Oklahoma Attorney General Intervenes in State Farm Insurance Fraud Case

Oklahoma Attorney General Gentner Drummond has intervened in a significant legal dispute involving State Farm, accused of a scheme to reduce payments on homeowners insurance claims related to wind and hail damage. This intervention marks a rare invocation of state statutory authority to address alleged widespread insurance fraud and racketeering impacting Oklahoma's insurance market. The legal conflict originated from a campaign led by the Oklahoma City law firm Whitten Burrage, representing numerous policyholders against State Farm's practices from 2020 to 2023. These practices reportedly involved arbitrarily lowering claim settlements by 50%, resulting in hundreds of millions in savings for State Farm in Oklahoma alone. Whitten Burrage has represented over 125 cases that settled for substantial sums, some exceeding the properties' values, with settlements kept confidential. State Farm commands approximately 30% of Oklahoma's homeowners insurance market, amplifying the impact of these alleged practices. The Attorney General's petition accuses State Farm of violating several Oklahoma laws, including the Consumer Protection Act, the Racketeer Influenced and Corrupt Organizations Act, and the Deceptive Trade Practices Act. Additional charges include civil conspiracy and unjust enrichment. Drummond's authority to intervene stems from sections of Oklahoma law allowing the Attorney General to act in cases where consumer rights and the state's economic interests are at risk, including insurance fraud and unfair business practices. The Attorney General's role extends to representing consumers in insurance rate matters and prosecuting related crimes. A key legal principle in this intervention is parens patriae, enabling the State to protect the economic health of its residents through legal action. This principle has precedent in other Oklahoma cases, such as the 2021 opioid litigation. While the Oklahoma Consumer Protection Act empowers the Attorney General to investigate and act against deceptive practices, the insurance sector's regulation traditionally falls under the Insurance Commissioner’s jurisdiction. Recent legislative changes, like the 2024 Insurance Data Security Act, have expanded the commissioner's authority, creating potential jurisdictional tensions. These tensions are highlighted by Drummond's ongoing inquiries into Insurance Commissioner Glen Mulready concerning homeowners insurance rates. The Attorney General’s intervention follows prior requests for inter-agency collaboration to address rising premiums. Drummond seeks to secure penalties, restitution, structural reforms, and recovery of profits from State Farm's alleged scheme. The outcome may influence regulatory enforcement and consumer protections in Oklahoma's homeowners insurance market. This case underscores the complex interplay between legal, regulatory, and market forces affecting insurance consumers in Oklahoma, spotlighting the state's mechanisms for addressing alleged corporate misconduct in the insurance sector.