and ordered by the Court (see Order 12/12/14 [Doc. No. 50]), led State Farm’s counsel to make a general statement at the beginning of Mr. Kwok’s deposition that it should “be placed under the auspices of the outstanding protective order.” See Kwok Dep. 4:2-6. This statement and a response by Plaintiffs’ counsel led the court reporter to state: “Well, I’m going to designate the whole thing then Confidential and y’all can de-designate what’s not confidential later.” Id. 4:20-22. State Farm’s subsequent delay in making a “de-designation” led Plaintiffs to file the instant Motion, seeking a determination that none of Mr. Kwok’s testimony should be treated as “confidential” under the Agreed Protective Order. State Farm has responded by identifying seven passages of testimony, cited by specific pages and lines of the transcript of Mr. Kwok’s deposition, for which it continues to seek protection as “confidential” under the Agreed Protective Order. See Def.’s Resp. Br. [Doc. No. 119], p.4. These seven excerpts total less than 16 pages of a deposition transcript spanning over 180 pages, and contain information about State Farm’s underwriting practices and internal procedures, including valuation tools and methods, inspection requirements, inflation provisions, and communications with policyholders. Although Plaintiffs dispute that Mr. Kwok’s designated testimony satisfies the statutory definition of a “trade secret,” the Court finds based on the nature of the testimony and the affidavit of State Farm’s employee, Greg Reichert [Doc. No. 119-1], that the designated testimony is subject to protection under the Agreed Protective Order. The "confidential" testimony of Mr. Kwok appears in portions of the deposition transcript cited as follows: 27:4-28:9; 77:4-78:2; 82:5-85:6; 86:3-94:16; 113:14-114:3; 143:11-144:25; and 149:21-149:23. The Court finds that the remainder of Mr. Kwok's deposition testimony does not contain "confidential" information and may be disclosed. IT IS THEREFORE ORDERED that Plaintiffs' Motion to Strike the Designation of Deposition Transcript of Kenneth Kwok as Confidential [Doc. No. 115] is GRANTED in part and DENIED in part, as set forth herein. IT IS SO ORDERED this 17th day of August, 2016. TIMOTHY D. DEGIUSTI UNITED STATES DISTRICT JUDGE Inspection Process Use this job aid to prepare property before binding coverage. Overview Before binding new Fire business, an inspection of the property is necessary. The inspection serves two purposes. Since our agents are the front line underwriters, an inspection provides an opportunity for the agent to see the property before we provide coverage. During the inspection, the agent should verify that the property meets our underwriting eligibility guidelines. The inspection also provides an opportunity to obtain or verify building characteristics used for estimating the replacement cost of the property. As you will learn in your Insurance to Value (I.V.) readings, information necessary to estimate the replacement cost of the property is best obtained during the personal inspection of the risk. Using information directly from a real estate listing, county tax records, etc. may result in an inaccurate estimate. Inspection Times At State Farm, we typically inspect risks at one of two different times: • When written as New Business. • When completing a Reinspection. New Business Inspections New Business should always be inspected at the time of the original application for insurance prior to binding coverage. Reinspections Reinspections occur sometime after the Fire business has been on the books. Over time, some risks may become ineligible or there may be a change to the property due to remodeling and/or additions. The reinspection process is also a great opportunity to keep in touch with our customers and provide "added value" service by reviewing their insurance needs. Tools Available for Fire Inspections Following is a list of tools needed for an inspection: • Estimating (I.V.) tool • Camera • Tape Measure or Roto-Rule • Inspection/Reinspection Worksheets • Solid Fuel Checklist Inspection Process Inspection Process When completing an inspection, it is important to inspect the interior of a risk as well as the exterior. There are several things to keep in mind. Two critical ones follow: • Correct square footage – Using the tape measure or Roto-Rule, measure the total square footage of the home. • Roof Inspections – Evaluate the potential for future roof problems due to old wood and/or worn roofs. Prior unrepaired damage or deterioration are serious concerns. This can impact future loss payments. Interior Inspection An interior inspection can provide you with good information about the customer and their personal property values (a possible need for a Personal Articles Policy) as well as allow you an opportunity to complete the "utility" inspection of wiring, plumbing, and heating systems. The interior inspection is also the best way to identify 'specialty rooms' and the other interior features of the home, such as hardwood or marble floors and masonry fireplaces. 