An Indiana appeals court is upholding a $14.5 million verdict against State Farm Fire and Casualty Co. for defaming a contractor following a massive 2006 hailstorm that brought in nearly 50,000 claims for State Farm.
State Farm wanted the appeals court to overturn the verdict arguing communications the company's fraud investigators had with authorities were privileged because they were made in the public interest, and that those communications were protected by statutory immunity because they were made in good faith.
The company also claimed the contracting company, owned by Joseph Radcliff, failed to prove the defamation was motivated by actual malice. However, the court rejected all of State Farm's appeals and upheld the verdict, which is among the largest defamation verdicts in U.S. history, according to court records.
"State Farm is disappointed in the ruling of the court and is considering its options," the company said in a written statement. It declined to comment further.
The case stems from a hailstorm in central Indiana in April 2006. State Farm denied many of its policyholders' claims after the storm, even though other insurance companies were paying similar ones, which led to a flurry of bad publicity, the court said in its opinion. Radcliff's company offered to help State Farm policyholders to get their claims paid, records say.
The insurer launched a fraud investigation into Radcliff and his company following the storm because it suspected him of damaging roofs by simulating hail damage to collect insurance money for the repairs, records say.
The company's fraud investigation, which was ultimately turned over to the National Insurance Crime Bureau and then Indianapolis Metropolitan Police Department, led to Radcliff's arrest on charges of insurance fraud, corrupt business influence, criminal mischief, and attempted theft. The charges were eventually dismissed and Radcliff's company closed because of the negative attention from the arrest, records say. State Farm also sued Radcliff for fraud and racketeering and Radcliff counterclaimed for defamation, among other things.
The appeals court also found the verdict, by far the largest defamation verdict ever in Indiana, was not excessive. "The jury's damage award does not punish State Farm; rather, it attempts to compensate Radcliff for the longstanding consequences it caused on the only profession that Radcliff ever knew," the court said in its ruling.
When the storm struck Indiana in 2006, the top five writers of homeowners insurance were: State Farm Group, with market share of 27.4%; United Farm Bureau of Indiana Group, with 8.66%; Allstate Insurance Group, with 7.67%; American Family Insurance Group, with 6.67%; and Liberty Mutual Insurance Cos., with 5.66%, according to BestLink (www.ambest.com/bestlink).