Extreme weather brings huge economic responsibilities. Some insurance companies allegedly tried to avoid this responsibility.
What happened?
“State Farm is like a good neighbor, right there,” a motto that now feels disingenuous to homeowner Koteiba Azzam of Sunland Park, New Mexico. Insurance Business Journal reported that Azzam filed a federal lawsuit accusing State Farm of orchestrating a companywide strategy to underpay insurance claims.
Azzam claims State Farm’s investigation after a burst water pipe damaged his home was found to be “inadequate and unreasonable,” resulting in a lack of insurance, causing the home to fall into disrepair and causing his case to be closed prematurely.
Azzam’s lawsuit is based on allegations that State Farm and its consulting firm McKinsey & Company adopted a claims management system called “Fire ACE” that was designed to transform the claims department into a profit center.
Under this new system, State Farm would reduce payouts, incentivize agents and adjusters to deny claims, and make lawsuits by policyholders more dangerous, even escalating small claims challenges into aggressive litigation. The filing also accuses State Farm of using preset claim values instead of matching actual market values to make repairs.
Why is profit-driven claim denial important?
More extreme weather events are occurring every year across the country and around the world. Citizens need to rely on their insurance to pay, regardless of whether they are dealing with five other claims or five thousand claims at the same time.
One of the largest large-scale payouts was the Los Angeles County wildfires in January 2025. According to the California Department of Insurance, 41,892 claims have been filed with numerous insurance companies and more than $20 billion has been paid out. However, 38,916 of these claims were partial payments – approximately 93% of all claims.
Dirty fuel, also known as dirty energy, causes extreme weather and many diseases. This pollution can cause everything from asthma and lung cancer to wildfires and severe cold. If governments and businesses can address these issues head-on and reduce their reliance on dirty energy, it will make our citizens healthier, our land safer, extreme weather events rarer, and ultimately lower insurance payouts.
What actions do we take in cases where profit-driven claims are denied?
Azzam’s lawsuit against State Farm is currently pending. State Farm currently has more than 96 million active policies and accounts.
This lawsuit will draw national attention to a huge problem, inspire change across all insurance platforms, and protect more citizens from the fear of never getting the coverage they deserve.
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