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Did State Farm “bribe” a Supreme Court Justice who overturned a billion-dollar judgment?

December 6, 2011 by Steven M. Gursten

Class-action lawyers want to reopen case after investigation by former FBI agent suggests insurer lied, possibly making illegal donations of $2 million to $4 million

Last week, I wrote about the new John Grisham book, The Litigators. The case that I’m going to discuss today is not a John Grisham novel (yet), but it sure reads like one.

It also serves as a cautionary tale about the distorting and perverse effect that campaign contributions can have on our legal system. In this post- Citizens United world of ours (Citizens United being possibly the worst U.S. Supreme Court opinion of the past 100 years) it shows how unlimited corporate and insurance company campaign contributions can undermine our entire justice system.

Bottom line: State Farm is accused of lying about having spent millions of dollars to support a conservative Republican candidate for the Illinois Supreme Court whose vote ultimately saved the insurance giant billions of dollars.

Here are the facts:

In 1997, State Farm Insurance Company got clobbered with a $1 billion class-action judgment in Avery v. State Farm for allegedly using inferior parts in its vehicle-damage repairs.

The Appellate Court upheld the judgment in 2001 and arguments were heard before the Illinois Supreme Court in May 2003.

Enter Judge Lloyd Karmeier.

Within six months of the Supreme Court arguments, Karmeier, a conservative Republican, threw his hat in the race for an open Supreme Court seat.

With the financial backing of State Farm, Karmeier won the election in November 2004.

Subsequently, Karmeier fended off claims that he should disqualify himself from participating in Avery v. State Farm. He insisted State Farm’s support would not influence his decision in the case. For its part, State Farm swore to the Illinois Supreme Court that it had only contributed $350,000 to Karmeier’s campaign.

Accordingly, Karmeier stayed on the case.

And in July 2005, he voted to throw out the billion-dollar judgment against State Farm, which is exactly what the Illinois Supreme Court did.

Unseemly as it was, that appeared to be the end of the story.

Until now.

Did State Farm really donate between $2 million and $4 million in campaign contributions to this judge?

Based on an investigation conducted by a former FBI agent, the plaintiffs’ class-action lawyers in Avery want the Illinois Supreme Court to reopen the case and reexamine the propriety of having allowed Karmeier to sit in judgment over his campaign benefactors.

Of particular concern are investigation results which allege that State Farm played a much bigger role in Karmeier’s campaign — financially and otherwise — than it previously disclosed to the Illinois Supreme Court.

According to news reports, the investigation contends that State Farm allegedly funneled between $2 million and $4 million to Karmeier’s campaign through the Illinois Civil Justice League and through the Illinois Republican Party by way of the U.S. Chamber of Commerce.

Additionally, it is alleged that a State Farm lawyer “vetted” Karmeier for the Supreme Court seat and consulted with the head of the Civil Justice League who was effectively “running” Karmeier’s campaign.

Obviously, these scandal allegations are only allegations unless and until the evidence proves them to be true.

But it is much more than an allegation to say that State Farm gave more than a quarter of a million dollars to a state supreme court candidate who, upon being elected, voted to throw out a billion-dollar judgment against State Farm.

That is a fact. And from where I’m standing, that is scandalous enough.

State Farm one of worst insurance companies in Michigan

Now, this is not the first time I’ve written about State Farm.

State Farm has made my list of the worst insurance companies for many years. As a No-Fault insurance lawyer (and including the other 17 lawyers here who also only handle auto accident insurance cases in Michigan), we have litigated Michigan No-Fault “PIP” insurance cases with every auto insurance company in the state.

This qualifies me to say from my own personal experience that State Farm is one of the very worst, if not the very worst insurance company in Michigan, about paying benefits right away and putting its own customers under “investigation” – often for no other reason than to avoid paying what they should have to begin with. But what State Farm did here, if it proves true, goes far, far beyond that.

This threatens our very civil justice system and our democracy

Note: This blog relies on information contained in the following news stories:

Lawyers: State Farm covered up support of candidate in most expensive judicial race in U.S. history, 9/15/2011, Belleville News-Democrat, bnd.com.

Plaintiffs lawyers: State Farm bought Karmeier’s SC seat, 9/16/2011, LegalNewsline.com.

State Farm Secretly Gave $2.4 Million to Ill. Judge in $1B Case, 9/22/2011, Strategist.

State Farm tries to block reopening of $1 billion Avery case, 9/30/2011, The Madison-St. Clair Record.

