Like a good neighbor, State Farm is there… to criminally prosecute its insureds on baseless fraud charges, and then to get popped for an $8 million verdict for malicious prosecution. A lawyer friend of mine in Missouri passed along this e-mail to me. I can’t summarize all the bad acts State Farm committed against its insured in two sentences – you’ve gotta read this for yourself…
This incredibly twisted story speaks for itself, inside…
James P. Frickleton and Michael C. Rader after a three week trial obtained a $8,645,000 verdict for their clients malicious prosecution and tort of outrage claims against State Farm and the National Insurance Crime Bureau.
Plaintiff Jennie Hampton’s 1990 Toyota Four Runner, valued at $10,300 and insured by State Farm Mutual Automobile Insurance Company, was stolen from her residence on the night of December 21, 1997. At this time Ms. Hampton’s lived with his half brother and co-plaintiff, Marvin Vail. The following day Jennie reported the theft in person to both State Farm and the Olathe Police Department. Five days later the vehicle was found burned and a total loss on a rural road in Miami County, Kansas. Subsequently, both the Olathe Police Department and the Miami County Sheriff’s Department investigated the theft and arson and determined that plaintiffs were not involved.
Despite two separate law enforcement agencies finding no evidence to implicate the plaintiffs, State Farm, through its Special Investigative Unit, conducted its own independent investigation and denied Jennie’s claim by concluding that she and Marvin Vail were guilty of insurance fraud. Specifically, State Farm asserted that Marvin, who was employed at a towing company, towed the Four-Runner to the rural area and conspired with Ms. Hampton to burn the vehicle in an attempt at falsely collecting insurance proceeds. Through their mechanical experts, whom they paid over $400,000 in the previous ten years, State Farm concluded that the engine was inoperable before the fire, and that plaintiffs were responsible for both the inoperability and arson.
Simultaneous with this independent investigation, Jennie Hampton filed a Breach of Contract claim against State Farm in Johnson County, Kansas. Shortly thereafter, State Farm, through its attorney, overtly threatened the unwarranted criminal prosecution of Ms. Hampton if she didn’t “back off” from her claim. Regardless of this threat, Jennie continued to pursue her claim. Notwithstanding State Farms long held conclusion that plaintiffs were guilty of a crime, it was not until after this threat that they instigated prosecution.
Two years from the date of the theft, the day any potential criminal statute of limitations were to run, Marvin Vail and Jennie Hampton were charged with felony insurance fraud in Johnson County, Kansas. The bases for the State’s charges derived entirely from information provided by State Farm and co-defendant, the National Insurance Crime Bureau. It was later uncovered that during their independent investigation, State Farm’s Special Investigative Unit threatened an independent witness to solicit perjury, concealed and disregarded clear exculpatory evidence, reported what information they did collect in a false manner, and directed the conclusions of their mechanical expert. State Farm, knowing they did not have access to the Johnson County District Attorney’s Office, then provided this one sided and erroneous information to NICB, requesting instead that they refer the case to the Johnson County District Attorney for charging.
NICB followed State Farm’s instruction and, through its employee and retired KBI agent who as an active agent worked side by side with the DA, presented the file to the Johnson District Attorney. Prior to this, the NICB had done absolutely no independent investigation to either confirm or deny the facts presented by State Farm. Rather, while presenting this information to the D.A., NICB admittedly “watered down” exculpatory evidence trying to instigate charging. Additionally, while meeting with the Johnson County D.A., NICB withheld critical evidence by not informing the prosecutor that it was State Farm, not NICB, which was behind the investigation and referral.
After reviewing the information provided, felony insurance fraud charges were filed against both Jennie Hampton and Marvin Vail. Prior to this neither Hampton nor Vail had any criminal history. As a result of the charges they were arrested, faced the extreme humiliation, anxiety and expense that is tied with being criminal defendants.
Following the criminal charges, State Farm continued to work behind the scenes preparing the State’s witnesses for the preliminary hearing testimony, claiming privilege on documents sought by the prosecutor, attempting to keep crucial evidence from being inspected by plaintiffs’ criminal attorneys, closely monitoring the criminal trial and providing well-prepared witnesses to testify at trial.
Eventually, on May 10, 2001, after a ten day criminal trial, both Jennie and Marvin were acquitted of all charges. Rather than showing remorse for instigating the wrongful prosecution, State Farm continued to not only proclaim Hampton and Vail’s guilt, but deny Ms. Hampton’s claim.
After the acquittals, Jennie Hampton’s breach claim in Johnson County, Kansas against State Farm was dismissed and re-filled with her and Marvin’s claims for malicious prosecution and the tort of outrage against State Farm and the NICB. After a three week trial in Jackson County, but before verdict, defendant NICB entered into a 537.065 high low agreement with a high of $100, 000 and low of $110,000 for Mr. Vail and $150,000 and $160,000 for Ms. Hampton. The jury returned a verdict for plaintiffs on all counts, and after a post trial hearing the Court entered judgment against NICB as set forth in the 537.065 agreement. The Court also entered judgment against State Farm for $200,000 in actual damages for Ms. Hampton and $175,000 for Marvin Vail. For her breach claim against State Farm the Court entered judgment in favor of Ms. Hampton for $251,700 in attorney fees. Additionally, the court entered judgment in favor of Marvin Vail and Jennie Hampton individually for their punitive claims against State Farm in the amount of $4,000,000 each.
This was posted in January 2006… the case is still active. I discovered that State Farm has appealed the jury verdict to the Missouri Western District Court of Appeals. The parties have filed their initial briefs, and oral argument is set for July 19. Unfortunately, PDFs of the briefs are not available online, so I don’t know what the basis for the appeal is. My guess is that State Farm is appealing, among other things, the size of the punitive damages award. Their argument would be that the punitive damages are more than X times the compensatory damages, which violates due process. The US Supreme Court made such a ruling a few years ago in BMW v. Somebody, probably Gore.
What did we learn from this cautionary tale? Basically, some insurance companies would rather commit several crimes than pay an insurance claim. — BEN POPKEN