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Senate Fails to Pass Rebuke of President on Iraq Policy, Troop Surge; Some Threaten Defense Funding Cuts; Three Climbers Missing On Mount Hood, Likely Injured By A Fall From A Ledge

Aired February 18, 2007 - 19:00   ET


RICK SANCHEZ, CNN ANCHOR, CNN NEWSROOM: Different country, different cause. A U.S. chopper's deadly dive in Afghanistan, but officials aren't blaming enemy fire.

WOLF BLITZER, CNN ANCHOR, THE SITUATION ROOM: You're saying this is the worst foreign policy blunder in American history?


BLITZER: Worse than Vietnam?

REID: Yes.


SANCHEZ: That's certainly strong stuff as lawmakers weigh in now on the war in Iraq.

Also adding insult to injury. Is your insurance company taking you for a ride? Tonight our special look at the politics of paltry payouts.

Hello, again, everybody, I'm Rick Sanchez. We have breaking news coming out of Oregon's Mt. Hood. Let's try and catch you up. Here's the information we have right now. A rescue effort is under way, as we speak, for three climbers who fell off a ledge earlier today. The missing hikers have tracking devices on them and some cell phones. So rescue workers are optimistic that they might be able to make at least make some kind of contact with them since they haven't been out long enough for the batteries to have died at this point.

However, they haven't been in contact with police or five other members of their climbing party who were at this point OK, and in contact with authorities.

What we're talking about, if you do the math, three climbers who were not accounted for. There's a huge rescue operation taking place. We're going to keep you updated as the developments warrant on this story.

Let's do this now. We're obviously going to try to reach somebody over there in Mt. Hood that we can talk to. Before we do that, let's go to Jacqui. To try and understand what we're talking about as far as the conditions.

You know, Jacqui, when we hear of cases like this we always hear of that term whiteout conditions. Is that what we're talking about, and can you explain to viewers what that would resemble?

JACQUI JERAS, CNN METEOROLGIST: Well, basically, you can't see a whole lot. In fact, it's very difficult to even see your hand in front of your face sometimes in conditions like those.

Keep in mind, they are way up there in elevation. So the intensity of the snowfall comes down at a much higher rate up there, and the visibility is reduced even more.

There's a storm system that's been pulling in for today. We have had a series of them lined up here in the Pacific. So the next several days, even the next week, storm after storm after storm. This is a real problem in the rescue efforts here. There you can see on the satellite radar picture, here, all the precipitation moving in.

I also have a Google Earth animation that I was able to put together to give you an idea what the terrain is. This is the second time in as many months that we've been dealing with this. We will zoom in and show you this area. This is Oregon. Here is the Portland area.

And then Mount Hood sits down to the south and to the east of there. This mountain is about 11,000 feet in elevation. And they're up there at 8,000 feet. We get observations as high as about 6,000 feet. That's the best I can get you for actual obs, right now, Rick. And that is with the temperature is 23 degrees and some of the snow is coming down. When you go higher up in elevation the temperature is colder, as well. So, you know they're down there into the teens probably at best. So some very frigid, very dangerous conditions at this hour.

SANCHEZ: That's what they're saying. They're at 8,300 feet. Yeah, that's cold. Not only cold, but you have the ground blizzards that develop even if it's not snowing.

JERAS: That's right. As the storm continues to approach, the winds will be kicking up, too.

SANCHEZ: Jacqui Jeras, we'll be checking back with you. Thanks for letting us know.

Now, to the news out of the deadliest single incident so far this year for the U.S. led coalition in Afghanistan. A military helicopter has crashed in the country's southeast side. Eight U.S. soldiers were killed; 14 others hurt. The helicopter was a CH-47 Chinook. It looks like that. It is widely used to ferry troops and equipment. U.S. officials are pointing to engine failure, not enemy fire, as the probable cause. Be enemy fire has been the cause of seven recent helicopter crashes in Iraq.

On CNN's "Late Edition" Wolf Blitzer asked the White House press secretary about a report -- about this and other attacks like it in "The New York Times." (BEGIN VIDEO CLIP)

BLITZER: Here's what "The New York Times" reported today. Documents captured from Iraqi insurgents indicate that some of the recent fatal attacks against American helicopters are a result of a carefully planned to strategy to focus on downing coalition aircraft, one that American officials say has been carried out by mounting coordinated assaults with machine guns, rockets and surface to air missiles. Is that true?

TONY SNOW, WHITE HOUSE PRESS SECRETARY: Without confirming or denying it shouldn't be surprise anybody that an enemy is going to look constantly for ways not merely to kill Americans, but also to attract media attention. There have been a number of occasions now where our helicopters, and aircraft, have been brought down by enemy forces. And they have, in fact, adopted tactics that are designed to do that. We're going to have to adjust.


SANCHEZ: That's Tony Snow with Wolf Blitzer.

