BLOOMINGTON — State Farm will pay $250 million to settle a federal lawsuit that accused the insurance giant of breaking federal racketeering laws by funneling money into the election campaign of an Illinois Supreme Court justice.
The compromise was announced Tuesday in the U.S. District Court for the Southern District of Illinois.
In a statement released late Tuesday by State Farm and Clifford Law Offices, the Chicago-based law firm representing policyholders in the litigation, the two sides said they reached the agreement "because they believe it is in the best interest of all the parties and to avoid protracted litigation and appeals that could continue for several more years."
The agreement "provides benefits to over 4 million current and former State Farm policyholders who were members of the class in Avery (vs. State Farm)," said the joint release.
State Farm denies liability and maintains its position that the company "considers the claims to be without merit," according to the settlement.
The class action lawsuit, Hale v. State Farm, arose from earlier litigation in Avery v. State Farm that challenged the insurance company's authorization to use non-factory vehicle parts on vehicles involved in accidents between 1987 and 1998.
A 1999 $1 billion jury verdict against State Farm in the Avery case was reversed by the Illinois Supreme Court in 2005.
In 2015, a federal judge in the southern Illinois district approved class-action status for a lawsuit by policyholders who alleged that State Farm directed campaign contributions that made their way to the coffers of the committee to elected Justice Lloyd A. Karmeier to the Illinois Supreme Court.
The millions in so-called "dark money" were channeled 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.
Karmeier, who is now chief justice of the Supreme Court, cast the deciding vote in favor of overturning the appellate court ruling that upheld the billion-dollar Avery verdict, policyholders noted in their lawsuit.
He was not a defendant in the case.
The racketeering and unjust enrichment claims against State Farm are dismissed under the terms of the settlement.