State Farm accused of orchestrating claims underpayment scheme
A New Mexico resident sued State Farm Fire and Casualty Insurance Company in federal court after the insurer denied full payment for water damage from a burst pipe on Jan. 24, 2025. Koteiba Azzam claimed the company used a management system called Fire ACE to reduce claim settlements and discourage legal challenges through aggressive litigation.
The lawsuit filed in the United States District Court for the District of New Mexico alleged that State Farm initially denied water damage claims to test whether customers would accept the decision. The complaint alleged that adjusters received incentives to limit payouts, and the insurer set claim values based on profit targets rather than repair costs.
Azzam accused State Farm of breaching contract terms and violating New Mexico insurance laws by conducting inadequate investigations and prematurely closing claims. The homeowner from Sunland Park seeks actual damages, punitive damages, and legal fees for roof-replacement costs the insurer refused to cover.