On the ground in Iraq, insurgents are answering back to the effort to try and bring peace back to Baghdad. After a brief lull in attacks, bombs went off in Shiite neighborhoods today, killed at least 62 people, according to some of the last reports that we've been getting. Here's the very latest from CNN's Arwa Damon; she is in the Iraqi capital.


ARWA DAMON, CNN INT'L. CORRESPONDENT (voice over): After two days of deceptive calm in the capital, on Sunday a thick plume of smoke reminding people that the start of a crackdown in no way means an end to the violence. Two car bombs exploding in quick succession on a busy southeastern Baghdad street, killing dozens and wounding more than 128 Iraqis; sending petrified people running, searing images of violence.

This, as the Iraqi government has been putting out good news lately, desperately trying to put a spin on the recent decline in violence.

GEN. QASSIM ATTA, IRAQI GOV'T. SPOKESMAN (through translator): There has been a clear 80 percent decrease in terrorist operations and various crimes over the last three days.

DAMON: Sunday's attacks, a brutal reminder that any statement of success against an increasingly capable and violent insurgency might be premature. The U.S. military cautions that the insurgents are lying low, watching the plan unfold before they come up with their own plan of attack. And days like this resonate more with the Iraqi people than any statements coming from their government, also shattering any optimism that may have been generated.

UNIDENTIFIED MALE (through translator): I have doubts that the security plan will succeed. We are uneasy.

DAMON: Unease underscored by Sunday's attacks, unease that is not surprising. Iraqis have seen plans like this one fail in the past, no matter how many statements are being made about success, or a decrease in violence, until Iraqis feel safe leaving their own homes, there's going to be little hope for a better future. Arwa Damon, CNN, Baghdad.


SANCHEZ: Meanwhile, of course, in Washington, supporters and opponents of the Iraq war are drawing new battle lines after the very first major skirmish since Congress fell to the Democrats. Interesting use of the word skirmish while troops are fighting this is what's going on in Washington as well. From the White House now, CNN's Kathleen Koch.


UNIDENTIFIED MALE: The motion is not agreed to.

KATHLEEN KOCH, CNN WHITE HOUSE CORRESPONDENT: After failing Saturday to pass a resolution to debate President Bush's Iraq troop increase, Senate opponents are asking, what next? Some powerful committee chairmen say rewrite and scale back the 2002 authorization to go to war.

SEN. CARL LEVIN (D-MI), CHMN., ARMED FORCES CMTE.: We can modify the authorization in order to provide a much more limited mission, which will remove our troops from the middle of a sectarian civil war.

SEN. JOE BIDEN (D-DE), FOREIGN RELATIONS CHMN.: I've been working with some of my colleagues to try to convince them that's the way to go.

KOCH: Others are eyeing a proposal by Congressman John Murtha to place conditions on future war spending and troop deployments.

SEN. CHUCK HAGEL (R-NB): I'm going to look very carefully at Congressman Murtha's points. Again, when --

UNIDENTIFIED MALE: And you may be open to them?

HAGEL: And I'd be open to it.

SEN. JACK REED (D-RI): Down the road will we consider issues with respect to fund something? I think so. But we'll never compromise the ability of American soldiers to protect themselves.

KOCH: One top Senate Republican points out the obvious about Murtha's measure, or those that would limit funds to the troops.

SEN. DICK LUGAR (R-IN): They're unlikely to pass to houses and be signed by the president.

KOCH: White House Press Secretary Tony Snow confirmed President Bush would oppose Murtha's so-called "slow bleed measure" to limit troop deployments.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: What I would say to members of Congress is calm down and take a look at what's going on, and ask yourself the simple question. If you support the troops, would you deny them the re-enforcements they think are necessary to complete the mission?

KOCH: And Snow took issue with Senate Majority Leader Harry Reid's characterization of the Iraq war as, quote, "The worst foreign policy mistake in the history of the country." Pointing out 77 senators voted to authorize the use of force in Iraq.

(On camera): But any face off over the president's current Iraq strategy will have to wait. Congress is in recess until February 26th. Kathleen Koch, CNN, the White House.


SANCHEZ: By the way, Kathleen's report mentions strong comments by Senator Harry Reid. Well, you're going to be able to hear them now from the horse's mouth. Here's a clip from "Late Edition" with Wolf Blitzer.


REID: This war is a serious situation. It involves the worst foreign policy mistake in the history of this country. So we should take everything serious. We find ourselves in a very deep hole. We need to find a way to dig out of it.

BLITZER: So maybe I misheard you. But you're saying this is the worst foreign policy blunder in American history?

REID: That's what I said.

BLITZER: Worse than Vietnam?

REID: Yes.


SANCHEZ: Tough stuff there from Senate Majority Leader Harry Reid. He's speaking to Wolf Blitzer.

