State Farm Insurance, the largest property casualty insurance company in the country, was the defendant in a lawsuit for fraud which they recently settled out of court; 4.7 million plaintiffs brought the class-action lawsuit naming State Farm as the defendant in the case. These policyholders claimed the company cheated them by using substandard vehicle replacement parts.
State Farm Auto Insurance policies guaranteed customers would receive original manufacturer parts to replace those damaged in vehicle accidents. Instead, the customers discovered the installation of generic, low-quality parts that cost much less. When the customers tried to protest and get the parts their policies promised them, State Farm denied their claims.
The class-action case, originally filed in Illinois, won when a jury gave the plaintiffs $456 million dollars for State Farm’s breach of contract. The trial judge added $730 million for punitive damages, resulting in a total award of over $1 billion. This was one of the largest class-action award verdicts in U.S. history. State Farm appealed the judgment.
A new allegation
Meanwhile, a vacancy opened in the Illinois Supreme Court for a new judge. After the election, this judge reversed the $1 billion judgment against the insurance company, causing attorneys to investigate the election. They claimed that State Farm funded the man’s campaign in return for the reversal.
A RICO conspiracy
Plaintiffs formed a class-action RICO lawsuit against State Farm. RICO is an acronym for Racketeer Influenced and Corrupt Organizations Act, a federal law enacted to punish criminal organizations. In this case, State Farm became a RICO suspect when plaintiffs claimed the company bought the judge to throw out their award.
When a RICO violation charge succeeds, part of the punishment is to triple the damages. Instead of over $1 billion, the plaintiffs—who were suing for much more this time—would receive the new amount, tripled under the RICO law. The plaintiffs, if they won the class-action RICO case, were in line to receive nearly $9 billion in awards and punitive damages from State Farm Insurance.
The RICO trial, scheduled in 2018, was ready to start when, at the last minute, State Farm—which had continually denied any involvement in a RICO scheme—offered to settle out of court for $250 million. The plaintiffs accepted the settlement. An attorney for the plaintiffs said the action, in his opinion, spoke for itself, meaning that big corporations do not offer that much settlement money unless they believe they will lose their case in court.
State Farm found out the hard way that customers can win when they fight back against unfair treatment by a big insurance company.