'Specialty rooms' are rooms intended, designed, and constructed for a specific purpose or function, such as a den, great room, library, or sunroom. Just remember, 'specialty rooms' are one of the important items used to establish the proper Residence Type of the home. Missing or incorrectly identifying 'specialty rooms' will lead to inaccurate replacement cost estimates. Property Surveys It is important for the agent to personally survey the insured property. This survey determines if the prospect qualifies for State Farm insurance as well as proper Insurance to Value (I.V.) information and other coverage needs. Coverage should not be bound until the agent has surveyed the premises and verified that the prospect does qualify. When the agent makes a premises survey: • Note the overall appearance and maintenance of the property. • Take a front and rear photograph of the property to help the Operations Center underwriter evaluate the property. • Check for proper fusing. Make sure the wiring, heating, and plumbing are in good condition and properly maintained. • If a wood stove has been installed, it must meet our underwriting criteria. A Solid Fuel checklist needs to be completed and photographs of the wood stove need to be submitted with the application. Refer to PLM for information regarding wood stoves. • Accurately measure the building so adequate I.V. can be determined. • Point out any hazards that make the property unacceptable for State Farm Insurance. • Suggest proper locks, smoke alarms, and fire extinguishers not only for loss prevention but also to obtain additional premium credits for the customer. Inspection Process Potential Concerns While inspecting the property, keep an eye out for potential liability exposures. Following is a list of some common liability exposures: • Swimming pools not properly fenced or secured • Gutters, downspouts, chimneys, or retaining walls that are loose • Broken or missing siding, roofing, or doors • Broken, sagging, or unsupported stairs or steps • Cracked sidewalks or holes in driveways (possible tripping hazard) • Dead trees which may fall and cause damage to property of others • Debris in yard (lack of pride of ownership) • Over-fused wiring, frayed insulation, improper splicing or excessive use of extension cords • Improperly installed or improperly maintained heating system • No central heating system in the building • Wood burning stoves • Unrepaired damage • Inoperable vehicles • Animals Other Concerns Some other concerns you may identify are: • Illegal business conducted on the premises (not insurable) • Legal business conducted on the premises (may require an endorsement or additional policy) • Homes now occupied by tenants as rental property • Multiple-family occupancy • Signs of vacancy or non-occupancy • Adjacent exposure concerns • Located more than ten miles from a fire department (The specified number of miles varies from state to state.) • Located on unpaved or inaccessible roads • Isolated, with no other homes visible from the dwelling • Hazardous storage of such things as flammable or waste materials Summary Inspections and reinspections help State Farm stay current with the risks we insure. By properly inspecting each risk prior to binding coverage and by following the reinspection schedule of your zone, we can insure that each and every risk State Farm insures is properly insured. IN THE DISTRICT COURT OF ROGERS COUNTY STATE OF OKLAHOMA DONNIE STELLING AND ) LINDSEY STELLING, husband ) and wife, ) Plaintiffs, ) vs. ) GRANT GINGERICH, an individual, and STATE FARM FIRE AND CASUALTY COMPANY, ) Defendants. ) CASE NUMBER CJ-2020-329 * * * * * VIDEOCONFERENCE DEPOSITION OF RICHARD HSIUNG TAKEN ON BEHALF OF THE PLAINTIFFS ON AUGUST 9, 2022 IN RICHARDSON, TEXAS * * * * * (VIA ZOOM) REPORTED BY: MELINDA R. NIEVEZ, CSR, RPR, CRR issuance, by a vendor. Agents may be asked to follow up for compliance with the requirements after the policy is issued. So as a front line underwriter, you know, they're—they're obtaining the information. And, for example, if the insured says they have 20 claims, as a front line underwriter, I mean, they can, you know, let them know, you know, what the concerns are regarding their—their claims. Or if they were—you know, the insured says, yeah, I had a water claim. There was unrepaired damage. You know, that is information that the agent may ask more questions and, you know, provide the company with additional information regarding the underwriting criteria when they submit