Three members of one family subjected to a brutal blood death. A suspect is in custody in this really surprising Chicago rampage.

Scary moments for passengers in Cleveland; new video of the plane that skidded straight off a runway. Look at this and look at the damage that's left behind.

Also watching your weather, Jacqui Jeras is going to be doing that. And she'll be following some of the developments taking place on Mt. Hood.

Fill us in on what the weather is out there right now, Jacqui. JERAS: Well, very snowy at this time, and very cold as well. Temperatures are down in the teens there. Speaking of teens, we have very cold air invading much of the of the East. Found out how that could affect your grocery bill. That's coming up as you take a look at a live picture from Daytona Beach.


SANCHEZ: Yeah, we also have a live picture -- I hope we do better than this one. This is New Orleans. Can we get that up? This is Mardi Gras is still going on. It's happening, folks. It's live. Obviously, there's two sides of the story with everything going on in New Orleans. We'll be talking about both here.

But before we go to the break, let's see if we can get you Mt. Hood. We have pictures that are just starting to come in. New pictures from that area around Mt. Hood. We do understand that these three climbers have fallen off of a ledge. They were about 8,300 feet when it happened.

These are the very first pictures we're getting in right now. I understand we might have some sound as well. Is that right, gang, in the booth? The Clackamas County sheriff's department spokesperson is on the line, as we speak.

I don't have your name, sir. If you would be good enough to introduce yourself we can start the conversation.

JIM STROVINK, CLACKAMAS COUNTY SHERIFF'S OFFICE: Certainly. Jim Sterling, Clackamas County sheriff's office here at Mt. Hood.

SANCHEZ: Jim, pardon us for the informality but we're trying to get this information out as soon as we can. Try and tells us what you could tell us at this point with the rescue operation.

STROVINK: Well, it's a very busy day on Mt. Hood. And the weather conditions are harsh. We have some whiteout conditions at the present time that are hampering this search and rescue effort.

However, we do have some very qualified individuals that are doing a great job. What happened is that shortly before noon time the Clackamas County sheriff's office dispatch center received a cell phone call from a member of a climbing party there on the mountain. This individual indicates that he was a member of an eight-man team. At about noon time, three of the members had fallen off a ledge due to the conditions. They were unable to communicate with them visually or verbally.

I didn't know the status of those three that had gone on over the ledge. They were unaccounted for. This team was well equipped. They have GPS, they have mountain locators units that are used in emergencies such as this, for identifying their specific location, electronic devices. They also had adequate clothing and climbing equipment with them.

The Portland Mountain Rescue personnel, AMR, the reach and treat team there on the mountain, a hasty team, now, is moving in their direction to assist these five members there that are counted for. They've been instructed to dig in and secure themselves in snow caves until rescue personnel can arrive there, and assist them getting them down the mountain. And then attempt to identify what the status is of the missing three.

Now, we also have information just coming in another mountain locator unit has been activated. And we believe that would be related to perhaps the other three that are unaccounted for.

SANCHEZ: Hold on. Let me stop you there. We're not quite sure what that means. You said another mountain activator, organizer has been activated. What does that mean?

STROVINK: Each of these individuals who are climbing were very well-equipped, well-prepared. They each had a mountain locator unit. This is an electronic device.

SANCHEZ: Oh, you're talking about the beacon?

STROVINK: That's correct.

SANCHEZ: So you're now telling us that someone has been able to capture that beacon so we might have an idea where they are?

STROVINK: That's correct. We have an activation there of this mountain locator unit. So perhaps those three that are unaccounted for have at least activated their mountain locator unit. And that now is of interest to those rescue personnel and trying to track on that and identify where that signal is coming from.

SANCHEZ: Hey, Jim, if they have a cell phone, which you seem to indicate that they have, are you worried that they haven't been using it to call you, or could it be a reception issue.

STROVINK: In that particular area, we do have reception problems. And that would be the best -- for those folks in the mountain right now, is that beacon that they have. So that's what we're relying on. It seems to be working quite well. We're honing in on that at the present time.

SANCHEZ: By the way, for the benefit of our viewers, as we talk to the spokesperson in Clackamas County, in Mt. Hood, we are following a situation where there is a rescue operation taking place. The information we have, as you've been seeing in some of those pictures that we're bringing you now. We're getting those pictures as we're sharing them with you. as well.

There are eight climbers who called for rescue because three in their party have fallen off a ledge.

If you would, Jim, would you characterize for your viewers what that means when you say they have fallen off of a ledge. Give us some dimension here of what that could mean in terms of the length of the fall itself. STROVINK: Well, see that seems to be part of the problem here. The individual from this team that's calling in and announcing, hey, we're having some problems here. We have three climbers that have fallen over a ledge. They can't see because of the whiteout conditions. They didn't have any idea exactly how far they have fallen or where they're at. They couldn't verbally or visually communicate with those three.

