Attorney General Gentner Drummond recently made a noteworthy move by filing a petition that accuses State Farm of violating ORICO, which is Oklahoma’s version of the Racketeer Influenced and Corrupt Organizations Act. The RICO laws, first enacted in 1970, were designed to combat organized crime like the infamous Italian mafia, La Cosa Nostra. This legal action marks a significant development in a long-standing saga involving State Farm and allegations of racketeering.
State Farm's entanglement with racketeering accusations dates back to 1997 when they were discovered violating their own auto insurance policies by using aftermarket parts for bodywork, resulting in a massive $1.1 billion jury award against them in a 48-state class action lawsuit filed in Illinois. Despite this ruling, State Farm appealed the decision and the tide turned in their favor with a controversial twist.
In a peculiar turn of events in 2004, a circuit court judge named Lloyd Karmeier from a rural county southeast of St. Louis won a seat on the Illinois Supreme Court after a record-breaking expensive judicial election. Karmeier's pivotal vote led to the overturning of the billion-dollar settlement against State Farm, raising suspicions of foul play in the judicial system.
A subsequent investigation in 2009 unearthed alleged ties between Karmeier and State Farm, with claims of campaign donations amounting to as much as $4 million. This revelation fueled further accusations of RICO violations against State Farm, seeking billions of dollars in damages. The legal battle culminated in a settlement of $250 million in 2018, averting a potentially damaging trial that could have tarnished State Farm's reputation as a criminal enterprise.
Oklahoma has now entered the fray, mirroring the legal struggles seen in Illinois. Drummond’s petition seeks to intervene in multiple cases against State Farm in Oklahoma, focusing on the alleged practice of pre-denying claims related to hail and wind damage for policyholders. The petition highlights a pattern of racketeering activities by State Farm, aiming to shed light on the purported enterprise-wide scheme.
Accusations of the insurance industry exhibiting cartel-like behavior have long persisted, stemming from the McCarran-Ferguson Act of 1945 that granted immunity to insurers from certain antitrust regulations. Critics argue that this immunity has enabled insurance companies to engage in dubious practices akin to price-fixing and collusion, akin to what cartels do in other industries.
Notable legal experts and commentators have weighed in on the contentious relationship between insurance companies and the law. Some have likened the industry to a quasi-criminal syndicate, pointing out instances of delaying claim processes, rejecting valid claims, and subjecting policyholders to prolonged litigation as questionable practices.
While debates continue on the enforceability of RICO laws against the insurance sector, legal precedents suggest that RICO can be a tool for curbing unlawful activities within the industry. Past cases have seen both accusations and defenses based on RICO violations, showcasing the legal complexities surrounding such allegations.
In light of the recent petition against State Farm by the Oklahoma Attorney General, the focus is now on uncovering potential wrongdoings and holding accountable those involved in the alleged scheme. The legal battle ahead will likely shape the future landscape of insurance practices and regulatory oversight, shedding light on the intricate dynamics between insurers, policyholders, and the law.
As the deadline for State Farm to respond to Drummond’s petition looms, the outcome of this legal confrontation remains uncertain. Whether State Farm will opt for another settlement or choose to engage in a high-profile trial is a question that intrigues legal observers and stakeholders alike. The developments in this case could have far-reaching implications for the insurance industry and consumer protection in Oklahoma and beyond.