State Farm Sued for Bankrolling Judge

Customers of State Farm Mutual Automobile Insurance Co. brought a class-action suit against the insurance company, claiming it helped elect a judge and block a billion-dollar award against State Farm.

The customers’ suit, Mark Hale v. State Farm Mutual Automobile Insurance Co., will proceed as a class-action suit, following a federal judge’s ruling September 16.

The plaintiffs, about 5 million State Farm customers, accuse State Farm of defrauding them by secretly bankrolling Lloyd Karmeier’s 2004 campaign. Further, the case alleges, State Farm “ …

created and conducted [a] RICO enterprise … to enable State Farm to evade payment of a $1.05 billion judgment affirmed in favor of approximately 4.7 million State Farm policyholders by the Illinois Appellate Court.”

The suit details a two-part process State Farm undertook to ensure the installation of a judge who would rule in its favor.

“In the first phase, State Farm sought to recruit, finance, direct, and elect a candidate to the Illinois Supreme Court who, once elected, would vote to overturn the $1.05 billion judgment,” the suit claims. “Defendants [State Farm] ultimately succeeded in obtaining this objective. Nine months after his election, Karmeier voted in favor of State Farm to overturn the $1.05 billion judgment of the Appellate Court.”

That award came as the result of a case brought by State Farm customers that claimed generic car parts used in car repairs were of lower quality than original equipment and violated terms of their insurance policies. In 1999, an Illinois jury awarded $456 million to the plaintiffs in that case, finding State Farm in breach of contract. The trial judge added $730 million in damages on a fraud claim. An appellate court reduced the verdict to $1.01 billion. However, the Illinois Supreme Court, with Karmeier’s support, nullified the award in 2005. The U.S. Supreme Court refused to review the case.

State Farm filed a motion for a stay in proceedings September 30, claiming the company “ … will be irreparably injured without a stay.”

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