So, they're separated from them. They don't know where they are at this time. I can tell you, that all of this activity is ongoing about the 9,000 foot level there of Mt. Hood. with these whiteout conditions.

SANCHEZ: Suffice it to say, they have fallen long enough they're no longer within earshot of the other five then. You have five saying three of them fell off the ledge, and they can't locate them. They're probably screaming for them, and they can't hear them. So it's enough of a fall it's a good distance away.

STROVINK: That's correct.

SANCHEZ: But it could be a long distance, it could be 20 to 100 feet?

STROVINK: That's correct. But the good news is we have this other activation, so we believe at least someone there in that party, in that group, the three that are unaccounted for, perhaps, have activated the locator unit and are signaling for assistance. And hopefully we'll be able to locate these individuals shortly as these rescue personnel move into the area.

SANCHEZ: So you have given us a pretty good picture of what the situation is there, and what might have happened. Tell us about the rescue itself. How far are your rescue officials from getting to the scene at 8,000 to 9,000 feet, where this is taking place?

STROVINK: They started out about just about an hour and a half ago from Timberline Lodge, 6,000 foot level. So they're moving by a Snowcat. And they are now on foot. They should be arriving shortly in this area of illumination where this search and rescue is being conducted, probably within the next hour or so.

Hopefully they'll have a better idea after they're able to arrive there and assess the situation. And hopefully locate these three individuals that are unaccounted for at this time.

SANCHEZ: Within the next hour or so. And finally one last question. As far as we know right now, injuries? We just don't know, right?

STROVINK: We don't have that. It's my understanding that the five people that had summoned assistance, they're OK.


STROVINK: They've been instructed to dig in, wait for rescue personnel to arrive. But we don't know the status of those three unaccounted for climbers.

SANCHEZ: Mr. Strovink, we thank you for bringing us up to date on this. You've been more than thorough. We know it is the outset of a situation. We certainly wish you the best of luck. We'll be checking back with you. You say maybe within the hour you'll have probably have somebody up there. If you don't mind, we'll be checking back with you. Our researchers here will talking to you. If we get another chance to put you on the air, I'm sure that will be OK with you, right?

STROVINK: Thank you, sir. Absolutely.

SANCHEZ: Jim Strovink with Clackamas County. He's the spokesperson there.

Obviously, a story that is developing as we're following it here. We really just got word of this as we were getting ready to put together this news cast and come on the air.

As we get more pictures, as we get more sound, we'll turn them around and bring them to you right away and stay on the story. We're going to take a short break. We'll be right back.


SANCHEZ: Welcome back to CNN NEWSROOM. We're following breaking news for you right now coming from Mount Hood.

The situation as we understand it for those of you may have just been listening just moments ago to that interview, is that there are at least three climbers who are unaccounted for right now in Mt. Hood. Five are accounted for. They're hunkering down.

What it's going to take, as we see Jacqui Jeras. Who is going to fill us in now on some of the weather conditions some of these rescue operators are faced with. It's probably going take an hour, according to what the spokesperson told us, for the rescue officials to get to the scene.

Jacqui, question to you what kind of conditions are they facing while they try to get to them in the first place using helicopters and of course, they're going have to do some mountaineering themselves?

JERAS: Yeah, are they actually using helicopters right now Rick, do you have confirmation of that?

SANCHEZ: He said they're going to be using a CAT, which is usually that machine that takes them probably halfway. And then from there they will probably have to climb.

JERAS: Yeah, visibility is so poor, I can't imagine that they're going be able to do this aerial.

SANCHEZ: yeah but that's what I'm asking, at the base of the mountain, is it poor? JERAS: Yeah. It's raining in Portland right now for example, yeah rain down in the valleys. We've got snow into the higher elevations and the higher up you go the more intense it is right now. Just by looking at that picture you can see visibility very difficult right now. Those winds are going start kicking in too as our next storm system approaches.

So I imagine that this is having a big impact on the rescue effort. Not only today, if hopefully they're able to rescue them and get to them today. But if not and this thing does carry into tomorrow and the next day and the next day, we're talking about a whole week of winter weather that's going be very extreme and very severe up here.

There you can see, just from the beginnings of our first storm system because this next punch that is going be coming in is going be a lot worse. So there you can see the rain that's coming down into the valley areas here, that's all painted in blue and then you get in the higher elevations. Snow levels are down there at I believe about 3500 feet or so.

So we're definitely seeing a lot of snow to go along with that. We're looking at also some other conditions. Speaking of skiers and also snowmobilers and hikers, people who are out there, this is a holiday weekend. Not only are we concerned about the weather itself, but we also have a very considerable avalanche danger.

So those of you thinking about going hiking maybe this weekend into the Colorado Rockies, down to the San Juan, across the Wasatch and Siuwincas (ph) and up into parts of Idaho and Montana, we have what we call a considerable threat of avalanche danger in the back country areas.

