Federal judge unseals State Farm court files

Monday, December 27, 1999

A federal judge has unsealed court records in a lawsuit that some consumer groups say may reveal a pattern of fraud and conspiracy by one of the nation’s largest automobile insurers.

U.S. District Judge Michael Hogan on Dec. 20 ordered files opened in the 1994 case Foltz v. State Farm Mutual Automobile Insurance Co. and ordered State Farm to return records that had been removed from the courthouse.

Last May, lawyers for three consumer advocacy groups filed a motion to unseal and restore the records.

“It is, for us, a complete victory,” said Matthew Whitman, one of the lawyers representing Consumer Action, Texas Watch and United Policyholders. “The judge recognized the controlling precedent that bound him to restore and open the public file and essentially give [it] back to the public.”

Hogan, based in Eugene, Ore., had presided over the original case. In issuing his latest decision, he said portions of the file that were closed before the case was settled — including medical records, claim files and State Farm personnel records — would remain sealed.

He set no deadline for State Farm to return the records that were taken from the courthouse.

“We think Judge Hogan issued a well-reasoned decision,” said State Farm attorney Ralph Spooner.

“This ruling recognized that the intervention should not be used as an opportunity to pry (into) the private claims files and medical records of literally hundreds of members of the public who were not parties to the litigation,” he said.

Whitman says that once the court file has been restored, the groups’ lawyers will be able to read a summary of the records that will remain sealed. They will then decide if they will petition to have other documents opened.

The consumer groups contend that the Foltz case may help other consumers in lawsuits against insurance companies and may also help the groups in their efforts to battle insurance fraud.

“This is a great victory for the public interest,” Larry Baron, one of the groups’ attorneys, said in a prepared statement.

“A lawsuit charging State Farm, one of the nation’s largest insurers, with cheating its policyholders was basically excised from the court records,” he said. “State Farm’s customers and the public will now see what State Farm has been so eager to hide.”

But according to Spooner, this type of deception never existed.

“This wasn’t a case where State Farm was trying to hide anything from the public,” he said.

Whitman says that any documents in the court file that prove Debbie Foltz’s allegations — namely, that State Farm conspired to defraud customers — cannot be shielded from the public.

The groups’ attorneys had argued that sealing the files violated the public’s right of access to court records as guaranteed by the First Amendment.

In the original case, Foltz charged that co-defendants State Farm and California Institute of Medical Research & Technology, Inc. had conspired to defraud her of medical benefits. Foltz sought reimbursement from State Farm for medical treatment her son received after an automobile accident. State Farm submitted her son’s medical records to the institute for review and, subsequently, reduced or denied benefits. Foltz alleged that the institute, under State Farm’s direction, had knowingly falsified reports indicating that her son’s treatment was unnecessary.

The case was litigated for more than four years and was eventually resolved through a confidential settlement. That settlement also stipulated that the court seal more than 450 documents in the case. State Farm applied for the return of portions of the Foltz file shortly after the case was settled, legal documents state.

The Associated Press contributed to this report.