A federal lawsuit accuses State Farm of orchestrating a company-wide scheme to underpay property insurance claims, spotlighting the insurer’s internal claims strategies.
Koteiba Azzam, a homeowner in Sunland Park, N.M., has filed suit in the United States District Court for the District of New Mexico, alleging that State Farm Fire and Casualty Insurance Company systematically denied and underpaid his claim after water from a burst pipe caused extensive damage to his property on or about Jan. 24, 2025. According to the complaint, State Farm’s investigation was “insufficient and unreasonable,” resulting in the denial of full coverage for repairs, including a complete roof replacement and associated contractor costs. The insurer is accused of closing the claim prematurely and leaving the property in disrepair.
But the implications of the case reach beyond a single claim. At the heart of Azzam’s lawsuit are allegations that State Farm, with the guidance of consulting firm McKinsey & Company, adopted a claims management system known as “Fire ACE.” The complaint describes Fire ACE as a strategy to transform the insurer’s claims department into a profit center. According to the filing, this system was designed to reduce payouts, incentivize claim denials, and make litigation burdensome for policyholders…