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UNIDENTIFIED MALE: There's an accident in this country every five seconds.
DREW GRIFFIN, CNN CORRESPONDENT (voice-over): It happened in Santa Fe, New Mexico, much the way Allstate describes it in its commercials.
Roxanne Martinez, driving down Cerrillos Road about noon, when the SUV pulled out from Tasuka (ph) Drive.
ROXANNE MARTINEZ, ACCIDENT VICTIM: I remember, you know, like hitting the driver side window. And then I just, I don't know...
GRIFFIN: The passenger side had been sideswiped. On the driver's side Roxanne was smashed against the window.
MARTINEZ: I had upper back pain. I went to chiropractors, physical therapists, massage therapists, acupuncture. They told me that my spine was damaged.
GRIFFIN: The person driving the SUV that hit Martinez was ticketed and had insurance, Allstate. That was good because Martinez was racking up bills, plenty of them -- C.A.T. scans, doctor visits, x-rays, all bills she thought Allstate would cover.
But after three years of fighting over the bills and still hurting from the accident, Allstate came with a take it or leave it offer, $15,000.
MARTINEZ: That was for, I guess, the car, medical -- I mean, that was everything. You know, I thought they'd pay all your bills and, you know, keep on paying your medical bills.
GRIFFIN: Roxanne Martinez was battling Allstate, the second biggest auto insurer in the nation. What she didn't know was that both Allstate and the largest auto insurer, State Farm, had changed the way they handled so-called minor crashes like hers.
(on camera): In an 18-month investigation across the country, CNN found that if you are injured in a minor accident, chances are high the two companies would challenge your medical claim, offering you barely a fraction of your expenses.
(voice-over): They would do it by forcing people into court, dragging out court cases for years and by convincing the public it was all designed to fight growing fraud in the car accident business.
But documents examined by CNN indicate the motive was profit. And Allstate has gone to great lengths to keep those documents secret. In two states where Allstate has been sued, the company has defied judges' orders to make the documents public.
According to Nevada Insurance Law Professor Jeff Stempel, the new get tough strategy is adding up to billions in profit for the insurance companies and little, if anything, for the public.
JEFF STEMPEL, UNIVERSITY LAW PROFESSOR: We can see the policyholders, individually, are getting hurt by being dragged into court on fender bender claims, and yet we don't see any collateral benefit in the form of reduced premiums even for the other policyholders.
So, I think now we can say to continue this kind of program is, in my view, institutionalized bad faith.
GRIFFIN (on camera): We wanted to ask Allstate and State Farm all about this on camera in an interview, but they both said no.
Allstate did send us an e-mail. In an e-mail, Allstate told us it did not believe it would "have any real opportunity of being successful in getting you (CNN) to do a balanced report."
State Farm sent an e-mail too, saying, "We take customer service seriously and seek to pay what we owe promptly, courteously and efficiently, and we handle each claim on its own merits."
And State Farm also added this. "Any attempt to generalize that State Farm has adopted consultant recommendations as other insurers is just plain wrong."
Who is the consultant State Farm refers to? The giant of the consulting industry, McKinsey & Company, hired by both State Farm and Allstate.
McKinsey & Company said it does not discuss any of its clients' business.
And at the same time Roxanne Martinez thought she was in good hands with Allstate, Allstate was being advised by McKinsey in writing to put boxing gloves on those good hands.
That strategy, says Martinez's lawyer, was to take valid claims and pay pennies on the dollar.
Attorney David Berardinelli has written a book about it and is challenging Allstate's strategy in what he hopes will be a class action lawsuit.
(On camera): So if you wanted to increase profit, you would try to chop the small claim?
DAVID BERARDINELLI, ATTORNEY: Sure. If you could take a thousand dollars off of a million claims, do the math.
GRIFFIN: A lot of money.
BERARDINELLI: A lot of money.
GRIFFIN (voice-over): Shannon Kmatz was an Allstate claims agent in New Mexico before she became a cop. She says she was trained by Allstate to treat most minor accident victims as frauds and offer them as little as possible.
