Unfortunately, many insurance companies are engaged in secret claims conduct that is intentionally designed so that policyholders get less than what they bargained for at the point of sale.
These lawsuits, like the one in the following story, expose what many insurance regulators are doing behind the scenes that no one knows about. Some of America’s most popular insurance companies are settling claims cases for millions of dollars, instead of going through with a public trial. The following story explains the case: Hindin v. State Farm.
State Farm Pays $30 Million
In 1993, after years of litigation, State Farm paid $30 million to a group of clients to settle their claims of bad faith and religious national origin discrimination. Los Angeles attorney Todd Hindin represented the clients and worked diligently to go after State Farm who was handling their uninsured motorist claims.
Hindin V. State Farm
Everyone thought that the four individual plaintiffs wound up receiving $34,000 each, but that wasn’t the case. They actually received a lot more. The incident that the case referred to was an automobile-versus-automobile accident in February 1987 and State Farm petitioned the court to vacate the award, although this request was dismissed before it was even heard.
Hindin V. State Farm Continued
In response, State Farm obtained information indicating that the underlying insurance claims were in part, fraudulent. In response, on February 14, 1996, State Farm filed a federal court fraud action against its former insureds and their attorneys, the Hindin parties. They sought both restitution of the $30 million payment and return of internal documents it had produced during the bad faith/discrimination litigation.
In addition, State Farm also requested equitable relief to prevent further dissemination of those documents. But everyone wondered what was in those documents that was so damaging to State Farm? What were they trying to cover up and prevent from ever seeing the light of day? Attorney Todd Hindin sought to find that out…
Bad Faith Case
According to Chip Merlin, from Merlin Law Group, Hindin wound up settling the case confidentially with State Farm for $30 million. No one even knew about this bad faith case settlement until State Farm made a huge deal about it and filed a lawsuit against Hindin and others asking for its $30 million back.
The case wound up being settled before Ronald Middler, Divisional Claims Superintendent, was scheduled to testify at the bad faith/discrimination trial concerning State Farm. Apparently, Hindin was citing discrimination based on race, religion and national origin as being the reason for the lawsuit.
Jewish Lawyers Lists
State Farm had an internal list of the names of Jewish lawyers, which they referred to as the Jewish Lawyers List. The claims of the clients of the attorneys whose names appeared on the Jewish Lawyers List were automatically transferred to State Farm’s fraud unit simply because the lawyer’s name appeared on the Jewish Lawyers List, the litigation report said.
“If your name was on the list of Jewish lawyers, your client’s claim would be automatically referred to the fraud unit and never settled or paid.” Dr. Frank Taylor, an economist with a doctorate and a former college professor of economics, insurance, and finance, was called on to investigate the religious background of the people whose names were on the list.
There were a total of 240 separate names that appeared on the two Jewish Lawyers Lists provided to Dr. Taylor. All of those names had been produced by State Farm at the bad faith/discrimination trial. Out of those 240 names, Dr. Taylor was able to obtain the necessary information on 193 of those attorneys, translating to 80 percent.
In the end, it was found that 115 of 193 (or 77 percent) of the lawyers on the lists were of Jewish decent. The remaining 28 lawyers on the list, though not Jewish, were members of a racial or ethnic minority.
The case explained that Jews comprise 2.9% of the population of the State of California, 5.9% of the population of the County of Los Angeles and 2.5 % of the population of Orange County. But, the Jewish composition of the State Farm Attorneys lists is more than 10 times the percentage that would accurately depict the Jewish composition of the general Los Angeles population.
The Numbers Didn’t Make Sense
Additionally, the list is more than 20 times what you would expect as a result of the Jewish composition of the general population of the State of California. Hindin asked Dr. Taylor to assume that insurance claims of clients represented by attorneys whose names appear on these lists are assigned to the handling units operated at State Farm. The reason being is that the attorneys names appear on one or more of the lists experienced substantial delays in the processing of their claims.
They also received substantially smaller offers to settle their claims than they would have received had they not been assigned one of these special units. “Dr. Taylor opined that based on his investigation and assuming the facts that Hindin has asked him to assume, there is very substantial evidence that State Farm discriminates against Jewish lawyers and their clients in the operation of the special units. It is unlikely that the result occurred by chance. It is likely that it occurred by design.”
A Conscious Intent
“The reason for Dr. Taylor’s opinion is that based upon his knowledge of statistics and the insurance industry, it is highly unlikely that these lists of names could be constructed with predominantly Jewish attorneys being listed by chance. Rather, it is clear that the insertion of predominantly Jewish names on these lists for special claims handling is the result of a conscious intent,” the litigation report said.
Therefore, “It is highly unlikely such a predominately Jewish list of attorneys would be submitted to the special claims units if Jewish discrimination were not a primary factor.” “Hindin sued State Farm for malicious prosecution and various other theories of liability. The appellate court upheld a dismissal of this lengthy litigation because Hindin failed to get the case to trial,” Chip Merlin wrote.
State Farm Agrees to Pay $250 Million
But this wasn’t the only State Farm lawsuit that ended with them shelling out millions. In September 2018, Law360 reported that State Farm settled a Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuit for $250 million. This settlement stems from a 1999 case where customers sued State Farm alleging they were given generic car parts of lower quality instead of original equipment for more than a decade.
Breach of Contract
This clearly violated the terms of their insurance policies so they took State Farm to court. The Illinois State Court jury awarded the customers $456 million for the breach of contract and the trial judge added $730 million in damages on a fraud claim. Even though an appellate court reduced the verdict to $1.056 billion, it was still one of the largest class-action awards in U.S. legal history.
State Farm Recruiting a Judge
Then, in 2004, Judge Lloyd Karmeier, a Republican who had been a circuit judge in Washington County for almost two decades, was elected to the Illinois Supreme Court. One year later, the court threw out the award and the U.S. Supreme Court refused to review the case. The plaintiffs sought to revive the lawsuit, claiming that State Farm spent more than $3.5 million on Karmeier’s election and continued to conceal its role even during the attempt to reinstate the original claim.
The appeal was rejected but months later, the policyholders filed the new racketeering lawsuit in federal court. The customers accused State Farm of leading an effort to recruit a judge friendly to its cause for the Illinois Supreme Court, secretly funding Judge Karmeier’s 2004 election campaign by funneling money through advocacy groups that didn’t disclose donors.
Nearly 20 Years Later
State Farm denied any wrongdoing in settling the claim, saying the settlement was made “simply to bring an end to the entire litigation” and “to avoid protracted litigation and appeals that could continue for several more years.” State Farm agreed to pay $250 million to the trial of customers who claimed they tried to rig the Illinois justice system to wipe out a $1 billion jury verdict from 19 years ago.