Like A Good Neighbor, State Farm Wants To Steal Your Money And Send You To Jail

Greg writes:

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…

Via bflawfirm:

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.

Greg writes:

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

Comments

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  1. IRSistherootofallevil says:

    The damages should be doubled every time they appeal. Somewhere along the way, they’ll probably settle the case.

  2. timmus says:

    Holy crap. There needs to be CRIMINAL charges brought against the responsible individuals at State Farm. This is an atrocious degree of misconduct.

  3. Bay State Darren says:

    I’d be suing the prosecutors, too. They were really asleep behind the wheel, just relying on the private businesses an not conduct an investigation. The dubious privilige assertions should have raised a red flag, too. It should’ve been obvious they were being used.

  4. strathmeyer says:

    Here is the BMW trial, where BMW was convicted of fraud for selling damaged but repaired new cars as new (BMW didn’t even tell the dealers).

    http://www.law.cornell.edu/supct/html/94-896.ZS.html

    (d) The second (and perhaps most commonly cited) indicium of excessiveness–the ratio between the plaintiff’s compensatory damages and the amount of the punitive damages, see e.g., TXO, 509 U. S., at 459–also weighs against Gore, because his $2 million award is 500 times the amount of his actual harm as determined by the jury, and there is no suggestion that he or any other BMW purchaser was threatened with any additional potential harm by BMW’s nondisclosure policy. Although it is not possible to draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case, see, e.g., id., at 458, the ratio here is clearly outside the acceptable range. Pp. 20-23.

  5. 5h17h34d says:

    @strathmeyer: What’s that got to do with this?

  6. TechnoDestructo says:

    Isn’t State Farm the name that comes up with every natural disaster for not paying claims?

    Why would ANYONE do business with State Farm? Why do they still exist?

  7. Codis says:

    Nice, i did a 20 page research paper on Gore vs. BMW for a college legal studies class a few years back.

  8. gorckat says:

    @5h17h34d: Mentioned at the end of the article as a possible basis for State Farm’s appeal.

  9. CaptainRoin says:

    well that’s just shitty. i’d drop state farm in a minute if it wasn’t for my 20+ years of loalty/accident-free discount thing i get from my parents.

  10. MommaJ says:

    “purgery”???? Who wrote this?

  11. cde says:

    But the difference is that one ended up with a working car, just not brand spanking new, while the other was facing a couple of years in jail. Punitave damages in this case should be alot higher.

  12. scotte says:

    Same old same old, when it comes to State Farm….if you want to read how State Farm’s “neighbors” and employees in and around Bloomington/”Normal”, Illinois (likely a bunch of fat SUV-driving corndogs) react to a fairly simple-to-understand car/truck crash that happened within a mile of State Farm’s black obelisk/.world HQ, log on to :

    http://www.pantagraph.com/articles/2007/06/01/news/doc465f

    …and read the comments, starting from the bottom.

    I’ve been outta the shithole that is Bloomington/”Normal” for over 20 years…and I will also never buy any Mistubishi that is/was built there, if these spewing-sphincters are any indication!

  13. Buran says:

    @scotte: The comments just tell me how it’s impossible to discuss ANYTHING on the internet without people starting to scream at each other for imagined slights. People are so rude behind their net anonymity.

  14. EtherealStrife says:

    Holy Shit. If this can be confirmed then wow. Even for an insurance company they are serious evil, and should face criminal charges for this bs.

  15. doormat says:

    In the Gore v BMW its one thing if there is no malicious intent. State Farm was trying to get these people sent to jail and committed several illegal acts in the process.

    If I were the jury, I’d calculate the punitive damages at 1% of their annual profit – or 53M. That would shock the industry into treating their customers fairly. (Granted I think tort reform is needed too, I think punitive damages should be awarded to the state treasury, not to the defendant and their lawyer).

  16. Landru says:

    I tried to get through the typos and errors, but I gave up after “purgery”.

  17. Jaysyn was banned for: http://consumerist.com/5032912/the-subprime-meltdown-will-be-nothing-compared-to-the-prime-meltdown#c7042646 says:

    This is a shame. I’ve been a State Farm customer for 12 years & have never had anything but prompt courteous service from them.

  18. Dr_awesome says:

    10 years later and this is still in the courts?

    god bless you, legal system.

  19. We had State Farm 4 years ago. Wife got tagged in a hit and run. State Farm decided to give us a problem and managed to turn what would have been a $3000.00 claim into a $45,000.00 judgment against themselves in less than 9 months.

  20. iMike says:

    @TechnoDestructo: State Farm has ~40MM policyholders. Apparently the word’s a little slow to get out.

  21. Karmakin says:

    1% of profits? And that’s going to make them sit up and notice? Sorry, but no.

    Try something like 250% of profits.

    And no, I don’t care about the shareholders. They made a risky investment, and it didn’t pay out. That’s the way the cookie crumbles.

  22. hop says:

    this is the same asshole outfit that bailed out on paying the katrina victims…….

