Companies Behaving Badly Part 3: State Farm Auto Insurance

On Monday, we began a week long feature on our blog about major companies and organizations that engaged in poor corporate conduct. The list of these companies and their bad deeds are courtesy of the American Association for Justice (AAJ), a group committed to preserving Americans right to a trial by jury. The list, officially titled “Worst Corporate Conduct of 2018” can be found here.

Today’s focus is on State Farm, the Bloomington, Illinois-based company that provides a full spectrum of insurance, from auto to pet coverage. State Farm is currently the largest provider of auto insurance in the U.S. Unfortunately, last year they were also found to have been in violation of something called the Racketeer Influenced and Corrupt Organizations Act, a federal law better known as the RICO Act.

Read below to find out what, exactly, landed them on the bad businesses list.


State Farm Used Money to Influence Illinois Supreme Court Justice
State Farm’s bad decisions arose out of a 1999 court case that was plaguing the company. In a class action lawsuit, a group of plaintiffs who were auto insurance clients of State Farm accused the company of fraud by contracting with car repair shops to use lower quality replacement parts when repairing their vehicles. The case went to trial, a Williamson County jury found State Farm to be in the wrong, and they were ordered to pay $1.18 billion. State Farm appealed the case and the appellate court agreed with the lower court’s decision that the company breached their obligation to their clients, but lowered the financial award to the plaintiffs to $1.06 billion.

In 2005, dissatisfied that the initial verdict was upheld, State Farm decided to take their appeal to the Illinois Supreme Court. Behind the scenes, however, the company was engaged in a game of financial influence, donating millions to a Supreme Court Justice nominee’s campaign through political action committees (PAC), the U.S. Chamber of Commerce and the Illinois Civil Justice League. These groups then passed the money on as donations to now Supreme Court Justice Lloyd Karmeier’s 2004 election campaign. He¬†won. The next year, he sat on the Supreme Court panel that determined the outcome of the verdict appeal by State Farm. The lower court and appellate court’s findings were overturned, with State Farm walking away victorious.

 

State Farm Ultimately Pays
However, State Farm still had to pay. This past September, State Farm agreed to a $250 million dollar settlement as a result of accusations that it violated the RICO Act by donating large sums of money to Justice Karmeier’s 2004 campaign. The RICO lawsuit, brought forth by some of the plaintiffs from the car parts fraud case, could’ve cost State Farm billions if they were found to be in the wrong during a jury trial. State Farm says they did nothing wrong, but settled the case to avoid another costly and lengthy court battle.

It would be hard to argue that large donations to an election campaign don’t impact a judge’s decision to reverse a costly verdict against donors. We are all aware of the influence that corporations with big pockets can have on the election of politicians that push laws and regulations. However, campaign finance reform is still not enforced or even on the law books and until then, companies who want to exert influence over candidates for any position politicians will likely continue do so. After all, if a company that promises to protect the safety and well-being of you and your family would be tempted by it, who wouldn’t?

 

 

 

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