It seems State Farm has not been a good neighbor for quite a while.

Worsening storms battered Oklahoma roofs for years. State Farm’s payouts, it turns out, didn’t exactly keep up.

A trove of internal documents unsealed by a Comanche County judge, first reported on by NBC News, shows the insurance giant quietly rewrote its own rulebook on hail and wind damage starting in 2020, squeezing nearly a billion and a half dollars out of policyholders in a single year. 

The paper trail now sits at the center of a legal war engulfing nearly 1,000 Oklahoma homeowners and the state’s top law enforcement officer.

One internal email spells out the bottom line in blunt corporate math.

“Volume down while severity up quite a bit,” a State Farm claims manager wrote. “About a $1.4B decrease in indemnity from 2020 to 2021.”

The same message tracked how roof replacement ratios cratered under the new approach.

“When we started this work, we were replacing roofs at a rate of 5.6 to every 1 we repaired. In 2021 we landed at 2.0 for every 1 and 2022 increased to 2.2 to every 1,” the email continued.

Another executive calculated that trimming approvals by a single percentage point was worth a staggering sum across the company’s claim volume.

“Each % point difference is about 5k claim, so if we didn’t pay for 1% of claims that did not have damage and were not covered but would have been paid for before based on lack of skill/will, that is 5k claims at $15,768 avg severity of $78.8 million,” the executive wrote.

The operation traced back to an internal hunch that State Farm was too generous compared to competitors on small hail and wind claims. A 2020 business plan flagged roofs as the biggest lever the company could pull, noting they made up 70% of claims and 57% of what State Farm paid out.

“If in fact Full Roof Replacements is our biggest bucket of opportunity,” one exchange between claims managers read, “We think our best option is to first focus on small hail/light wind.”

State Farm brought in outside consulting firm Haag Engineering to retrain adjusters, but Haag’s damage metrics didn’t match State Farm’s own policy language, according to internal correspondence.

“The information provided by Haag does lend an engineering perspective in some instances and not an insurance coverage/damage perspective,” one March 2020 email read. “While their perspective is not inaccurate, it is not State Farm’s understanding and should be noted in advance of viewing the videos.”

It wasn’t just customers getting blindsided. A Kentucky-based agent wrote directly to leadership in 2021, warning the claims process was destroying the business.

“This system is not only broken it is taking us down quicker than you can imagine. Its gone from bad to worse in record time,” she wrote. “Inspectors are being sent out to measure and photo roofs and hand out a very small estimate to REPAIR knowing that in a lot of cases it should be much more than that. They are afraid to get their hand slapped and are in the pockets of State Farm so they are low balling at best and almost NEVER replace a roof.”

Even company insiders acknowledged the fallout privately.

“The roof thing is a problem,” one representative wrote. “We have not done ourselves a favor there and claims leadership needs to clearly communicate the philosophy change to agents.”

Ryan Graff, a Wisconsin attorney who has represented policyholders against insurers, told NBC News the documents show a company applying standards it never disclosed to customers.

“You can cut costs through claims. What you can’t do is sell one thing and provide another,” Graff said. “In every jurisdiction, insurance policy interpretation cannot be more restrictive than what is in the policy. That is a huge no-no.”

Peter Kochenburger, a visiting law professor at Southern University Law Center, was more cautious in his own remarks to NBC News.

“These records certainly suggest areas to inquire about and possibilities of improper conduct,” Kochenburger said. “There’s nothing wrong with trying to get the quickest result and the most accurate result. That’s fine, but it has to be the actual. You can’t lowball your policyholder.”

Oklahoma Attorney General Gentner Drummond sued State Farm in June, accusing it of running a “Denial Enterprise” under the state’s anti-racketeering statute.

“This case is about more than individual claim disputes,” Drummond said. “The allegations describe a corporate scheme that threatens the integrity of Oklahoma’s insurance market place and undermines public confidence in an industry families rely on when disaster strikes.”

Drummond suggested the case could turn criminal.

“There may be a scheme inside of State Farm’s leadership to intentionally defraud Oklahomans, and if that can be proven, that RICO will cross into the criminal world.”

A company lawyer, during a hearing over the records, insisted the documents show nothing more than routine business analysis.

“State Farm believes a plain reading of the documents shows that it was only evaluating if they were properly paying claims,” the lawyer said, adding that in some cases the company had been paying claims with “no evidence of damage.”

“Plaintiff’s counsel make statements and they misconstrue documents as if that scheme theory is fact. It’s not fact. It’s merely argument,” she said.

A company spokesperson added, in remarks to NBC News, that so-called bad-faith suits make up roughly 1% of the 30,000 claims State Farm handles annually, and that the insurer has paid out more than $1 billion to Oklahoma customers for wind and hail damage over the past two years.

“Each claim is fairly and diligently evaluated based on its specific facts,” the spokesperson said.

Only 31 documents have been unsealed so far, with hundreds of thousands more still under wraps. Internal emails from 2023 obtained by NBC News suggest leadership had no plans to abandon the strategy.

“We need to go back to what worked in the past to quickly make an impact,” one executive wrote.

With more than 1,000 lawsuits pending and Oklahoma’s attorney general now circling with racketeering claims of his own, State Farm’s roof reckoning is far from over.