Progressive has settled with the family of a policyholder that claimed the insurance company defended her killer, but the deal came about only after the truly awful story made its way around the Internet.

Matt Fisher, the policyholder’s brother, blogged about his family’s ordeal this week in a Tumblr post titled, “My Sister Paid Progressive Insurance to Defend Her Killer in Court.” In the blog post, Matt detailed how his sister Katie was killed in 2010 when a driver ran a red light and struck her car while she was crossing in an intersection. The other driver was underinsured, meaning it was up to Katie’s insurance company — Progressive — to pay the balance of the value of the policy she had taken out to protect herself against uninsured or underinsured drivers.

But, according to Matt Fisher, Progressive didn’t want to do that.

Matt Fisher: At which point we learned the first surprising thing about Progressive: Carrying Progressive insurance and getting into an accident does not entitle you to the value of your insurance policy. It just pisses off Progressive’s lawyers. Here I address you, Prospective Progressive Insurance Customer: someday when you have your accident, I promise that there will be enough wiggle room for Progressive’s bottomless stack of in-house attorneys to make a court case out of it and to hammer at that court case until you or your surviving loved ones run out of money. Read more

And because the Fishers lived in Maryland, they couldn’t sue the insurance company to get the money. So, they were forced to sue the driver. And because Progressive evidently did not want to have to pay Katie’s family, the company’s legal team shockingly and outrageously helped the man who had killed her.

Yes, even though the company claimed that the man’s insurer, Nationwide, represented him, a report showed that Progressive’s legal team helped his defense.

The Daily Mail: Court documents clearly show that Progressive filed as an ‘interested party’ and was ‘allowed to intervene as a party defendant’ and ‘granted all rights to participate in this proceeding as if it were an original party to this case.’ Which means they not only assisted the defense, but acted as if they were the defense. Read more

Talk about a nightmare insurance story. The family had to endure a trial that should not have even happened. Although Katie’s estate was eventually awarded $760,000 by a Baltimore jury, the verdict came against the driver, not Progressive, and the Fishers were unlikely to see most of that money. Three days after Matt Fisher’s post, the company reached a deal with the family. The amount of the settlement was not disclosed, but the family’s attorney said it was for “tens of thousands of dollars more” than the $75,000 claim balance the family had originally been seeking.

What makes the story even worse is the way Progressive’s social media team handled the whole situation — a series of robo-tweets in response to Matt Fisher’s post that said, “This is a tragic case, and our sympathies go out to Mr. Fisher and his family for the pain they’ve had to endure. We fully investigated this claim and relevant background, and feel we properly handled the claim within our contractual obligations. Again, this is a tragic situation, and we’re sorry for everything Mr. Fisher and his family have gone through.” We know they were automated, by the way, because the same tweet was tweeted at different Twitter users more than a dozen times.

The tweets from Progressive’s Twitter account have since been removed, and clicking on the TwitLonger links that accompanied the tweets show that the user account has been banned. Also, the picture of Flo (above), whom you are most likely familiar with if you’ve ever seen a Progressive commercial, has also been taken down.

After Matt Fisher’s story went viral, Progressive gave a pretty lame explanation of the situation. In a post on its website, the company said, “A trial was necessary so that a jury could review all of the evidence and come to a decision. In those circumstances, under Maryland law, the insurance company providing the Underinsured Motorist coverage is considered a defendant. As a defendant in this case, Progressive participated in the trial procedures on our own behalf while Nationwide represented the other driver.”

Note that by claiming it participated on its own behalf, Progressive basically admitted that it was protecting itself — not its policyholder. Bet you won’t see Flo touting that fact in a Progressive ad anytime soon.

— Posted by Tracy Bloom.