  23. Happened in a county called MIAMI, of course they probably assumed it was criminal.

    In cases like this you have to ask whose poor judgment got them into this situation and why. I mean, this story is so awful that it’s making me wonder if the company my dad told me to put my faith in is bad across the board or if we just had some zealous assholes at this particular branch.

    Either way: they realize it’d be easier to play this out in the background rather than face a public apology. Stupid of them, but that’s how they’re going to play it.

  24. mantari says:

    It is all about protecting the bottom line. They’ve got a crack team of people who’s job it is to minimize payouts. When they get going on the case, they’ll look at any opportunity that they can find to deny your claim.

    Yup. They’ve got a whole department who’s job is to work against you. In the name, of course, of weeding out fraud.

    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.

    Hurricane Katrina, anyone? “Yes! Our expert says this is all water damage. No wind damage at all. No claim!”

  25. Mr. Gunn says:

    @hop: Yes, this is the same company who fraudulently denied billions of dollars of claims in Mississippi and Louisiana. Their “experts” made findings such as “It was the flood waters that tore your roof off, so we shouldn’t have to pay.”

  26. Bryan Price says:

    I got screwed over 30 years ago by State Farm, and they weren’t my insurance. My opinion of them makes Satan look good. And because of that early age screw-over, I look at every insurance company the same way.

  27. SkyeBlue says:

    If you ever think of doing business with them again just remember how they treated all those poor victims of Hurricane Katrina.

  28. lonelymaytagguy says:

    @MommaJ: @Landru: One reason net grammar and spelling police are frowned upon, is they frequently make mistakes in their posts. The question mark belongs inside the quotes.

  29. _Puck says:

    I was recently in a car accident with a State Farm customer. As the incident was her fault, I have to deal with State Farm for getting my car repaired. Not only did they not do an actual estimate for repair (there processes apparently equate to some guy looking at the car and saying “Yep, it’s totaled”), they are trying to screw me about $3000 for the cost of the car. While I’m contesting their values, they take away the rental and say it’s standard policy.

    I’d never do business with State Farm after what I’ve gone through with them.

  30. bohemian says:

    State Farm’s action in this case are practically warm and fuzzy compared to some insurance companies retaliation behavior. This is all too common.

    Workers comp and long term disability insurers have a habit of frequently going after claimants with baseless fraud charges as retaliation after the courts forced the insurer to pay an obvious claim.
    So someone who is seriously injured or disabled is now facing potential time in the pokey and trying to figure out how to pay for a lawyer.

  31. juri squared says:

    I feel terrible for the plantiffs, if all this is true. I’m amazed State Farm would go through all this expensive legal stuff instead of just paying out the ten grand.

  32. Turboner says:

    @scotte: Too bad, man. The only Mitus worth owning came from the Normal, IL DSM plant, along with the 3000GT. Not sure about the father-to-the-DSM Starion, though.

  33. Nickoli says:

    @lonelymaytagguy: Only if the question marks are part of the original text being quoted.

  34. JustAGuy2 says:

    Everybody does know that this commentary was written by the Hamptons lawyers, right? That means that it might have just a tinge of bias, no?

  35. danio3834 says:

    Auto insurance is racketeering made legal. You pay an exorbitant amount of money for a ‘service’ that amounts to nothing, then when you need it, the company fights to the bitter end to find a way to not honor their agreement.

    While insurance fraud is a reality, this story is just nuts. State Farm has unlimited resources, so whoever felt all this was necessary, will do it to the next customer too.

    The only companies that have it better than Insurance Companies are banks and oil companies, and most banks sell insurance.

  36. YellowBird says:

    How about Michigan State Police? A trooper retired and they gave him the license plate from his car – I bought it on Ebay and another one. I then tried to sell one; next thing I know a Detective AND a trooper show up at my door with a search warrant. “STOLEN PROPERTY”.

    Although I had names, receipts, etc. that didn’t phase the Post Commander SHE demanded prosecution! This dragged on for many months; several visits to court, attorneys fees, affidavits, subpoenas, etc.

    During that time I did find out that MSP was giving away the same license plates that were supposedly “stolen”. Went up to Lansing and they gave me a dozen more MSP plates including several that had never even been on a vehicle. My attorney freaked when I showed him my “new collection”. It sure got the Prosecuting Attorney & Judge’s attention. BUT THE POST COMMANDER STILL WANTED TO PROSECUTE AND THE TRIAL WAS SET FOR DATE.

    Finally a week before my JURY TRIAL I was able to get someone to listen to reason. HOW CAN YOU PROSECUTE SOMEONE FOR STOLEN PROPERTY WHEN YOU ARE GIVING IT AWAY??? Charges were quietly dropped but they kept my confiscated license plate. Thinking about the whole thing – its very important to harass law abiding citizens – its not like they have anything better to do.

    MSP SUCKS.

    BTW – they don’t give away free MSP license plates any longer.

  37. nffcnnr says:

    Attorneys wrote that email? That is sad. They must be used to oral arguments, because their writing sucks. i saw this article and was going to forward the link to many friends who might find it interesting, but the crappy writing degrades the credibility of the author.

