Insurance Journal reported that a federal judge on Sept. 16th ruled that 4.7 million State Farm policyholders can band together to sue the insurer for allegedly lying about its efforts to financially back Lloyd Karmeier for a seat on Illinois’ highest court relating to a 1999 class action suit concerning the use of non-OEM parts that resulted in a $1 billion verdict.
In the original 1999 class action (Avery vs. State Farm), plaintiffs alleged that State Farm had deceived policyholders by specifying the use of non-OEM parts for collision repairs and breached its contract with the plaintiff class. A Williamson County jury agreed, resulting in a judgment against State Farm of $1.18 billion: $456 million for breach of contract, $600 million for punitive damages under the consumer fraud law and $130 million for disgorgement damages — representing direct savings realized by State Farm from use of non-OEM parts.
In 2001, the 5th Appellate Court affirmed the judgment but reversed a portion of the damages, lowering the total award to $1.056 billion.
The Supreme Court of Illinois, however, ruled that the Williamson County Circuit Court erred in certifying a nationwide class in the Avery case and overturned the verdict.
Some State Farm customers claimed the insurer conspired to help elect an Illinois Supreme Court candidate so that he could vote to throw out a $1 billion award against them. They contend in their class-action lawsuit that State Farm defrauded them by secretly bankrolling Karmeier’s 2004 campaign. In exchange, they allege, Karmeier provided a key appellate vote against upholding the $1 billion verdict.
The ruling will complicate State Farm’s efforts to fend off claims it engaged in racketeering by working with others to get Karmeier elected, specifically to target the 1999 verdict in Illinois state court. The ruling was one of the largest class-action awards in U.S. legal history.
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