Rick, what considerable means is that some natural avalanches are a possibility but human-triggered avalanches are a very high probability. So they're asking you to stay, get out of the back country, stay on the groomed trails if you are a skier if you are. Five people have died just this weekend in avalanches. Back to you.

SANCHEZ: Thank you so much, Jacqui.

It's interesting as you listen to that, I'm thinking of my own experiences in those whiteout conditions how difficult sit to be able to hear what people are saying in those conditions. When he said, well, they may have called out to them, they probably didn't hear them.

Again, it's a breaking story in Mt. Hood. We'll be all over it. We'll be right back with a lot more news.


SANCHEZ: Welcome back to CNN NEWSROOM. I'm Rick Sanchez. We do have breaking news for you. As you've been probably hear us tell you. There is a dire situation taking place right now at Mt. Hood, Oregon. Five climbers are accounted for but three others aren't. And the information given to rescue officials is that those three climbers have fallen off a ledge. The rescue officials, we just talked to, say it's probably going to take about an hour for them to get to the scene. And see if they can begin the rescue operation. Obviously, if anything happens on the story, we'll bring it to you immediately. We're really all over it.

So let's bring you now to another story that we're going to be focusing on. This is a story that affects all of us.

If you are injured in a car accident, even a minor one, you expect the insurance company to be there for you, right. After all that's what the commercials promise when we watch them.

May not always be the case of late. CNN's Investigative Correspondent Drew Griffin spent 18 months looking at how insurance companies -- your insurance companies -- respond to minor impact accident claims. And we're going to spend the rest of this program on this important story as well. Here's Part 1 of Drew's report.



UNIDENTIFIED MALE: There's an accident in this country every five seconds.


DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT (voice over): Somewhere in the U.S. just now a car crash.

ANN TAYLOR, ACCIDENT VICTIM: Yeah, oh, it was a jolt.

GRIFFIN: A jolt that can leave the car with barely a scratch.

TAYLOR: You couldn't tell anything from those pictures.

GRIFFIN: But can leave driver and passengers with major pain.

UNIDENTIFIED FEMALE: I felt immediate pain. I couldn't even breathe.

GRIFFIN: Chances are it has happened to someone you know, maybe even yourself. Call them minor accidents or fender benders. The damage to sheet metal is easily repaired, but not always the damage to your body.

TAYLOR: I woke up the next morning and I couldn't move. I had severe pain in my back, down both legs were numb and tingly.

GRIFFIN: For Ann Taylor, a nurse, the diagnosis was herniated disk muscle tears and the treatment would mean time off work, physical therapy, and medical bills. A claim Taylor estimated amounted to $15,000. State Farm offered her $2,000.

TAYLOR: I was just very insulted.

GRIFFIN: In an 18-month investigation CNN found that if you are injured in a minor accident like Taylor's, chances are high an insurance company will challenge your medical claim and offer you barely a fraction of your expenses. And in some cases, the insurer will say that you, the policyholder, are flat out lying just to get money.

(On camera): Insurance industry insiders and plaintiff's lawyers tell us that the auto insurance industry underwent a major change that began ten years ago. The change involved how much money some big insurers would pay for doctor bills, for rehabilitation, and for wages lost when people like Ann Taylor says she couldn't go to work because of her back pain.

(voice-over): Insurance companies wanted to increase profits.

JIM MATHIS, FMR. STATE FARM/ALLSTATE EMPLOYEE: 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, a former insurance company insider who now testifies against insurance companies, says those three D's have added up to big B's, as in billions, for auto insurance companies.

MATHIS: 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.

GRIFFIN: For the country's two biggest insurance companies, State Farm and Allstate, the strategy was shaped by the major business consulting firm McKinsey & Company. It was designed to stop paying so much across the board to victims of minor accidents. According to this Allstate training manual, claims handlers were to convince policyholders to accept smaller walk away settlements. The ultimate goal was to turn the claims side of the insurance business into a profit center. Allstate and some other insurance companies used a computer system called Colossus to re-enforce this hard line approach. Insurance insiders in court documents say Colossus was programmed to predetermine compensation for injuries. State Farm and Allstate would not talk to CNN on camera but the president of an industry trade group did. He says the critics are all wrong.

ROBERT HARTWIG, PRESIDENT, INSURANCE INFO. INSTITUTE: Insurers don't blanket deny claims on any grounds whatsoever.

GRIFFIN: Don't tell that to Ann Taylor. The person who rear ended her was a State Farm employee driving a State Farm car. Fault was never an issue, but after dragging out her claim State Farm's offer of just $2,000 Taylor said was absurd. Taylor hired Attorney Jeff Cooke and decided instead of settling she would fight. It turned into a major legal battle, eventually ending up in this courtroom three years after the accident. To fight State Farm's denial of her injury claim, Ann Taylor brought in medical testimony. To present its case, State Farm did not bring in any medical expert of its own, but began digging deep into Ann Taylor's past.

