With extreme weather comes great financial responsibility. Some insurance companies are allegedly attempting to skirt that responsibility.

What’s happening?

“Like a good neighbor, State Farm is there,” is a motto that now feels disingenuous to Koteiba Azzam, a homeowner from Sunland Park, New Mexico. Insurance Business Magazine has reported that Azzam filed a federal lawsuit accusing State Farm of orchestrating a company-wide strategy to underpay insurance claims.

Azzam claims that the investigation conducted by State Farm after a burst pipe damaged his house was deemed “insufficient and unreasonable,” resulting in a lack of coverage, leaving the house in disrepair, and leading to the premature closure of his case.

The basis of Azzam’s lawsuit is allegations that State Farm and its consulting firm, McKinsey & Company, adopted a claims management system called “Fire ACE,” which was a plan to turn the claims department into a profit center.

Under this new system, State Farm would reduce payouts, incentivize claim denials for agents and adjusters, and make lawsuits more treacherous for policyholders, to the point of escalating minor claim challenges to aggressive litigation. The filing also accuses State Farm of using preset claim values rather than matching actual market values for repairs.

Why are profit-driven claim denials important?

More extreme weather events are happening every year across the country and the globe. Citizens need to depend on their insurance to pay out regardless of whether they are also addressing five other claims or five thousand simultaneously.

One of the largest mass payouts was for the Los Angeles County wildfires in January 2025. According to the California Department of Insurance, 41,892 claims were filed with a myriad of insurance companies, and more than $20 billion in payments have already been paid. However, 38,916 of those claims were partial payments — roughly 93% of all claims.

Dirty fuels, also known as dirty energy, cause extreme weather and many illnesses. This pollution causes everything from asthma and lung cancer to wildfires and freezing temperatures. If governments and corporations were to address the problems head-on and reduce their dependency on dirty energy, it would make our citizens immensely healthier, our land safer, and extreme weather events rarer, ultimately reducing insurance payouts.

What’s being done about profit-driven claim denials?

Azzam’s filing against State Farm is currently active. State Farm presently has over 96 million active policies and accounts.

This lawsuit will bring national attention to a big problem, inspire change across all insurance platforms, and protect more citizens from the fear of never receiving the coverage they are owed.

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