  38. RulesLawyer says:

    @CaptainRoin wrote i’d drop state farm in a minute if it wasn’t for my 20+ years of loalty/accident-free discount thing:

    Explain to me why you have insurance? Of course insurance companies are going to be the nicest companies on the planet when they’re taking your money. But when they have to pay it out, you get situations like this one. Or mine:

    In very short summary, I had a major house fire in 2003. The house was insured by Farmers Insurance. The cost to repair the house and replace lost property came to about $325,000, according to my contractor and independent adjuster. They offered $75,000. A year later, we filed suit, and during discovery found that their original adjuster had entered a note in their system saying that the claim was worth close to what we were asking, but he disappeared from the company the same month, never to be found again.

    Farmers threatened me with criminal fraud charges, alleging that the contractor listed the independent adjuster’s fee in his cost estimate to me. Other non-construction costs were listed (e.g., interest) in the estimate, and the adjuster’s fee was specifically not in the claim we filed with the insurance company.

    This didn’t stop Farmers. Almost two years after the fire, we finally settled for $300,000. I’m sure it cost them more than $25,000 to pay their three attorneys, their several adjusters, and their appraiser. If I was less patient, if I didn’t have substantial savings and deep credit to pay almost two years of living expenses, or if I wasn’t savvy enough to investigate and enforce my legal rights, I’d have been forced to settle for much less.

    Never, ever, ever forget that insurance companies exist for one reason and one reason only. Ready? You’ll be surprised how clear this makes everything they do. It’s the same as most companies:

    Maximize shareholder value.

    Result: collect as much money as possible. Pay out as little as possible.

  39. Frost Face says:

    @Turboner: I knew you would chime in here! I loved my DSMs, but if you want a good Mitsubishi get an Evo… mine was FOB, hand assembled in Japan!

  40. bnissan97 says:

    I sent this to my insurance agent. No I don’t have State Farm. I got this back. Please release me from liability but this is the quote.

    “When they were caught denying medical claims a few years back, it was
    found
    out that the “independent medical review board” was owned by StateFarm
    and the
    doctor that was supposed to be signing these reviews,of course,denying
    the
    claim, was really a clerk in the office with a rubber stamp. I was
    expecting
    the article to say they owned the NICB.”

  41. Morgan says:

    @Nickoli: Nope; punctuation goes inside the quotes regardless of whether it was part of the quotation.

  42. johnniewalker says:

    My State Farm experience:
    About 20 years ago, I bought a limited edition art print for $2000. My renter’s insurance stated art & jewelry was covered up to $5000, (i had no jewelry) but my Agent wanted me to pay for a rider which I declined.

    After 2 years I placed an ad to sell the artwork. I was, shall we say naive, and the painting was stolen during a daylight burglary.

    My agent first said it wasn’t covered. I pointed out the policy said it was. He refused to accept that and then State Farm accused me of selling it, and filing a false claim that it was stolen.

    My wife and I were followed by a PI, and had friends, neighbors, and landlords asking us what we had done wrong, wondering why we under investigation. We had to take time off of work to go to depositions. Lawyers asked the same questions over and over and tried to trip us up which was totally impossible, since we had nothing to hide.

    Finally, they agreed to pay and I was offered a replacement or the sum of ~$3800 (the artwork had appreciated). I took the cash and cancelled my policy.

    Now:

    I have a *great* agent with Farmers that actually works for me.

    I haven’t had any claims, but my wife has had two. One her fault, and one not. In both cases, we made one phone call to our agent and he handled everything and repairs were paid for quickly, and no deductible in the case where is wasn’t my wifes fault. I always hear about people who have to call the other people involved in the accident, other people’s insurance companies, or repair shops, or are waiting weeks or more for checks. I wonder what their agent is doing for them?

  43. areallygoodname2 says:

    Like a good neighbor, state farm will screw your wife and borrow tools.

    [areallygoodname.com]

  44. robert6969 says:

    Dear State Farm,

    I am writing you this because I think you people are RATS. You screwed my wife and I, 7 years ago in Newton County Georgia when our home was robbed and burned. After a year the officals in the County turned the investigation to us. Because you didn’t want to pay and the case was unsolved. The county told us that your company pushed them toward us to avoid paying and bribes were paid to them by State Farm Ins. They said that they know we are innocent.You ruined our lives and reputations. We want JUSTICE. I will tell everyone everywhere about your BAD Company until the day I die. I will win in court and you will now pay DAMAGES to us.

    You need to open this case and settle with us NOW. I will not stop these post or the other things I am doing to cost you business until you do the right thing. You picked the wrong people to play with. I will tell the world. I am not threatening harm to anyone, only a financial impact on your company by telling the truth, til you do the right thing. Person by person I will tell them our story. They are listening and I am being heard. You know who I am and you know the truth. Are you honest enough to call my lawyer and settle like you should have done 7 years ago. I am man enough to do this forever. Newton County Georgia.