State Farm’s claims evaluation software is flawed, says Colorado Court of Appeals

by • November 1, 2007 • UncategorizedComments Off on State Farm’s claims evaluation software is flawed, says Colorado Court of Appeals1350

By Dan Clifford, publisher

© 2007 The Medical-Legal News

The Colorado Court of Appeals recently reversed a lower court judgment and held that State Farm violated the state’s No-Fault and Deceptive Practices Acts by refusing to pay, based on what a computer database told it, “reasonable and necessary expenses” for medical costs incurred in a car wreck.

State Farm had argued that its refusal to pay submitted bills occurred because the charges were higher than comparative costs for the given geographic area. This defense hit a snafu — the treating orthopedic surgeon of the insured was the only one in the geographic area about whom data could have been compiled.

State Farm submits charges to the Medico database through the Sloans Lake Auto Injury Management program. The court noted that the use of such computer programs does not exempt an insurer from paying all reasonable expenses to the insured, and added that “…when an insurer unilaterally denies benefits it deems to be unreasonable, it assumes the risk of suits by the insured party.”

By reversing the lower court, the high court left open the possibility that class actions against State Farm are still on the table, as numerous insureds have had claims paid based on State Farm’s exclusive use of the computer database. •

(Reyher v. State Farm, No. 06CA0239, 2007).

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