JEFFREY COOKE, ANN 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 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 long-time boyfriend and couldn't all these things add to stress and that could have caused her back pain?

ANN TAYLOR, NURSE: They didn't have any expert testimony, they never had a physician look at me.

GRIFFIN: 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, yeah, she really wasn't hurt.

GRIFFIN: Michael Freeman is a crash expert. He's often called in to testify when insurance companies claim accident victims aren't 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 surprised 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, even less than the take it or leave it offer she had gotten three years earlier.

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 the day, they assumed that she was not significantly injured.

GRIFFIN: Three jurors contacted by CNN said the pictures were a major factor in their verdict and they were surprised the case had taken three years to go to court. Two of them thought that Ann Taylor had already been paid and was simply trying to get more money. One even wondered why Taylor had dragged the case out for so long. 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: An Allstate manual spelled it out, force the claimant and attorney to think about the obstacles they must overcome. Allstate's consultant McKinsey & Company told the good hands people that Allstate should put boxing gloves on those good hands. Dragging the claimant through court for months if not years, that's right, years. Don't believe it? 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: But Kmatz got to see her company's strategy 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, wow, what am I doing? This is not right.

GRIFFIN: What insurance companies are doing says the Insurance Information Institute's Robert Hartwig is really good for most of us by helping keep premiums down.

ROBERT HARTWIG, PRES., INSURANCE INFO. INSTITUTE: What insurers are trying to do is monitor costs. Every insurer is under the same pressure to do it.

GRIFFIN: Jim Mathis worked for Allstate and State Farm. He says the new strategy was not about keeping insurance premiums down, it was about making more money.

MATHIS: It's not based on the need of the policyholder, it's not based on the injury, it's not based on the individual dynamics of the accident, it's not based on what should be a settlement value or offer to this claimant, it's not based on ethics, it's not based on profit. It's based on how much profit.

GRIFFIN: Jeff Stempel, University of Nevada Las Vegas law professor, who specializes in insurance issues, says most of the nation's auto insurers have adopted similar tactics. JEFF STEMPEL, UNLV 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 policyholder. So I think now we can say to continue this kind of program is, in my view, institutionalized bad faith.

GRIFFIN: But remember Ann Taylor did take her case and State Farm to court. She presented the facts before a jury of her peers and the jury didn't believe her.

TAYLOR: I figured that it was just going to be a fair process. I was the victim. I got hurt. They caused the injuries. I figured that they would make things right.

GRIFFIN: According to former auto insurance insiders, Ann Taylor found herself confronting yet another part of the get tough strategy, a persuasive public relations campaign to make the public believe that people like Taylor, claiming to be hurt in a minor accident, were most likely frauds.

Does the insurance industry believe that a good majority of lawyers out there and a good majority of doctors out there are crooks?

HARTWIG: Generally it's a very small minority, who in fact impose tremendous costs on everyone else.

GRIFFIN (on camera): But as you're about to see, even though the insurance companies knew most of us were honest, they came up with a strategy that would treat anyone, not just the small minority, as people trying to scam the system. If the critics are right, right now you probably believe that anybody who says they were hurt in a minor fender-bender is a liar. That is exactly what the insurance companies want you to think.


SANCHEZ: Next, part two of our series.


UNIDENTIFIED MALE: If you could take $1,000 off of a million claims, do the math.

GRIFFIN: A lot of money.

UNIDENTIFIED MALE: A lot of money.


SANCHEZ: You paid your premiums in good faith, but will your insurance company let you down when you need it the most? Investigative reporting, we're bringing it to you from the NEWSROOM.

We're also bringing you breaking news reporting, because this is what's going on right now in Mt. Hood. Three climbers missing, may have fallen off a ledge. We're all over it. We'll be right back.


SANCHEZ: We welcome you back to the CNN NEWSROOM. You see those pictures right there, they've been coming in over the past half hour or so, the pictures from Mt. Hood, Oregon. Somewhere on that mountain, about 8,300 feet or maybe higher, some climbers, three of them, have fallen off a ledge. There's a desperate rescue operation going on right now for them and we have crews and we have people following this story. As any information becomes available on it, we'll bring it to you right away.

We're also following this investigation for you. Investigative reporter Drew Griffin spent 18 months digging into how car insurance companies respond to claims in minor impact crashes. And as we're about to hear, if you're injured in something that resembles a fender- bender, you could end up in the fight of your life with your insurer.


GRIFFIN (voice-over): During the 90's, Allstate, the good hands people, and State Farm, the good neighbor, turned to one of the leading corporate consulting firms in the world, McKinsey & Company. McKinsey's consultants zeroed in on the money insurance companies were paying for medical claims in minor crashes. The solution, stop paying so much.

