Court of Appeal Rules that Lawsuit Against State Farm for Earthquake Claims Mishandling Should Go Forward

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Bill Vetoed By Governor Davis Would Have Protected Consumers From State Farm’s Delay Tactics

Los Angeles— The Second District Court of Appeal today rejected State Farm‘s motion to stop a lawsuit brought on behalf of the public by a State Farm policyholder. State Farm had argued that the consumer suit chilled the company’s free speech rights.

Read the court opinion here.

“We are pleased that the Court of Appeal saw through State Farm‘s attempt to shield its misconduct in the cloak of the 1st Amendment,” stated Pamela Pressley, FTCR staff attorney. “We can now finally take on the real issue in this case of whether State Farm has mishandled legitimate insurance claims and mistreated its policyholders.”

A State Farm policyholder (represented by The Foundation for Taxpayer and Consumer Rights and Robinson, Calcagnie & Robinson) filed a lawsuit in April 2002 on behalf of the public under Business and Professions Code section 17200 based on allegations of mishandling by State Farm of its policyholders’ Northridge earthquake claims, including by misrepresenting available benefits to policyholders, lowballing and delaying claims.

State Farm attacked the complaint on the grounds that it was a SLAPP (strategic lawsuit against public participation) suit to curb its freedom of speech and filed a motion to strike the complaint. The Los Angeles Superior Court granted State Farm‘s motion to strike, but today, the Court of Appeal reversed that ruling and remanded the case back to the superior court for further proceedings.

The Court’s opinion states:

We thus conclude that the alleged wrongful acts of State Farm were not done in furtherance of any claimed right of free speech. . . .Plaintiff seeks no relief from State Farm for its communicative acts, but rather its alleged mistreatment of policyholders and its related violations and evasions of statutory and regulatory mandates. Even State Farm does not argue that such activity would be protected as an exercise of a right of petition or free speech.

(Slip Opinion, Gallimore v. State Farm, Case No. B147397, p. 15.)

Davis Vetoed Legislation That Would Have Protected Public From State Farm‘s Delay Tactics

California Governor Gray Davis vetoed SB 789 (Kuehl) which would have prevented corporations from abusing the Anti-SLAPP motions as State Farm has in the Gallimore case. SB 789 sought to protect consumer and public interest lawsuits from the attempts by corporations to tie up the lawsuits and make it difficult for non-profit organizations to pursue legitimate claims against the companies.

“If Governor Davis had signed SB 789, the Gallimore case might have been the last example of corporations turning the anti-SLAPP consumer protection law on its head,” said Douglas Heller, senior consumer advocate with FTCR. “Instead, Davis vetoed the bill, ensuring that consumers will continue to face unfair corporate delay tactics in their efforts to hold corporations accountable for bad behavior.”


Consumer Watchdog
Consumer Watchdog
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