We help people when insurance companies don't keep their promises.


By Mike Abourezk and Marialee Neighbours


Claims manuals and procedure guides demonstrate the procedures used by an insurance company's claim handlers. This category of discovery may include supervisor/manager manuals that describe their duties in supervising claims personnel; employee handbooks used by employees to guide their actions; documents and manuals relating to quality control audits; indexes of forms; and other manual or educational materials used in addressing claims. In addition, this category includes policy interpretation documents which describe the standards, criteria or procedures that employees use to determine the scope of insurance policy terms.

Claims manuals and procedure guides are highly relevant in a bad faith action because they often show that insurers deliberately train personnel to minimize claims and elevate the insurer's financial interests above the interests of insureds. This kind of conduct violates the "equal consideration" rule that applies to bad faith actions. Kunkel v. United Security Ins. Co., 84 S.D. 116, 168 N.W.2d 723 at 726 (S.D. Jun 11, 1969)

Insurer Misuse of Claims Manuals and Other Training Materials

Insurer mis-use of claims and other training materials is best understood by looking at specific examples. The following list outlines some of the training manuals and materials that have been used by one major property and casualty insurer, State Farm Mutual Automobile Insurance Company.
  1. In one training seminar entitled "Negotiating Skills for the Claims Professional," State Farm instructs its adjustors that "s(he) who has control of the dollars is in a position of Power! If you are in a position of power, use it! If you are in a position of no power, delay."

  2. Personnel manuals showed that State Farm creates goals for adjustors in the payment of claims. Adjustors that achieve the goals are rewarded with salary increases and bonuses.

  3. State Farm sponsored contests among claims adjustors, awarding cash prizes and trophies to those who paid the least in claims.

  4. One State Farm operations guide instructed that: "The claim superintendent should not overlook the opportunity to strengthen his file by creating self-serving correspondence."

  5. State Farm internal directives repeatedly instructed employees to destroy anything that could be used as evidence against State Farm in bad faith lawsuits.

  6. State Farm's "Auto Claim School" training manual instructs claims adjustors to "Take good notes-take pride in your workbook-keep it for six months, then destroy it."

  7. One State Farm operations manual, instructed claims personnel to ask embarrassing personal questions of claimants:
Most of us consider our income, our debts, our domestic problems, how we spend our money, whether we are keeping another women, and things of this nature to be very personal. We don't like other people asking us questions about these things, and, under normal circumstances, we don't go around asking other people those questions, however, when we're faced with what we think is a fraudulent claim or where a punitive damage count is in a lawsuit, these matters become extremely important to the successful defense of a claim. If the insured is paying the expenses of keeping some woman in an apartment, that may be extremely personal business, especially if he is married, but if he submits a claim to us, or charges that we are guilty of conduct for which we should be punished, it is also our business.


Recognizing the relevancy of claims manuals and procedure guides, courts routinely overrule insurer objections and order them produced. For instance, in Grange Mut. Ins. Co. v. Trude, the Kentucky Supreme Court ruled that the insurer's training and policy manuals were relevant in a bad faith case. 151 S.W.3d 803, 813. In that case, the court said:

The question is whether Grange's own policies, as described in the manuals, embody or encourage bad faith practices. And use of such manuals is not without precedent in our courts....Grange's training and policy manuals are relevant to Wilder's bad faith claim, and absent some sort of privilege or other showing of irreparable harm, they are discoverable.

In Champion Intern Corp. v. Liberty Mut. Ins Co., 129 F.R.D. 63 (S.D.N.Y. 1989), a federal court held that the insured was entitled to discovery of an insurer's instructions to sales personnel and claims manuals. In that case, the court reasoned:

" [W]hen dealing with a complicated organization, such as a large insurance company, knowing what the internal understanding was might inferentially have some bearing on what the external manifestation was likely to have been . . . and from a discovery point of view that, it seems to me, is sufficient justification for including these documents."

Id. at 67 (citation omitted). See also Miel v. State Farm Mutual Automobile Insurance Co., 185 Ariz. 104, 912 P.2d 1333 (Ariz. App. Div.1 1995) (claims manuals and discussions of claims handling in automobile liability insurer's in-house newsletter found relevant in bad faith action-addressed insurer's approved policies and procedures for handling claims); State Farm Mutual Automobile Insurance Co. v. Engelke, 824 S.W.2d. 747 (Tex.App.1992) (no abuse of discretion to require an insurer to provide all documents, manuals and training materials used in training insurer's claims handling personnel); Vining on Behalf of Vining v. Enterprise Financial Group. Inc., 148 F.3d 1206, 49 Fed. R. Evid. Serv. 1026 (10th Cir. 1998) (evidence of insurer's training manual was admissible); Bonenberger v. Nationwide Mutual Ins. Co., 791 A.2d 378, 2002 Pa. Super 14 (Pa. Super. 2002)( trial court properly admitted evidence of insurance claims manual where manual was in existence since 1993 and used by insurer's employees as primary guide in evaluating, valuing and negotiating claims); Glenfed Development Corp. v. Superior Court, 53 Cal. App. 4th 1113, 62 Cal. Rptr. 2d 195 (Cal. App. 2 Dist. 1997) (insurer's claims manual discoverable).


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