DAVID BERARDINELLI, ATTORNEY: 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: Santa Fe, New Mexico Attorney David Berardinelli who is suing Allstate over its practices has written a book about the change in the auto insurance business.

BERARDINELLI: And it essentially changed the focus of casualty insurance from being a safety net for the middle class into a profit maker for the shareholders and the companies administering the insurance system.

GRIFFIN: Simply put, he says, the McKinsey strategy laid out in a mountain of documents was to increase profits by denying or reducing claims payouts. McKinsey refused to grant an interview for this report. State Farm and Allstate also would not talk to CNN on camera. Allstate though has gone to great lengths to keep those McKinsey documents secret. In two states Allstate has defied judges' orders to make the documents public. But we've seen some of those secret documents and CNN has obtained these training manuals, including this one from Allstate based in part on the so-called McKinsey documents. Allstate decided to call these claims, MIST, it stands for Minor Impact Soft Tissue Injury. Michael Freeman, a forensic epidemiologist says even a slight bump in your car can create a lifetime of major pain. MIST though implies something far less severe. FREEMAN: The acronym is meant to both disparage the injury, soft tissue is a generic term for, oh, it's a soft tissue injury. It should get better in a short period of time. And then of course minor impact, meaning that this couldn't have been much of an impact if you can't show that there's a lot of damage. So it's all based around how the vehicle looks.

GRIFFIN: And the message given to the accident victim, if you hire a doctor or a lawyer to challenge the low ball offer, get ready for a long legal fight. Rob Deitz was a claims adjuster for Farmers Insurance for 14 years. He says his company also got tough on minor crashes.

ROB DEITZ, FORMER FARMERS INSURANCE CLAIMS ADJUSTER: At the end of the day, at the end of a year and a half of two of litigation, we'll pay whatever award we have to. But you're going to work for it and you're not going to like it.

GRIFFIN: Robert Hartwig, the president of the Insurance Information Institute says all CNN has uncovered in our investigative report is typical business common sense. Keep costs and therefore prices down.

HARTWIG: It's incumbent upon us to do that, because again, if there are no checks and balances, there will be no limit to what the cost of auto insurance will be.

GRIFFIN: But a staff attorney for Allstate in a New Mexico lawsuit testified this was not about lowering or controlling auto insurance rates. It was about profit. She said, "We were told at this meeting that McKinsey had concluded that Allstate was paying too much for claims. Allstate was going to change the way claims were handled so that claimants could not get lawyers." The strategy, make fighting Allstate quote, "So expensive and so time consuming that lawyers would start refusing to help clients." One secret McKinsey document seen by a CNN producer in this Lexington, Kentucky courthouse advised Allstate to put boxing gloves on its good hands, when a victim fights for a better settlement.

(on camera): But insurance companies had to do one more thing. They had to convince the public, and especially juries already skeptical about personal injury attorneys that cutting payments in minor impact crashes was a good thing, a way to fight fraud.

MATHIS: They used the media's perception of plaintiff attorneys as ambulance chasers, to move that.

GRIFFIN: Jim Mathis spent 14 years in the business as a claims superintendent for State Farm and as a claims specialist for Allstate.

MATHIS: The problem has never been that there are that large a number of fraudulent claims.

GRIFFIN: Yet he watched as the insurance industry launched a media campaign to convince the public that fraud was indeed a huge issue. But even the Insurance Institute's Robert Hartwig acknowledges nationwide, most policyholders are honest.

HARTWIG: The fact of the matter is, is the vast majority of claimants, people, policy holders who have accidents and have injuries are honest people. It's only a tiny minority of individuals and a tiny minority of medical providers who, in fact, file bogus claims.

GRIFFIN: In fact, insurance experts tell us fraud has held at a constant four percent.

Insurance companies have gone to court, and I think you mentioned it yourself, with big photos of automobiles that were in accidents and told jurors don't believe this doctor, believe this picture. There's not much damage here. How can this person be hurt. Is that fair?

HARTWIG: There are probably in the vicinity of 25 to 30 million auto insurance claims every year. A very, very tiny minority actually wind up in dispute.

GRIFFIN: Do you know we've been talking to judges who say their courts are clobbed with these kinds of case.

HARTWIG: Again, you have to take a look at what is producing the log jam here. We have a group of attorneys quite frankly, who are very upset because, guess what, the gravy train has ended.

GRIFFIN: Who is causing the log jam? We asked a judge.

JUDGE DAVID DREYER, INDIANAPOLIS SUPERIOR COURT: The jury system is besieged by low-impact, small auto accidents.

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.

DREYER: They have 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 and control whether or not it's going to be paid or not.

GRIFFIN (on camera): State Farm spent three years fighting Ann Taylor over that $15,000 claim. But in the end, its strategy worked. The jury didn't believe Taylor, awarding her just $1,500. The lawyer she hired got virtually nothing. More importantly for the industry, its message was heard once again loud and clear. Fight the insurance companies over soft tissue medical expenses, you will come out a loser.


