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Arkansas Law Firms Awarded $6.5M in Fees from State Farm Suit

4 min read

Two Arkansas law firms will share an award of $6.5 million in attorneys’ fees for representing plaintiffs in a class-action lawsuit against State Farm Mutual Automobile Insurance Co. It’s one of the largest awards in Arkansas in recent memory.

The law firms, Caddell Reynolds of Fort Smith and Carney Bates & Pulliam of Little Rock, were also awarded $83,306 in expenses, according to an order last month from U.S. Magistrate Judge Patricia Harris.

State Farm agreed to pay $21.7 million to settle claims with about 8,700 class members related to insurance coverage for medical payments that its customers should have received but didn’t. The money for the attorneys’ fees and expenses will be taken out of the settlement.

“We were able to demonstrate that State Farm was guilty of basically taking $22 million from their insured, and they fought us over it,” said the attorney for the class members, Bill Horton of Caddell Reynolds.

Attorney Randy Pulliam of Carney Bates & Pulliam said the State Farm case was one of several against insurance companies filed in recent years over the same issue. The two law firms have settled class actions against insurance companies such as Southern Farm Bureau Casualty Insurance Co. of Bloomington, Illinois, and Geico Casualty Co. of Chevy Chase, Maryland.

The case against State Farm was filed in 2011 in U.S. District Court in Little Rock by Kenneth Williams Jr. and his parents, Mary and Kenneth Williams, who were the named class members.

In 2007, Mary Williams and her son, who was 15 at the time, were injured in an auto wreck. Allstate Insurance Co. insured the other vehicle.

Mary Williams and her son received a settlement from Allstate. But State Farm, which had paid their medical bills, took a portion of the money the family received to cover the cost of the medical treatment.

The family should not have had to pay State Farm the money they received from Allstate, Horton said. Mary and Kenneth Williams had coverage through State Farm called med pay, which generally covers the first $5,000 of a person’s medical bills, he said.

“So you’re a State Farm customer, you have a car accident and you have $5,000 worth of medical bills — State Farm steps in and pays that $5,000,” Pulliam said.

If the State Farm insurance customer then settles the claim with the driver who caused the accident, an insurance company can’t subrogate, or take back, that $5,000 without a court determination that the insured has been made whole, which means all of the insurer’s personal injury claims have been paid, Pulliam said.

State Farm could also take back the med pay money if it reached an agreement with its insured customer that the customer had “been made whole,” he said.

Instead, Horton said, State Farm would “claim a fake lien, and they would send it to the insurance company that you’re trying to settle with and say, ‘We want our money back.’ And that insurance company would send them a check.”

The customers, though, didn’t realize that State Farm wasn’t entitled to that money, Horton said. State Farm would send its clients letters saying that according to the policy, State Farm was allowed to claim the money. “In fact, Arkansas law did not allow them to do that,” Horton said.

Horton said State Farm had been recovering the med pay money from its customers for decades when it shouldn’t have.

“The $22 million that we got is the tip of the iceberg,” he said. That’s because he could recover money only from claims after 2006, in the five years before the lawsuit was filed.

State Farm said in an email to Arkansas Business that it was “pleased to have reached an agreement to settle this case.”

State Farm spokesman Roszell Gadson said State Farm has changed its procedures in handling the med pay claims. “We have nothing further to add,” Gadson said.

Distribution Expected Soon
The money for the class members is being held by the settlement administrator, Kurtzman Carson Consultants of New York, and is expected to be distributed soon.

Everyone who met the criteria will be paid with 6 percent interest. Horton said he reviewed about 8,500 of State Farm’s files, which took nine months, looking for qualified class members.

Judge Harris decided the attorneys’ fees. The percentage of attorneys’ fees could have been between 28 and 35 percent.

“We were on the low end of the range,” Horton said. “We were pleased with the judge’s decision.”

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