SHANNON KMATZ, FORMER ALLSTATE CLAIMS AGENT: A hundred dollars, yes. I've offered people $50. They have minimal damage to the back of their vehicle and they're claiming that they're hurt.
GRIFFIN: Then Kmatz got to see the insurance strategy firsthand from the other side.
KMATZ: I turn around and get in a car accident myself. My car has minimal damage and I can't walk. And I realize, whoa, what am I doing? This is not right.
JIM MATHIS, FORMER INSURANCE COMPANY INSIDER: It really came down to three basic elements. A position of delay, a position of denying a claim and then ultimately, of course, defending that claim that you denied.
GRIFFIN: The three D's.
MATHIS: Exactly.
GRIFFIN: Jim Mathis is a former insurance company insider who now testifies against insurance companies in court.
And the profits are huge?
MATHIS: The profits are good. And as long as the public allows this to occur, the insurance companies will get richer and people will not get a fair and reasonable settlement. Period.
ROBERT HARTWIG, PRESIDENT, INSURANCE INFORAMTION INSTITUTE: Insurers don't blanket and deny claims on any grounds whatsoever.
GRIFFIN: Robert Hartwig is president of the Insurance Information Institute, an insurance industry trade group.
HARTWIG: What insurers are trying to do is monitor costs. And every insurer is under the same pressure to do it.
GRIFFIN (on camera): And this Allstate training manual obtained by CNN details how that was going to be done, by forcing what the manual calls smaller walkaway settlements.
(voice-over): The walkaway settlement for Roxanne Martinez was a take it or leave it offer of $15,000 that came three years after her accident. She said that would pay a little more than half of her costs.
MARTINEZ: It's kind of hard when you're thinking, like, you know, are they going to leave me broke or, you know what -- I mean, that's what -- that was very stressful.
(END VIDEOTAPE)
ROBERTS: And when we come back, we'll tell you what can happen when you take an insurance company to court. Also ahead, a sorority that's taking heat for pushing nearly two dozen members out the door. The sorority says the women weren't recruiting enough new members. The women say the reason they were kicked out is skin deep, pure and simple.
When 360 continues.
(COMMERCIAL BREAK)
ROBERTS: Before the break, we introduced you to a woman who says she was put through the wringer by car insurance giant Allstate. She said that Allstate wanted her to settle for thousands of dollars less than what she was entitled to.
She refused the deal that they offered and went to court. And that's where she says the battle got even tougher.
Her case isn't an isolated one, however. As our reporting reveals, accident victims across the country are fighting back against the insurance companies they thought would protect them.
Once again, CNN's Drew Griffin.
(BEGIN VIDEOTAPE)
GRIFFIN: When Ann Taylor's car was rear-ended...
ANN TAYLOR, ACCIDENT VICTIM: I woke up the next morning. I couldn't move. I had severe pain in my back, down both legs were numb and tingly.
GRIFFIN: The doctor diagnosed herniated disk muscle tears, and the treatment would mean time off work, therapy and medical bills.
The person who hit her was a State Farm employee driving a State Farm car. So Taylor thought at least financially she'd be covered.
It added up, said Taylor, to $15,000. But after dragging out her claim, State Farm offered her only $2,000.
TAYLOR: I was just very insulted.
GRIFFIN: Taylor hired Attorney Jeff Cooke and decided she would fight. It turned into a major legal battle eventually ending up in this courtroom.
Taylor's case is an example of how the two largest auto insurance companies, State Farm and Allstate, have changed the way they handle claims when people are hurt in minor impact crashes.
CNN's investigation reveals a strategy to increase profits by limiting payments to accident victims. And former insurance insiders say most of the industry has adopted the strategy.
Allstate and State Farm, the industry leaders, would not talk to CNN for this report. But Jim Mathis, a former insurance company insider, who now testifies against the insurance business in court, did. And he says cutting payments to people like Taylor has meant billions for the insurance companies.
MATHIS: It's not based on what should be a settlement value or offer to this claimant. It's not based on ethics. It's based on -- it's not based on profits. It's based on how much profit.
GRIFFIN: Taylor's case finally got to court three years after her accident. Her lawyer brought in medical testimony. To present its case, State Farm just dug deep into Ann Taylor's past.
