Farmers Colossus Summary

Back in the 1990’s Computer Sciences Corp. of California introduced to the insurance industry an artificial intelligence computer program tool to help adjusters place values on insurance claims for personal injury. The program, called Colossus, was eagerly adopted by some of the largest insurers including Allstate, Aetna, Hartford Financial Services and Zurich Personal Injury. Colossus is currently used by about half of the insurers operating in the United States, including Farmers. But you won’t find it mentioned in any sales brochures or insurance policies. You won’t even hear that claims are being settled by computer.

Why?

Adjusters that have used the system, and have subsequently left the industry, say that the Colossus program consistently delivers value ranges that are well below what human adjusters would consider a fair settlement. This in turn, has lead to a significant increase in the number of rejections of settlement offers and a dramatic increase in the number of cases being taken to court in efforts to reach reasonable settlements.

Enter Robert Dietz and Christy Klein - two former adjusters from Farmers Insurance. Since leaving Farmers, the two have appeared as expert witnesses in lawsuits for consumers accusing their respective insurance companies of acting in bad faith in personal injury claims. Both left Farmers because they were frustrated at the company’s new cost-cutting practices (Farmers introduced the use of Colossus in March of 2000 – Dietz quit in August 2001, Klein in January the following year).

Farmers has asked a Washington state court to silence the two ex-staffers to prevent them from revealing what Farmers has called “insider information” on how the company settles claims. In it’s lawsuit, Farmers claims it “wants to ‘debrief’ the two regarding their knowledge of the Colossus computer program” – (a condition the pair subsequently agreed to).

What brought all this to a head was the fact that Dietz and Klein were scheduled to present a seminar to the Washington State Trial Lawyers Association and brief the audience on the Colossus computer program. Lawyers must attend annual “professional development” courses to retain their licenses and this seminar was expected to be very well attended – apparently to Farmers potential embarrassment.

Records filed by Farmers in their lawsuit to gag the two former employees, maintains that two months following the introduction of the program, the insurer contracted Computer Sciences Corp. to modify the program to Farmer’s specifications. Dietz, in responding to the suit, says he was one of 30 to 40 experienced claims adjusters called on by the company to participate in a “tuning session” that would set benchmark values. These values would be used to determine approximately how much the company would pay a customer who, for example, broke a leg versus the amount it would pay for a broken neck. Dietz claims that he was told these figures would then be reduced by 80 percent and entered into Farmer’s customized version of the Colossus program.

In court documents prepared for the suit, Dietz says “My vast experience in evaluating claims was replaced by values generated by a computer. More often than not, these values were not representative of what I had experienced as fair and reasonable. As such, it became difficult to settle claims, and it was at times embarrassing to even make the offer that Colossus recommended, knowing it would be rejected, and a suit would be filed.”

In Klein’s response to the suit, she alleges that “Top of the range settlement offers were often rejected by the claimant – which result in an increasing number of cases remaining open – thus increasing my pending case load. It also drove more cases into litigation in an attempt to reach a fair settlement.”

Farmers suit maintains that Dietz and Klein’s effort to share what they know about the Colossus software would breach “the duty of loyalty they owe their former employer”. Neither Dietz nor Klein, however, had ever signed a confidentiality agreement with Farmers. The Lawyer representing Dietz and Klein, Karen Koehler, states that requests for gag orders from the insurance industry claiming the spread of trade secrets are typical. “We’re always fighting them and we’re always losing,” she said. “This is what we deal with, It’s intimidating for some people.”

This would appear to be yet another example of the heavy hand of a large insurer attempting to manipulate the system in order to preserve its less than ethical practices. If someone threatens to expose the cheating and disreputable activities of the company, use the courts to hammer them into the ground like a tent pegs.

Farmers may well be “shooting itself in the foot”. By bringing this action to court, it could be forced to provide damning evidence under discovery – evidence that they are currently working so hard to keep concealed. By allowing evidence on the Colossus program (and the way Farmers has used it in an attempt to reduce claims payouts) to be entered in court (and it’s hard to see how they can successfully avoid doing so), the disclosure of this ill conceived corporate practice will take place on a far larger stage than that of the Bar Association seminar. It remains to be seen as to whether this effort will backfire on them. 

                             If you have Adobe Acrobat Reader you can read the entire case that was filed.

                                                         Farmers Colossus Case

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