Sometimes It’s Not Over Even When It Seems to Be

Just because you’ve reached the end of the line doesn’t necessarily mean that the war is lost. That’s the lesson to be drawn from Hale v. State Farm Mutual Automobile Ins. Co.

Imagine this: for years your law firm has litigated a class action suit against a major U.S. insurance company, with no expectation of receiving anything for your efforts unless you eventually succeed with the case. In fact, not only have you and your team devoted thousands of hours to the case (equivalent to millions of dollars in legal fees), you’ve also spent lots of money on consultants, experts and investigators, as well as on other expenses for the complex litigation (again with no guarantee of ever being reimbursed).

Imagine further that through your efforts you secure a billion-dollar judgment, which the insurance company, backed by an army of lawyers and seemingly endless resources, immediately appeals to the state’s highest court. And then imagine what no one in that position would ever want to imagine: on appeal, the judgment gets reversed and the case dismissed.

Having been sent home packing by the state’s highest court, and with no federal “hook” upon which to ground an appeal to the U.S. Supreme Court, you might think that you’re officially out of luck, with nothing more to do but be forever haunted by the thought of “what once was and what could have been.”

And then again, given the stakes involved, maybe you’re not out of luck.

State Farm Class Action Suit

Some twenty years ago, a class action was brought against State Farm in Illinois state court. The suit alleged fraud in conjunction with the use of non-OEM (original equipment manufacturer) parts and repairs over which State Farm had control.

In 1999, a verdict of $1.18 billion (later reduced to $1.056 billion) was returned. State Farm appealed and in August 2005, the Illinois Supreme Court reversed. Rather than throw in the towel at that point, counsel for the class took a novel approach. They instituted a new class action in Illinois federal court, alleging that State Farm and others were liable under RICO (the federal Racketeer Influenced and Corrupt Organizations Act) for successfully conspiring to elevate to the Illinois Supreme Court a judge by the name of Lloyd Karmeier, who reached the Illinois Supreme Court in 2004 and cast a vote in State Farm’s favor on the appeal.

Ultimate Settlement

More recently, as the trial in this new, Federal RICO case was about to start, State Farm settled, agreeing to pay $250 million – a fraction of the original verdict amount. It was, nevertheless, a substantial recovery in a case that was once dead in the water.

The lesson in my view is that creative lawyering and tenacity is what we need to make insurance companies keep their promises to their insureds.


Evan S. Schwartz
Founder of Schwartz, Conroy & Hack