State Farm Must Give Up Trade Secrets in Claims Lawsuits, but Under Court Review

The Alabama Supreme Court has opened the window a little wider into insurance carriers’ claims-handling procedures, not only requiring them to be made available in some lawsuits but also to be shared with plaintiffs’ lawyers in similar litigation.

The high court’s decision, in a side issue in Foor vs. State Farm, tempered a lower court’s order requiring State Farm to share closely held and trade-secret information on how damage estimates are revised or reduced. The Bullock County Circuit Court’s 2025 decision, in a homeowners’ roof claim dispute, is the latest skirmish in the years-long, multi-state war of words between adjusters and policyholder advocates on one side and a few large insurers on the other.

“While we would have preferred a different outcome, we appreciate the meaningful safeguards the Court placed around confidential information,” a State Farm spokesperson said in an email Thursday. “The ruling requires recipients of confidential information to abide by the protective order, and preserves the court’s authority to enforce those protections, including requirements to return or destroy materials when those cases conclude.”

The lower court’s decision, allowing significant sharing of confidential claims handling procedures, had generated widespread concern among insurers, business groups and legal organizations. It resulted in no fewer than three friend-of-the-court briefs that urged the high court to overturn or rein in the circuit court’s ruling.

“The ‘sharing’ provision in the (lower court’s) order relinquishes near-complete control of some of State Farm’s most sensitive information to plaintiffs’ counsel for their unfettered, nationwide use,” reads an amicus curiae brief filed in the appeal by the U.S. Chamber of Commerce and the American Tort Reform Association.

Attorneys with the Alabama Free and Fair Enterprise Institute also penned an amicus brief, noting that the Attorney Information Exchange Group, based in Birmingham, runs one of the largest clearinghouses for documents gained in litigation, for other litigants’ use.

“…Once confidential information is outside the control of the court, there is no limit as to how the information could be used by others,” attorney Ed Haden wrote for the Institute.

In the State Farm case, the homeowners in Union Springs, James and Kristina Foor, said a winter storm in early 2024 caused significant hail and wind damage to their roof. A roofing contractor gave an estimate for $9,112, and the Foors filed a claim with State Farm.

State Farm offered to settle the claim for $4,059. The Foors rejected that and filed suit in Bullock County, charging breach of contract and bad faith, and asking for roof replacement costs, plus mental anguish and punitive damages.

“State Farm has a pattern and practice of lowballing roofing claims and, upon information and belief, has implemented a program to reduce roof payouts without regard to the merits of the claim,” the Foors’ complaint argued.

To prove that, the Foors’ lawyers, with the Jinks Crow and Inge Johnstone law firms, said they need extensive internal documents from the insurance giant, and needed to be able to share that with other clients that have similar claims. State Farm objected, then objected again.

Circuit Court Judge Bernard Smithhart entered an order allowing the information to be shared and used by the Foors’ lawyers in their other cases against State Farm. But the judge put some guardrails up—barring release of the material to other insurers and to the news media, and requiring others outside of the Foors’ lawyers to agree in writing to refrain from sharing the documents further.

The recipients must also return information marked “confidential” to State Farm within 35 days, the judge noted.

But State Farm said the order was too broad. The insurer appealed to the state Supreme Court, asking the justices to order the lower court to strike the sharing requirements.

In the Aug. 13 decision, the justices offered a modified sharing plan: First, the Foors’ lawyers are permitted to use only the State Farm information about eight other cases. Second, the lower court must review the documents provided to ensure they are in keeping with the court’s order.

Thirdly, the protective order must require that “each person — whether an expert, a contractor, or a consultant working with counsel in this case or anyone involved in one of the other listed cases — must sign the exhibit agreement that binds the signatory to the provisions of the protective order and renders the signatory subject to the jurisdiction of the circuit court for the purpose of enforcement of the protective order.”

Two justices dissented. One dissented in part. The attorneys in the case could not be reached for comment this week.

The Foors’ lawsuit complaint echoes what others involved with property insurance claims have said for a number of years—that some insurance companies regularly reduce damage amounts, often without a second inspection.

This month, three Texas homeowners filed a proposed class-action lawsuit, arguing that the Texas Windstorm Insurance Association had fraudulently reduced claim estimates for properties damaged by Hurricane Beryl.

Field adjusters in Florida, working on a contract basis for carriers, charged in 2022 that a number of Florida insurers, after Hurricane Ian, had fraudulently “doctored” their damage estimates in a way that made it look like the field adjusters had drastically revised their own reports. Insurers have disputed that, contending that the field adjusters had misunderstood what the policy covered. Two years later, Florida’s chief financial officer imposed a rule barring insurers from altering adjusters reports without an explanation to policyholders.

And in 2025, some U.S. Senators took up the baton, grilling State Farm and Allstate executives about homeowner damage estimates that had been slashed. During one hearing before a Senate subcommittee, State Farm Vice President Michael Keating stood and apologized to one of the insureds, a North Carolina homeowner.

A State Farm spokesperson said Tuesday that State Farm “remains committed to handling every claim fairly based on the facts of the loss and the coverage provided.”