JEFFREY COOKE, TAYLOR'S ATTORNEY: The lawyer stands up and says to Ann Taylor during her cross-examination, tell the jury about your back injury when you were 16 years old.
GRIFFIN: In fact, the attorney for State Farm raised questions about Ann Taylor falling off a horse when she was in high school. And the lawyer also asked Taylor, a nurse, about throwing out her back when she moved a patient.
(On camera): The attorney even brought up personal things that Ann Taylor had to sell a horse, that Ann Taylor had to sell her house, that Ann Taylor had even broken up with a longtime boyfriend, and couldn't all these things add to stress and that could have caused her back pain?
TAYLOR: They didn't have any expert testimony. They never had a physician look at me.
GRIFFIN (voice-over): They tried to make you out to be a liar.
TAYLOR: Exactly.
GRIFFIN: The attorney for State Farm did produce one piece of evidence, very large photos of two slightly damaged cars.
TAYLOR: They expected the jury to see those and to say, she really wasn't hurt.
GRIFFIN: Michael Freeman is a crash expert, often called in to testify when insurance companies are trying to use photos to deny a crash victim was injured.
How do the insurance companies use photos? Well, take a look at a photo of a car with minimal damage, he says, and convince the jury what they probably were already thinking. That doesn't look like much. How could that person be hurt?
MICHAEL FREEMAN, FORENSIC EPIDEMIOLOGIST: You're eventually being judged by what your car looks like, not by what your doctor says or by what the impact of a particular crash has had or injury has had on your life. That's not fair. It's not right. It's fraud.
GRIFFIN: What stunned Taylor in the end is that State Farm's strategy worked. The jury didn't believe she was hurt. They awarded her just $1,500, less than what State Farm originally offered.
We contacted three of the jurors. They said this photo played a big part in their verdict. And they thought the insurance company had already paid its share and Taylor was only trying to get more.
Why did they look at her and must have assumed this lady is trying to rip off the insurance companies, she's a fraud.
COOKE: When she walked in the courtroom and she walked to the jury box and she walked to the testimony box and she walked out of the courtroom at lunch and at the end of a day, they assumed that she was not significantly injured.
GRIFFIN: It's a case straight out of the McKinsey playbook, the three D's. By denying her claim, State Farm forced Taylor to hire an attorney and sue. After a three-year delay, Taylor walked into a courtroom with no noticeable pain. And by defending the case for years, State Farm forced her attorney to front expensive litigation costs, which in the end he didn't get back.
FREEMAN: They make these cases so expensive to litigate that attorneys won't want to take them.
GRIFFIN: Indianapolis superior court judge David Dreyer says he hears it from his colleagues across the country, courts bogged down with minor impact cases. He says the insurance companies' own lawyers admit to him they're being forced to drag the cases out.
JUDGE DAVID DREYER, INDIANAPOLIS SUPERIOR COURT: They've confided to me that they would rather settle a case, and that they aren't allowed to settle by the insurance companies that of course control the defense.
GRIFFIN: It's a strategy spelled out in this affidavit from a former Allstate attorney in a lawsuit against Allstate. She explains how 10 years ago the insurance giant was changing the way it did business, driving lawyers out.
The former Allstate attorney says Allstate's strategy was to make fighting the company "... so expensive and so time consuming that lawyers would start refusing to help clients." The president of the Insurance Information Institute says the change was need.
ROBERT HARTWIG, PRESIDENT, INSURANCE INFORMATION INST.: We have a group of attorneys, quite frankly, who are very upset because, guess what? The gravy train has ended.
MARTINEZ: She had, like, taken off the other way.
GRIFFIN: Remember Roxanne Martinez from the beginning of our investigation? She was sideswiped, and Allstate offered her $15,000 to cover her medical bills and lost wages. Her case also dragged on for years. But after listening to what her lawyer said it was a deliberate attempt to drag Martinez through the wringer, her jury awarded $167,000 plus interest.
MARTINEZ: And I was happy. I thought, well, you know, all my bills are getting paid.
GRIFFIN: Industry insiders say 80 to 90 percent of accident victims don't fight. They take what the insurance company offers.
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