State Farm

The Supreme Court will consider whether to overturn a jury verdict against State Farm Fire and Casualty Co. in a whistleblower case alleging fraud.

BLOOMINGTON — A federal judge in southern Illinois has approved class action status for a lawsuit accusing State Farm of violating federal racketeering laws by directing money into the election campaign of a state Supreme Court justice in hopes of influencing a ruling.

About 4.7 million policyholders with the Bloomington-based insurance giant could benefit from an estimated $7.6 billion payout, according to Clifford Law Offices, the Chicago-based law firm representing the policyholders. 

The alleged "scheme," claims the lawsuit before U.S. District Court Judge David Herndon, is a violation of the Racketeering Influence and Corruption Act, more commonly referred to as RICO. The lawsuit is related to an alleged, complex plot to influence a decision by the Illinois Supreme Court on an appeal of a $1.05 billion verdict against State Farm in a 1997 lawsuit, Avery vs. State Farm. 

That judgement was based on a contention that State Farm authorized non-factory parts for repairs on cars involved in accident claims between between 1987 and 1998.

In a response Tuesday, State Farm spokesman Justin Tomczak said the company was "disappointed in the court’s decision on the class certification question, and respectfully disagree with it.

"We intend to ask the appellate court to review this ruling in the very near future. Plaintiffs have unsuccessfully asserted and reasserted these allegations for many years and should not be permitted to do so any longer.”

The alleged scheme to defraud policyholders involved State Farm creating a pipeline of campaign contributions that ended up in the coffers of the committee to elect Justice Lloyd A. Karmeier to the Illinois Supreme Court.

State Farm funneled millions of so-called "dark money" through donations to the U.S. Chamber of Commerce, which then sent the money onto a political action committee and the Illinois Republican Party for use in Karmeier's 2004 campaign, according to the lawsuit.

After he was elected in November 2004, Karmeier cast the deciding vote in favor of overturning the appellate court ruling that upheld the billion-dollar verdict in the Avery case, contends the lawsuit. 

Karmeier, who is not a defendant in the case, was named Monday by the Illinois Supreme Court to serve as its next chief justice.

State Farm was accused in a 2012 lawsuit filed by two Texas men of hiding the alleged donations and its intent to influence the Supreme Court decision.   

With the new ruling giving that lawsuit class action status, the estimated settlement could now exceed $7.6 billion, according to Clifford.

As part of his ruling on Friday, Herndon noted that the initial complaint said State Farm "recruited Karmeier, directed his campaign, had developed a vast network of contributors and funneled as much as $4 million to the campaign."  

State Farm concealed its connection to Karmeier's campaign after he was elected and the appeal of its case was pending, said the complaint.

A hearing to review the status of the case is set for Oct. 15.

Follow Edith Brady-Lunny on Twitter: @pg_blunny


McLean County Courts Reporter

McLean County courts reporter for The Pantagraph.

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