Claims Software Cited in Bad Faith Suit COLOSSUS, a claims evaluation software tool, has become a key issue in a bad faith insurance settlement lawsuit in Washington state.

Insured Barbara Martin, who suffered severe spinal and neck injuries in an automobile accident, alleges that defendant Farmers Insurance Company of Washington, a subsidiary of Los Angeles, Calif.-based Farmers Insurance Group, used COLOSSUS to lowball her underinsured motorist claim, according to her attorney, Mike Nelson of Seattle-based Nelson Tyler Langer.

Ms. Martins vehicle was rear-ended by a driver carrying only $100,000 in automobile liability limits. The at-fault drivers insurer settled by paying the policy limit.

Ms. Martin then tried to collect additional damages from the underinsured motorists coverage in her Farmers policy. Her lawsuit alleges that Farmers, in bad faith and based on its total reliance on COLOSSUS, refused to pay any damages over and above what she had already collected from the drivers insurance company.

Three years later, an arbitrator ruled that Ms. Martins total damages from her injuries was $377,000, including pain and suffering, depression and diminished ability to interact with her husband and children. After the arbitration, Farmers tendered its $100,000 policy limit under the underinsured motorists coverage.

In her lawsuit, Ms. Martin alleges that Farmers is liable for additional damages in excess of policy limits due to its bad faith, breach of contract and violation of consumer protection laws, Mr. Nelson noted.

“To Farmers, COLOSSUS is God,” said Mr. Nelson, quoting what he said he had been told by a former Farmers claims supervisor. “The purpose of COLOSSUS is to calculate a plaintiffs pain and suffering. But how can a computer do that?” Mr. Nelson asked rhetorically.

He pointed out that COLOSSUS does not calculate medical costs and lost wages, as those items can be figured out by other, more precise means.

“The whole concept of using a computer to evaluate personal injury is flawed,” Mr. Nelson continued. “A computer cant replace human judgment. How can it put a price on a wifes relationship with her husband and children?”

“Insurance companies use COLOSSUS as a way to force lower payments and settlements,” Mr. Nelson said.

Farmers Insurance Group did not return a telephone call seeking comments on the case.

El Segundo, Calif.-based Computer Sciences Corporation, which licenses the COLOSSUS software, is not a party to the lawsuit.

John Tyler, a director in CSCs financial services group, describes COLOSSUS as “a tool to assist adjusters in evaluating claims and making fair recommendations.” Mr. Tyler noted that COLOSSUS considers medical records, treatments and complications related to the injury, and includes a component on the impact of the injury on the injured partys lifestyle.

“COLOSSUS doesnt ask everything thats needed to adjust the entire claim,” Mr. Tyler said. “In fact, COLOSSUS only evaluates general damages, not specific damages, and does not consider certain other extraneous factors. These additional components must be taken into account by the adjuster outside of COLOSSUS to fairly adjudicate the claim.”

According to Mr. Tyler, “COLOSSUS is intended to be a tool to help adjusters follow best practices in reaching a fair value for the claim.”

In a statement distributed in response to recent media inquiries on the Farmers suit, CSC said that COLOSSUS is “designed to aid insurance claim representatives in evaluating bodily injury claims.” The statement pointed out that COLOSSUS is designed to provide “recommendations” that are “intended to be a starting point for case evaluation, not the ending point.”

CSCs statement concluded: “The COLOSSUS tool is intended to support the human decision-making process, not to replace the claim representatives experience or judgment.”

According to Mr. Tyler, CSC can and does provide training to carriers on how COLOSSUS works, but it is ultimately up to the carrier to decide how to use COLOSSUS and the weight to be given to the resulting recommendations.

“This is a case of first impression,” the attorney Mr. Nelson said, noting that no other court has considered the issue of whether basing a settlement offer totally on what a claims estimation software calculates can amount to bad faith.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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Claims Software Cited in Bad Faith Suit

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