Judge allows Oklahoma AG intervention in State Farm racketeering lawsuit

In response to Oklahoma Attorney General Gentner Drummond’s court intervention in an alleged racketeering property insurance lawsuit, State Farm has told the court that, as a state official, Drummond has no legal grounds, authority, or precedent to be involved because the lawsuit is private.

Drummond filed a motion to intervene on Dec. 4 in a case against State Farm, which alleges that the company operated a coordinated program to limit roof-related insurance payouts by denying or reducing valid hail, wind, and tornado damage claims. The motion was granted on Dec. 30.

In an accompanying petition for intervention filed in Oklahoma County District Court, Drummond asserts that while State Farm marketed its policies as providing full replacement-cost coverage, the company predetermined claim outcomes to meet corporate savings targets rather than honoring policy promises.

“The Attorney General has a substantial, legally protectable interest in ensuring that Oklahoma insurance consumers are not subjected to deceptive, unfair, or unlawful insurance practices,” the petition states. “The claims and defenses in this action concern the same transactions, policies, and practices that are the subject of the Attorney General’s investigation. Disposition of this case without participation by the Attorney General may, as a practical matter, impede the state’s ability to protect the public interest.”

Drummond asks that the court award penalties, damages, structural reforms, and the recovery of profits State Farm allegedly obtained through its scheme.

“Oklahomans are paying rising homeowners insurance premiums yet receiving less protection in return, as State Farm simultaneously pursues additional rate increases while allegedly escalating its claim denials and underpayment practices,” Drummond states in the motion. “Oklahomans can weather inflation and Oklahoma storms, but they cannot withstand a system in which they are charged more while effectively insured less. Inflation and weather do not explain, let alone justify, the widening gap between what Oklahomans pay and what they receive.”

He added that profiting from increased premiums while reducing claim fulfillment undermines public confidence in the insurance system and places Oklahoma homeowners at unacceptable risk.

“Protecting consumers from unfair and deceptive insurance practices is a core sovereign responsibility, and intervention is necessary to ensure that insurers operating in this state do not engage in unlawful conduct that leaves Oklahomans paying more for coverage they do not truly receive,” he said in a press release.

The petition alleges that State Farm implemented an internal program, commonly referred to as the “Hail Focus Initiative,” to drastically reduce roof indemnity payments in Oklahoma.

Drummond alleges that State Farm has violated the Oklahoma Consumer Protection Act, the Oklahoma Racketeer Influence and Corrupt Organization Act, and the Oklahoma Deceptive Trade Practices Act, as well as civil conspiracy and unjust enrichment.

In response, State Farm wrote that the private lawsuit centers on the interpretation of a specific insurance contract and claim adjustment.

“There is no state board, commission, officer, or branch of government named in this lawsuit,” State Farm wrote. “There are no public funds at issue. Yet the Attorney General feels it is his ‘duty’ to intervene because the lawsuit involves ‘people of the state.’ He does not explain why this particular lawsuit implicates his power, while every other lawsuit involving ‘people of the state’ does not.

“He does not offer any authority, precedent, or standard that courts should use to determine where his power starts, or where it ends. He does not offer any limiting principle on his purported power to intervene whenever an interest of the state or the people of the state is ostensibly impacted. It is unlikely that such an expansive view of his power to interject into private disputes will survive constitutional scrutiny.”

As part of its argument, State Farm notes that the Oklahoma Supreme Court rejected “similar expansive and limitless assertions of power” by Drummond earlier this year.

State Farm notes that before Drummond was attorney general, he criticized his predecessor for intervening in a Farmer’s Insurance lawsuit, calling it “abuse of the office,” and his power “was used in a threatening way to an insurance company to produce documents to a political ally…”

“[U]nder Oklahoma law, the power the Attorney General attempts to assert over the insurance industry is reserved exclusively to the Insurance Commissioner,” State Farm wrote. “To determine otherwise, as to either issue, would be an extraordinary and egregious expansion of the Attorney General’s power on both fronts… to the extent the Attorney General has authority to represent the public interest over insurance markets (he does not), it is not at issue in this litigation amongst two private parties.”

The response adds that permitting the attorney general to intervene in a private lawsuit creates “unchecked unilateral state power that is ripe for abuse.”

“If granted such unbounded power, the Attorney General would have carte blanche to insert the State into private litigation to support a friend, a political ally, or a campaign donor,” it states. “He could obtain documents through discovery that a private litigant cannot, only to share them with his co-counsel of choice. He could threaten causes of action that private parties cannot bring, or use them as an intimidation tactic to incentivize an increased settlement to the benefit of a single, preferred plaintiff.”

The response adds that Drummond has sought intervention based solely on claims handling decisions and the use of a computer to evaluate insurance claims.

“He does so while partnering with the same lawyers he once criticized for exploiting the Attorney General’s Office for their own financial gain. Furthermore, Mr. Drummond himself has stated that the Attorney General should not use the office to intimidate private litigants in the same way that he is now doing. This Court should take Mr. Drummond at his word: this is an abuse of the office,” it states.

During a Senate subcommittee hearing held in May to investigate claims handling following recent natural disasters, Sen. Josh Hawley (R-Missouri) grilled Allstate and State Farm executives, saying testimony from adjusters and policyholders, along with previous lawsuits, appears to show the companies are “running a racket” and a “pattern of fraud” while making “outrageous profits.”

State Farm policyholder, Jacob Vertel, testified that his family, including two young children, was still living in temporary housing at the time as it battled with the insurer over a claim for his North Carolina home, which was significantly damaged during Hurricane Helene in September 2024.

State Farm has repeatedly deemed the home livable despite water pouring through outlets and the sky visible in multiple rooms, including his children’s bedrooms, the living room, and bathroom, according to Vertel.

Michael Keating, State Farm operations vice president, testified that State Farm doesn’t deliberately underplay claims.

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