Dismantling the denial machine

In a previous issue, we shared the heartbreaking story of a young boy and his mother. While on a morning walk in their California condo complex, they were brutally attacked by a pit bull that had escaped through a door left ajar during common area maintenance.

Andrea Posey, Miles Cooper, and Maryanne Cooper secured a $10 million judgment for the family. But for the victims, that judgment was only half the battle. The real fight was just beginning — this time against an insurance giant that refused to pay.

The denial: A technicality over the truth

All unit owners in the complex were covered under a $1 million liability policy with Farmers (Truck Insurance Exchange) for incidents “arising out of” common area maintenance. Because the dog escaped while the owner’s mother was sweeping the common sidewalk, the link was clear.

However, Farmers denied coverage. They argued that the sweeping didn’t cause the bite; the dog’s “vicious nature” did. By abandoning their insured, Farmers left the unit owner defenseless and the victims without the compensation the court had awarded them.

The strategy: Navigating the bad faith maze

Prosecuting a bad faith claim is an exercise in legal chess. It requires navigating a minefield of coverage evaluations and setting up a non-collusive underlying trial. Getting the judgment was the first step. The second step? Bringing Farmers to heel via a separate insurance bad faith case. That required specialty counsel, which is where Terry Coleman of Pillsbury & Coleman, LLP came in. The road wasn’t easy. The first insurance bad faith trial ended in a mistrial. Despite a previous settlement offer of $1.25 million, Farmers walked into the retrial offering zero dollars, betting that a jury wouldn’t hold them accountable for a $10 million underlying judgment on a $1 million policy.

The smoking gun: The “Closing Ratio”

During the two-week trial in Alameda County, the team uncovered previously hidden and systemic corruption within Farmers’ claims-handling process. Farmers’ Coverage Review Team was incentivized by a “Closing Ratio” performance goal. The fastest way to “close” a claim? Deny it. Data revealed that this team found “no coverage” nearly 78% of the time. This wasn’t just a mistake in the moment. Farmers incentivized a “denial machine” designed to prioritize corporate metrics over policyholder rights.

The result: Accountability beyond the policy limit

The jury saw through the excuses. They returned a verdict finding that Farmers acted in bad faith. As a result, Farmers is now responsible for the full $12.5 million (the original judgment plus interest) — more than twelve times the original policy limit.

Why it matters

This victory is about more than one family. The evidence of Farmers’ “Closing Ratio” claims practices have now been shared with policyholder counsel nationwide. By exposing this practice, the lawyers involved help ensure that other insured individuals victimized by this “denial machine” can finally obtain justice.

At Coopers LLP, we don’t just stop when the first judgment is signed. Whether we are fighting a reckless trucking company or an insurance carrier acting in bad faith, we relentlessly pursue the outcome — sometimes with our insurance specialty allies — to make sure our clients receive just compensation. Exposing systemic rot here and there is an added benefit.

Original prosecuting attorneys:  Andrea Posey, Maryanne Cooper, and Miles Cooper

Insurance bad faith counsel:  Terry Coleman of Pillsbury & Coleman, LLP