The lawsuit alleges that State Farm charged people for traditional indemnity medical coverage on their policies - meaning they should have been able to go to the doctor or hospital of their choice when seeking care after an injury and have their medical bills paid by State Farm. Instead, the company allegedly used a scheme to provide what amounted to "managed care," and denied all or part of many claims that were submitted. The policyholders accuse State Farm of violating Nebraska's Consumer Protection Act and the Deceptive Trade Practices Act.

The lawsuit accuses State Farm of using secret, unscientific reviews to deny personal injury protection claims. The lawsuit provides a number of illustrations: In one case, a woman's car was rear-ended and she was rushed to a hospital emergency room-- State Farm allegedly decided most of her medical expenses were unreasonable and denied coverage.

In another example, a man's medical expenses from a serious car accident after he had paid premiums for two decades were rejected in a "utilization review," after he refused to undergo a medical examination by a doctor chosen by the insurance company.

In 1998, a jury in Idaho awarded a policyholder nearly $103,000 in compensatory damages and $9.5 million in punitive damages for medical bills that were initially denied after a 1992 car crash. The judge in that case, rejecting State Farm's bid for a retrial or reduction in punitive damages, called the review process "a completely bogus operation."

On September 9, 2004, the Nebraska Supreme Court will review the case, to weigh whether or not thousands of people who never filed claims can join the lawsuit. They allege that they should be able to seek damages for the difference in the costs between managed care and the coverage they thought they were buying.

State Farm is finalizing a settlement in a similar class action in Washington.