SANCHEZ: We're just now getting information from that situation we've been following for you on Mt. Hood. We understand that we have an official now who is part of the rescue operation. His name is Russell Gubele, he's good enough to join us now to let us know what's going on. When last we checked, we had heard from a spokesperson that you heard by telephone of the eight climbers who are on the mountain. Five of them had contacted you, three are still missing. Nobody had officially seen these guys yet. Or none of your rescuers had gotten to them. Has that changed Mr. Gubele?


SANCHEZ: Sir, I'm sorry you're breaking up a little bit. I don't know if it's your phone or our audio system, but would you try and tell us that one more time. We're just trying to see if we get a sense as to whether or not you've made contact physically yet with those five climbers.


SANCHEZ: Boy, we really do apologize. The information that we have is that there may have been contact made at this point. That would certainly be good news for us as we follow the story still. The three climbers that are missing. Hold on, I'm being told by a producer now that he had told her on the phone just moments ago -- yeah, I got it Claire that five indeed, have been reached by a search team that five have been reached by a search team. That's important information because as you might recall, when we first started bringing this story the information was that they had made contact with them by phone but that they hadn't physically reached them yet. So that's the new information, we'll continue to work the story. And we're also going to be wrapping up this investigation that we're telling you about by investigative correspondent Drew Griffin. We'll have that for you which includes this.


SANCHEZ: We welcome you back. Profits before policyholders. An 18-month CNN investigation reveals a disturbing pattern when it comes to how some auto insurance companies respond to personal injury claims. Here's Drew Griffin with the final part of his investigative report.


GRIFFIN (voice-over): This photograph shows the car Roxanne Martinez was driving when she was hit on a Santa Fe, New Mexico street.

ROXANNE MARTINEZ, ACCIDENT VICTIM: I remember you know like hitting the driver's side window and then I panicked. I was like in pain automatically.

GRIFFIN: Martinez was taken to the hospital in an ambulance. She suffered, head, neck and back injuries. Allstate offered her $15,000 to settle the case, money that she said wouldn't even cover her medical bills. So she sued and the dispute dragged on. Two years later, a jury awarded her $167,000 plus interest.

MARTINEZ: I was, like, oh my God, from 15,000 to this? I was, like -- I was happy. I thought, well, all my bills are getting paid.

GRIFFIN: Adan Carriaga was rear-ended in an accident that wasn't his fault. He ended up in an emergency room the next day.


GRIFFIN: $100.

CARRIAGA: A hundred bucks.

GRIFFIN: For what?

CARRIAGA: For settlement.

GRIFFIN: Carriaga sued and a jury awarded him $12,000. Both he and Martinez say they were victimized twice, first in their car accidents, then by the insurance company that forced them to hire lawyers to recover their medical expenses. Martinez and Carriaga are part of a pending class action suit in Santa Fe, New Mexico that alleges Allstate knew they were injured, knew they were not at fault but dragged them through the ringer anyway. Their lawyer says they are victims of a strategy that was all about boosting profits by denying or reducing medical payments to auto accident victims. And the strategy has worked.

Insurance industry insiders say reducing payments in claims has added up to billions in profits. But what have you and I gotten out of it? According to the Insurance Information Institute auto insurance bills have actually been going up 30 percent since insurance companies began fighting medical claims and calling it fighting fraud.

HARTWIG: Remember, there are many other things that go into the cost of auto insurance. For instance, how many collisions there are. We're not talking about injuries. How many cars are stolen. So there are many other factors which make up the total cost of auto insurance.

GRIFFIN: State Farm and Allstate would not talk to CNN on camera. They did send e-mails. Allstate told us, "CNN already has a point view and that Allstate would not have any real opportunity of being successful in getting you to do a balanced report." State Farm wrote, "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 that any attempt to generalize that State Farm has adopted consultant recommendations as other insurers is just plain wrong." In a second e-mail, a company spokesman said the insurer had worked with McKinsey to improve its claims process, but that State Farm had stopped using a specific McKinsey program in 1999.

For years we've been told the insurance companies are different than other businesses. Sure, profits have always been important to insurance companies, but their first obligation is to their policyholders. Fact is, most of us are required to buy auto insurance and consider it crucial financial safety net.

(on camera): But as you have seen in this investigative report, when it comes to so-called minor accidents, some insurance companies have been putting profits ahead of policyholders. They counted on no one really noticing. We did. Question now, will anyone do anything about it? Drew Griffin, CNN, Atlanta. (END OF VIDEOTAPE)

SANCHEZ: It's a developing story. The latest from Mt. Hood as it happens. And the writings of Martin Luther King, it's a CNN documentary, it's next. We'll be back.