In 2018, a court trial was scheduled against State Farm Insurance, the largest property casualty insurance company in America. The company was the defendant in a class action lawsuit for 4.7 million auto insurance customers. Filed under the Racketeer Influenced and Corrupt Organizations Act, the RICO lawsuit represented auto insurance customers from every state in the country except two states that had independently filed their own lawsuits.

The RICO charge filed in Illinois against State Farm alleged the company paid several million dollars to get a federal judge elected to the Illinois Supreme Court who agreed to dismiss the RICO lawsuit. If the class action lawsuit prosecution won, State Farm would pay nearly $9 billion to the insurance customers. The dollar amount was so high because RICO charges include treble damages for a conviction.

How did State Farm allegedly defraud customers?

Auto insurance policies from State Farm entitled policyholders to receive new, original manufacturer factory replacement parts in the event of vehicle accident damage. Instead, the lawsuit stated that State Farm installed cheap, substandard generic parts costing much less. When customers filed claims against State Farm demanding new parts, the company allegedly denied their claims. Eventually, 4.7 million claimants formed a class-action RICO lawsuit against State Farm.

What is the RICO act?

The RICO act is a federal law that allows penalties against groups, including corporations, for racketeering. Racketeers are criminals who cheat people by substituting a poor-quality repair or item to fix a problem. State Farm was recently named fourth by the American Association for Justice on their 10 worst insurance companies in America report for denying customer claims or using delay tactics to avoid payment. 

What were the charges against State Farm?

State Farm allegedly funded a judge's 2004 election campaign to the Illinois Supreme Court. The prosecution claimed State Farm funneled millions of dollars in campaign funds through various groups that did not legally have to disclose donors. Eventually, the prosecution traced 90 percent of the judge's campaign funds directly back to State Farm. The company persistently denied guilt and disavowed knowledge of the millions in campaign contributions, in spite of email evidence to the contrary.

The lawsuit claims that, because of the generous secret donations by State Farm, the judge bought by State Farm won the Illinois Supreme Court election. A trial judge and an appellate court awarded over a billion dollars to the class action litigants. State Farm appealed, and the judge State Farm sponsored cast the deciding vote to overturn the award. Appeals and litigation finally allowed the class-action lawsuit to go to trial in 2018.

Just before the trial, State Farm—which had steadfastly maintained its innocence—suddenly paid $250 million to the class-action defendants to drop the case. An attorney for the plaintiffs said he thought that the settlement spoke for itself; corporations don't usually pay that kind of settlement money unless they are sure they will lose the case and pay billions of dollars to the class-action insurance owners.

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