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5 Replies to “Did State Farm “bribe” a Supreme Court Justice who overturned a billion-dollar judgment?”

  1. Steven,
    I have been a victim of exactly the type of mistreatment State Fraud does to others only I fought them and became (according to them) the first person to ever receive a settlement, then demand more later and get it,back in 2003. I am currently fighting them again for a claim on my home where a hail storm destroyed houses in my county and they say the damage to my house is not from hail. i actually enjoy fighting them and in my research i uncovered the article about the bribery scandal and have posted a petition on change.org for the resignation of Ed Rust Jr. Its not about the money anymore. i will work tirelessly to see that State Farm is exposed on a national level but I need help. Im thinking World News tonite. Can you help me get my petition to a place where others will see it and spread the word too? Ive tried to contact Sen Thompson but have not heard anything as of yet. I asked him to tweet the petition address. Thank you for anything you can do.
    Lou
    http://www.change.org/petitions/state-farm-insurance-resignation-of-ceo-edward-rust-jr

  2. I thought that state farm is a mutual … member owned…so they are not supposed to donate money to political campaigns. Isn’t that true?

  3. Talia, this is what I found on http://www.sourcewatch.org:

    State Farm Political Contributions and Lobbying

    State Farm spent $3.62 million on lobbying activities in 2010. [6] A list of its lobbyists and lobbying firms can be found HERE. The list of bills State Farm lobbied on can be found HERE.

    Open Secrets latest information about State Farm is from 2008. That year, State Farm gave a combined total of $4.1 million in federal and state political contributions.

    Since 2000, CEO Edward Rust has given over $50,000 to political campaigns.[7]

  4. I spent two months short of 40 years employed as a State Farm Claim Representative, Claim Superintendent and Divisional Claim Superintendent (The job has been reclassified as a Section Claim Manager), and ten years as a lobbyist in State Government.

    After retiring as a lobbyist for State Farm I was Executive Director of the Insurance Institute of Kentucky, a non-profit trade association dedicated to educating, supporting, and assisting the Kentucky insurance consumer, market and industry.

    In all of my claim responsibilities as a claim representative I was trained by State Farm to treat the customer as I would want to be treated. and to investigate every aspect of every single claim to be certain the customer as treated properly. My files went through two levels of review by State Farm management people, and the entire claim operation underwent Market Conduct Examinations completed by the Kentucky Department of Insurance.

    Yes, State Farm claim representatives made mistakes in handling files. Every person who has handled an insurance claim for any length of time, has made a mistake. But I have never objected to taking a second look at a file where there was a complaint. Insurers have claim management people trained to review closed files, either on their own volition, or at a request from the consumer.

    Unlike the comments made by an attorney earlier in this document, I can not imagine the value of closing a file when an open claim is pending.

    At the time I was supervising claim a division, it was possible for as many as 300 individual claim reports to be reviewed each week by each representative. Some were no record files in which the policyholder was not at fault, and some would be one vehicle files not involving any other claims, except that of the policyolder. However, a full review was required to be certain no other claims pending when the file was closed.

    During my forty years of reviewing thousands of claim files, I neither saw nor heard any instructions by State Farm employees or management to give the claim customer less than the best service available.

    As a lobbyists it was my responsibility to work against laws or regulations that would increase the policyholder premiums. I worked with other lobbyists to bring strong seat-belt laws to Kentucky, and I was a founder of the Kentucky Alliance for Motor Vehicle Safety, and organization dedicated to improving highway safety in our state.

    Sitting legislators know little about property and casualty insurance, and one of the responsibilities of a lobbyists is to inform the legislator about the consequences of insurance legislation, if it is passed. As an example, in 1980 the Kentucky legislature passed a health insurance bill without the input of any health lobbyists, and the bill resulted in 49 of 50 health insurance companies leaving the state.

    During my Tenure with the Insurance Institute of Kentucky I was in touch with representatives from 90 percent of the companies doing business in Kentucky, and during those contacts I heard no comments about those companies not having the responsibility to deal fairly, openly and properly with each customer.

    Every insurance department in the U.S. has a Consumer Protection Department, or a department with a similar name, and their investigators will dilligently investigate complaints submitted by a consumer. Most Insurance Commissioners have the power to fine insurers licensed in a praticular state for proven violations. If you have a complaint, I would advise you to deal directly with the DOI first, rather then rely on an attorney whose initiative is to make money.

    Before any one takes a complaint seriously about

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