the application. Q Okay. Now back to my question. My question was simply, does State Farm consider its agents their front line underwriters? A Per se, yes. They are our front line underwriters. Q And then you went on in your answer and you read from an Agent Role paragraph, did you not, in Exhibit 3? A The first paragraph, yes. A I do recall seeing the Underwriting Philosophy before. Q And this would be in the timeframe that was responsive to what the Court ordered for you to be on, wouldn't it? A (No response.) Q Wouldn't it? January 1, 2017? A Hold on one second. Q Is January 1, 2017, within the timeframe that the Court allowed, five years to when the policy was incepted in 2019? A Yes. That would be in the timeframe from 2014 to -- Q And according to this document, under "Underwriting Basics." So I guess this is just the basics of underwriting -- State Farm's Underwriting Philosophy, it states, quote, "To assure continued financial stability and competitive rates, the agent and underwriter" -- that's you -- "must carefully select the business we write." Is that a true statement? A (No response.) Q Is that a true statement? A That's stated in the Underwriting Guidelines. Q I know that. I'm asking you, as the corporate designee, if that's a true statement in your opinion. A Yes. Q "The business must be properly insured to value." Is that a true statement? A Yes. Q "Must have an acceptable loss history, be well-maintained, have a roof in good repair." Are those true statements? A In general, yes. Q "And must meet all the requirements outlined in this guide." "In addition, the Residential Lines Insurance Risk Model (RLIRM) is a risk-measuring tool developed by the company to aid in the selection of quality new business." Did I read that correctly? A Yes. Q Do you still use RLIRM? A I don't -- I don't know. Q But you're the corporate designee on underwriting. How could you not know? MS. McNEER: Object to the form. THE WITNESS: I don't know. Q (BY MR. MARR) Have you stopped at State Farm using the Residential Lines Insurance Risk Model? MS. MCNEER: Object to the form. THE WITNESS: Yes. I mean, being that it's no longer in our guidelines, I would assume that it is no longer being used. Q (BY MR. MARR) Okay. Well, I don't want you to assume. I want you to tell me, as State Farm, whether or not you still use the Residential Lines Insurance Risk Model. A I don't know. Q Why didn't you mention it before? MS. MCNEER: Object to the form. THE WITNESS: I don't know. I don't know. Q (BY MR. MARR) Turn to Bates 365. It specifically talks about exterior roofs. Quote, "Improperly maintained roofs increase the potential for loss." Is that a true statement? A Can you make it a little bit larger, so I can see it? Q Absolutely. Can you see it now? A Yes. Q Is it a true statement here that State Farm contends that "Improperly maintained roofs increase the potential for loss"? A Yes. Q From an underwriting standpoint, as the corporate designee on underwriting, is it true that risks with damage or deteriorated roofs are unacceptable? MS. McNEER: Object to the form. THE WITNESS: Yes. That's what it states in the Underwriting Guideline. Q (BY MR. MARR) Well, is that a true statement? Do you agree with that, as the corporate designee on underwriting for State Farm? A I believe it's a statement, "risks with damage or deteriorated roofs are unacceptable." So it's saying that it is unacceptable to State Farm. Q And as the corporate designee on underwriting, is that correct? A That is the guideline of -- that is stated, yes. Q No. Is that correct? Is that still State Farm's position, that risks with damage or deteriorated roofs are unacceptable? MS. McNEER: Object to the form. THE WITNESS: Yes. Q (BY MR. MARR) Is it State Farm's THE DISTRICT COURT, SIXTH JUDICIAL DISTRICT GRADY COUNTY, STATE OF OKLAHOMA STEVEN BARNETT and MARSHA BARNETT, Plaintiffs, Case No. CJ-2020-141 VS. STATE FARM FIRE & CASUALTY COMPANY ART BAIRD, TODD ROWLAND INSURANCE AGENCY INC., STEVE BREED D/B/A STEVE BREED CONSTRUCTION COMPANY., INC., Defendants. TR A N S C R I P T NOW, on this 2nd day of August, 2022, the above-entitled cause comes on for Motion for Sanctions and Motions to Enforce before the Honorable Kory Kirkland, District Judge, sitting in and for the County of Grady. REPORTED BY: Malinda L. Roy, District Court Reporter DISTRICT COURT OF OKLAHOMA - OFFICIAL TRANSCRIPT was not produced. It's a movement of the goalpost, past what was already fully answered in the interrogatory, yet here it is, here it was produced. Interrogatory Number 7, Your Honor. Another one that State Farm substantively responded to. It asked for all inspections of the property by defendants relating to the underwriting of the policy. We're complying. We're -- we're playing along. There's no question that this