State Farm And Bad Faith Insurance

Dallas and Fort Worth insurance lawyers know all too well the games some insurance companies play to beat the system.  That knowledge has taken on new meaning after reading this story from BloomBerg.  The story is titled, State Farm Faces Suit Over Claims It Bankrolled Judge.

Some customers of State Farm Mutual Automobile Insurance Co. claim the company conspired to help elect an Illinois Supreme Court justice candidate so he could vote to throw out a $1 billion award against the company.  Now they will be able to bring their case as a group.

A federal judge on Sept. 16 ruled that 4.7 million State Farm policyholders can band together to sue the insurer for allegedly lying about its efforts to financially back Lloyd Karmeier for a seat on Illinois’ highest court.  Customers contend in their class-action lawsuit that State Farm defrauded them by secretly bankrolling Karmeier’s 2004 campaign.  In exchange, they allege, Karmeier provided a key appellate vote against upholding the $1 billion verdict in a case over the use of generic parts in car repairs.

The ruling will complicate Bloomington, Illinois-based State Farm’s efforts to fend off claims it engaged in racketeering by working with others to get Karmeier elected specifically to target the 1999 verdict in Illinois state court.
The ruling was one of the largest class-action awards in U.S. legal history.

Missy Dundov, a State Farm spokeswoman based in Illinois, said the company intends to “ask the appellate court to review this ruling in the very near future.”

The plaintiffs “have unsuccessfully asserted and reasserted these allegations for many years and should not be permitted to do so any longer,” Dundov said in an e-mail.

Illinois Supreme Court officials didn’t immediately return a call for comment on behalf of Karmeier, who is now the court’s chief justice.  He isn’t named as a defendant in the racketeering suit.

In their original case, State Farm customers claimed the generic car parts were of lower quality than original equipment and violated terms of their insurance policies.  An Illinois jury awarded them $456 million for breach of contract in 1999 and the trial judge added $730 million in damages on a fraud claim.  An appellate court reduced the verdict to $1.01 billion.

The Illinois Supreme Court threw out the award in 2005 with Karmeier’s backing and the U.S. Supreme Court refused to review the case.  Lawyers representing State Farm customers later uncovered the insurer’s financial backing of the judge.  Karmeier won re-election to his post in 2014.

Policyholders later sued State Farm and others who backed Karmeier’s 2004 campaign alleging they engaged in racketeering by secretly launching an effort to recruit and fund a judicial candidate willing to vote down the $1 billion verdict.  They argued State Farm officials lied when they denied in court filings that they backed Karmeier for the appellate post.

U.S. District Judge David Herndon found customers could band together to press claims that State Farm and others worked to “secretly subvert the judicial process and deprive plaintiffs of an impartial forum” to review the award.  The State Farm customers have established that there are “common questions regarding defendants’ acts and omissions to evade” the judgment, he concluded.

The case is Mark Hale v. State Farm Mutual Automobile Insurance Company, No 12-660, U.S. District Court, Southern District of Illinois.