We’re from the Insurance Company. We’re Here to Help.

We’re from the Insurance Company. We’re Here to Help.

People are constantly asking me why they need a lawyer when it is obvious that the person who caused the accident is liable and the other person’s insurance company “should pay all the damages and make sure all the injured people are compensated appropriately.” Most laypeople don’t understand what we who deal with insurance companies and injury claims on a daily basis know all too well: The insurance company is not your friend. They are not your “neighbor,” and they don’t care about you. In fact, the insurance company owes its allegiance to its shareholders to maximize their profit which, in essence, means bringing in as many dollars as possible in premiums and paying out as few dollars as possible in the form of claims. Insurance companies engage in conduct that they design to affect a litigant’s ability to gain favorable compensation. These events occur in such forms as legislative tort reform (which is designed to change the law to limit a person’s right to recover for their injuries) and in forum shopping (which is the act of pigeonholing injured persons to where and how they can bring claims against the company). State Farm recently demonstrated to what lengths an insurance company will go to affect the playing field for deciding injury cases.

But first, some background: In 1999, an Illinois state court awarded State Farm’s customers $456,000,000.00 for a breach of contract claim that they had brought alleging State Farm had used sub-standard replacement parts to repair its own insured’s vehicles. In addition to the verdict, the trial judge added an additional $730,000,000.00 in damages on a separate fraud claim because the company tried to hide what they were doing. The total award to the plaintiffs was $1,186,000,000.00 (yes, billion). Of course, State Farm appealed, and the appellate court reduced the 1.186 billion dollar verdict to $1,056,000,000.00, which was still one of the largest class action awards in U.S. legal history.

In 2004, Judge Lloyd Karmeier, who had been a circuit court judge for almost 20 years, won his bid for election to the Illinois Supreme Court. A year later, the Supreme Court (now including Justice Lloyd Karmeier) threw out the billion dollar award, and the United States Supreme Court refused to review the case. This ruling ended State Farm’s obligation to pay the billion dollars to the grieved people.

In an unrelated twist, the United States Supreme Court rendered a ruling involving a large coal mining company, Massey Energy Co., in 2009. That ruling held that judges are obligated to recuse themselves (take themselves off a case) where their top campaign contributors are parties to a claim. (You would think this would be common sense, but apparently it is not). Upon review of Judge Karmeier’s 2004 election contributions, it became clear that State Farm had funded more than 3.5 million dollars of the 4 million dollars raised by Justice Karmeier’s election campaign in 2004. Worse yet, State Farm had concealed the true source of those donations by providing the campaign contributions through a number of advocacy groups that did not disclose State Farm as their donor.

Based on the 2009 Supreme Court decision, a lawsuit was filed in the United States District Court for the Southern District of Illinois by the name of Hale v. State Farm Mutual Automobile Insurance Company, 12-CV-00660, accusing State Farm of fraud under the federal Racketeer Influence and Corrupt Organizations Act (RICO). On the eve of trial, State Farm settled the case for $250,000,000.00. Of course, State Farm contends that the $250,000,000.00 settlement was designed to settle the claim without admitting liability to any wrongdoing.

It isn’t just State Farm that engages in less-than-honorable practices. Other insurance carriers, particularly GEICO, were notorious in the State of Florida for sending representatives to appear at court ordered mediations without providing them any authority to settle claims. After some litigation, Rule 1.720 of the Florida Rules of Civil Procedure was enacted. Plaintiff’s lawyers affectionately referred to this recent rule amendment as “The GEICO Rule,” which now requires parties who appear at mediations to have full authority to settle without consultation in order for a good faith mediation to occur or risk court sanctions.

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