policy was endorsed and that there was a valid claim of a valid loss. So we're getting way far field, but we're producing that information and we went back to 2004, Your Honor. We produced the entire underwriting file. We produced the photographs that we disclosed in our answer Art Baird, the retired agent who was sued, went out to this house and he took pictures of the front and back of the risk. He put those in his underwriting file, that was the inspection that was conducted by the agent. Now, fast forward to today, that does not happen on every claim. I always talk about agents being frontline underwriters. They certainly interview their clients and rely on the information that their client's giving them, but it is no longer a requirement that everytime that the agent himself has to go out there and take a picture of a risk. More times than not, there's not that type of evidence of inconsistent discovery results that in one case, in this case, there has been denials that things exist, that appear in other cases. That is -- that is odious to my sense of justice. And it's my job as a judge to make sure that we have a discovery system with some kind of teeth, some way to ensure justice. And a fundamental principle of justice is that -- that similarly situated individuals are treated in a similar manner. It's axiomatic. And it's not what's happened in this case. That disappoints me. So here's what I'm gonna do, I am going to order number one, that the dropdown index which was requested at the beginning of this -- this hearing will be turned over as a -- as a rubric that can be used to identify basic systems of compliance. I also am going to order that an actual State Farm employee be designated as to having relevant knowledge as to the acquisition of discovery. And I do think that it will be appropriate to take limited depositions of those employees just to ascertain the due diligence methods of complying with that discovery. Not work product, but due diligence methods. What -- what type of key word search was punched in here, that type of stuff. I don't like this additional layer of the discovery IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA NATHANIEL NEILL and ALICIA NEILL, Plaintiffs, VS. STATE FARM AND CASUALTY COMPANY, et al., Defendants. CASE NUMBER: CIV-13-627-D ORAL/VIDEO DEPOSITION OF KENNETH KWOK JULY 2, 2015 CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER ORAL DEPOSITION OF KENNETH KWOK, produced as a witness at the instance of the Plaintiffs, was duly sworn, was taken in the above-styled and numbered cause on the JULY 2, 2105, from 9:48 a.m. to 2:38 p.m., before Chris Carpenter, CSR, in and for the State of Texas, reported by machine shorthand, at the offices of Regus USA, 7000 N. MoPac Expressway, 2nd Floor, Austin, Texas 78731, pursuant to the Federal Rules of Civil Procedure and the provisions stated on the record or attached hereto. A. The agents do have a role in kind of what we consider to be a front-line underwriter, where they will take a look at the risks to see if there are any glaring issues. If the house is dilapidated and getting ready to fall over, we expect the agent to use their position with the company to not write that risk. Q. Does the underwriting department have the -- the ability and the opportunity to do any inspection above and beyond what the agent does with the two photos? A. I think that's outside of what we're here to discuss. Q. Go ahead and answer my question. A. I think -- Q. You are the underwriting designee, are you not? A. I am, but I'm only here to talk about the calculation of the replacement cost coverage of this policy and this method of determining replacement cost valuation for homes in Oklahoma in that time frame. Q. All right. Go ahead and answer my question, your interpretation notwithstanding. MR. JONES: I'm going to instruct you not to answer the question as posed. I think it's beyond the order. MR. MARR: Okay. You understand -- Q. (By Mr. Marr) So there's not really a need to reinspect them every year? A. From what I can see, there's not a need for us to inspect the homes every single year. Q. Okay. All right. The -- you have here that the premises was inspected on September 1st, 2006. I guess that's prior to the policy being underwritten? A. That's right. Q. And that's -- that's normal protocol? A. It is. It's normal protocol for the agents to go out to the premises -- well, agent or their team members to go out to the premises, take some photos and take a look at the exterior. Q. Okay. And why do you ask about -- why was the decision made to include a section in here on roof history and unrepai red damage? I mean, it seems self-explanatory, but since you're the underwriting designee, I'd like for you to confirm. A. As we discussed a little bit earlier, you