State Farm Insurance Tricks

It’s probably not right to pick only on State Farm.  Most if not all, of the insurance companies or their individual employees will break the rules for their own gain.  This is illustrated in a Chicago Tribune story titled, State Farm Pays $250 Million, Ducks Trial Over Allegations It Tried To Rig Illinois Justice System.

The story tells us State Farm agreed to pay $250 million on the brink of a trial to customers who claimed the company tried to rig Illinois justice system to wipe out a $1 billion jury verdict from 19 years ago.

The customers were seeking as much as $8.5 billion in damages in a civil racketeering trial that was set to start Tuesday in federal court in East St. Louis, Illinois.  A judge granted preliminary approval to the accord and set a final fairness hearing for December.

The biggest U.S. auto insurer was accused in the case of leading an effort to recruit a judge friendly to its cause for the Illinois Supreme Court, secretly funding Judge Lloyd Karmeier’s 2004 election campaign by funneling money through advocacy groups that didn’t disclose donors.  Under the federal Racketeer Influenced and Corrupt Organizations Act, any damages would have been tripled.

Karmeier and his Democratic opponent, Gordon Maag, spent a combined $9.3 million in their battle for the southern Illinois seat on the Supreme Court, the Associated Press reported.  It was the most expensive judicial race in American history at the time, according to experts the AP interviewed.

The company denied any wrongdoing in settling the claim.  The settlement “is made simply to bring an end to the entire litigation,” and “to avoid protracted litigation and appeals that could continue for several more years,” said a company spokesman.

The settlement came after the jury was selected last week and just before opening statements were set to begin.  That probably shows State Farm was spooked by the risk of an adverse verdict.

Corporations generally don’t part with that kind of money just before the opening statement of a trial unless they got a really negative vibe from the jury that was impaneled.  The settlement for far less than what plaintiffs were seeking isn’t unusual.  Two hundred and fifty million dollars in hand may be worth declining a shot at a billion, that only would come after many appeals.

The plaintiffs were $1 billion in damages based on the original verdict and $1.8 billion in interest, plus tripling under the RICO law.

The settlement ends more than 20 years of litigation by State Farm customers who alleged they were given generic car parts of lower quality than original equipment for more than a decade, violating the terms of their insurance policies.