know, a roof is a large part of the house. And a roof, if it is damaged, will likely continue to see damage. So we are concerned if the roof or any piece of the property is not at its utmost condition before coming to State Farm. Q. Okay. And the unrepair ed damage question? A. Yeah. Yeah. If damage has not been completed on a home or completely repaired, it will continue to deteriorate at a much quicker pace than something that is already repaired and in good shape. Q. Okay. So that's something that you want to look out for because that's not the kind of risk State Farm wants to get into? A. Yeah, yeah. We are very careful about the condition issues and concerns of a home before writing the home itself. IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA NATHANIEL NEILL and ALICIA NEILL, ) Plaintiffs, ) v. ) STATE FARM FIRE AND CASUALTY COMPANY, ) Defendant. Case No. CIV-13-627-D ORDER Before the Court is Plaintiffs’ Motion to Strike the Designation of Deposition Transcript of Kenneth Kwok as Confidential [Doc. No. 115]. Plaintiffs challenge the blanket designation by Defendant State Farm Fire and Casualty Company ("State Farm") of the entire transcript of the deposition of its corporate representative, Kenneth Kwok, as confidential pursuant to the Agreed Protective Order [Doc. No. 57]. State Farm has filed a response brief [Doc. No. 119], and Plaintiffs have replied [Doc. No. 120]. The Motion is fully briefed and ripe for decision.¹ Upon a joint motion of the parties, the Court entered a protective order pursuant to Fed. R. Civ. P. 26(c)(1) to govern the disclosure of documents and information that the parties later designated in good faith as constituting: a trade secret as defined by Okla. Stat. tit. 78, § 86(4); "confidential research, development, or commercial information," meaning ¹ After the briefing was completed, the Court granted State Farm’s request for a stay of further discovery, including a ruling on the instant Motion, pending the disposition of State Farm’s motion for summary judgment. See Order 12/14/15 [Doc. No. 122]. The Court has now issued its summary judgment ruling. See Order 8/16/16 [Doc. No. 124]. "information that is maintained in secrecy from third parties and which would result in substantial competitive harm if publicly disclosed;" or "personal confidential information" as further defined in the order. See Agreed Protective Order [Doc. No. 57], ¶¶ 1-2. State Farm's concern regarding the scope of the Rule 30(b)(6) deposition noticed by Plaintiffs and ordered by the Court (see Order 12/12/14 [Doc. No. 50]), led State Farm's counsel to make a general statement at the beginning of Mr. Kwok's deposition that it should "be placed under the auspices of the outstanding protective order." See Kwok Dep. 4:2-6. This statement and a response by Plaintiffs' counsel led the court reporter to state: "Well, I'm going to designate the whole thing then Confidential and y'all can de-designate what's not confidential later." Id. 4:20-22. State Farm's subsequent delay in making a "de-designation" led Plaintiffs to file the instant Motion, seeking a determination that none of Mr. Kwok's testimony should be treated as "confidential" under the Agreed Protective Order. State Farm has responded by identifying seven passages of testimony, cited by specific pages and lines of the transcript of Mr. Kwok's deposition, for which it continues to seek protection as "confidential" under the Agreed Protective Order. See Def.'s Resp. Br. [Doc. No. 119], p.4. These seven excerpts total less than 16 pages of a deposition transcript spanning over 180 pages, and contain information about State Farm's underwriting practices and internal procedures, including valuation tools and methods, inspection requirements, inflation provisions, and communications with policyholders. Although Plaintiffs dispute that Mr. Kwok's designated testimony satisfies the statutory definition of a "trade secret," the Court finds based on the nature of the testimony and the affidavit of State Farm's employee, Greg Reichert [Doc. No. 119-1], that the designated testimony is subject to protection under the Agreed Protective Order. The "confidential" testimony of Mr. Kwok appears in portions of the deposition transcript cited as follows: 27:4-28:9; 77:4-78:2; 82:5-85:6; 86:3-94:16; 113:14-114:3; 143:11-144:25; and 149:21-149:23. The Court finds that the remainder of Mr. Kwok's deposition testimony does not contain "confidential" information and may be disclosed. IT IS THEREFORE ORDERED that Plaintiffs' Motion to Strike the Designation of Deposition Transcript of Kenneth Kwok as Confidential [Doc. No. 115] is GRANTED in part and DENIED in part, as set forth herein. IT IS SO ORDERED this 17th day of August, 2016. TIMOTHY D. DEGIUSTI UNITED STATES DISTRICT JUDGE