State Farm Fire & Cas. Co. v. Radcliff

Decision Date28 May 2013
Docket NumberNo. 29A04–1111–CT–571.,29A04–1111–CT–571.
Citation987 N.E.2d 121
CourtIndiana Appellate Court
PartiesSTATE FARM FIRE & CASUALTY COMPANY, Appellant–Plaintiff, v. Joseph Martin RADCLIFF and Coastal Property Management LLC, a/k/a CPM Construction of Indiana, Appellees–Defendants.


Dennis F. Cantrell, Cantrell, Strenski & Mehringer, LLP, Jan N. Campbell, Gene R. Leeuw, Jeffrey R. Oberlies, Matthew G. Butcher, Leeuw Oberlies & Campbell, P.C., Karl L. Mulvaney, Nana Quay–Smith, Shannon D. Landreth, Bingham Greenebaum Doll, LLP, Indianapolis, IN, David P. Sanders, Jenner & Block, LLP, Chicago, IL, Attorneys for Appellant.

Julia Blackwell Gelinas, Maggie L. Smith, Frost Brown Todd, LLC, William N. Riley, Joseph N. Williams, James A. Piatt, Price Waicukauski & Riley, LLC, J. Mark McKinzie, Riley Bennett & Egloff, LLP, Indianapolis, IN, Attorneys for Appellees.


VAIDIK, Judge.

Case Summary

In April 2006, central Indiana suffered a large hailstorm. Joseph Radcliff formed a company to repair the storm-damaged homes. State Farm Fire & Casualty Company began denying many of its policyholders' claims even though other insurance companies were paying similar claims. Radcliff and his company offered to help the State Farm policyholders. Amid a flurry of bad publicity about State Farm's claims response which in part was generated by Radcliff, State Farm launched an insurance-fraud investigation into Radcliff and his company. Radcliff was arrested on fourteen felony counts, but the charges were eventually dismissed pursuant to a diversion agreement with the State. State Farm then sued Radcliff and CPM for fraud and racketeering; Radcliff and his company counterclaimed for, among other things, defamation.

Following a nearly six-week-long jury trial before the Honorable Steven Nation in which over forty witnesses testified, a jury returned a $14.5 million verdict in favor of Radcliff and his company on their defamation counterclaim. This is one of the largest defamation verdicts in United States history. State Farm now appeals arguing that (1) it is entitled to judgment on Radcliff's defamation counterclaim pursuant to two defenses: the public interest privilege for crime reporting and statutory immunity; (2) Radcliff failed to prove actual malice by clear and convincing evidence; and (3) it is entitled to a new trial on damages. Utilizing our standard of review for judgments on the evidence, we conclude looking to the evidence most favorable to Radcliff that State Farm is not entitled to judgment on either of the defenses. Also, utilizing a heightened standard of review for defamation cases, after an independent review of the record, we uphold the jury's verdict that Radcliff proved actual malice by clear and convincing evidence and conclude that State Farm is not entitled to a new trial on damages. We therefore affirm the trial court.

Facts and Procedural History
A. The Good Friday 2006 Hailstorm and State Farm's Handling of the Ensuing Claims

On Good Friday, April 14, 2006, central Indiana suffered a large hailstorm that caused millions of dollars in property damage, generating almost 50,000 State Farm claims. State Farm's handling of these hailstorm claims led to the events in this case.

After the hailstorm, the Indiana Department of Insurance received 425 complaints from State Farm policyholders, and in March 2007, the Department of Insurance initiated a “Market Conduct Examination.” 1 CPM Ex. 178. The Market Conduct Examination revealed “areas of concern” regarding State Farm's handling of the claims in the wake of the hailstorm. Id. At about the same time, a class-action lawsuit was filed on behalf of more than 7000 State Farm policyholders whose hail claims had been denied. During the same time, Indianapolis's rtv6 Call 6 investigative reporter Rafael Sanchez televised reports about State Farm's refusal to pay claims related to the hailstorm and reported the backlash against State Farm from its policyholders. Tr. p. 4054. As the pressures grew, State Farm became concerned with the public's perception of its image.

B. Radcliff Creates CPM to Repair Hail-damaged Homes

Several months after the storm, Radcliff created Coastal Property Management LLC (CPM) to repair the storm-damaged homes. Although headquartered in Indiana, CPM had offices in Ohio and Missouri and nearly 400 workers. Id. at 4014–15.

Radcliff was retained by approximately 300 State Farm policyholders whose claims had been denied. Id. at 4023. By late 2006, Radcliff saw other insurance companies approving claims when the homeowners next door—insured by State Farm—had their claims denied. Id. at 4023–26.

Radcliff took his clients' concerns to the Department of Insurance, where he learned that State Farm was already being investigated for unfair-claims practices. Id. at 4023–24, 4026–28. The Department of Insurance asked Radcliff for evidence in its investigation of State Farm. Id. at 4028.

Around this same time, Radcliff contacted Rafael Sanchez with rtv6 because he had seen a story on the news about State Farm and the April 2006 hailstorm. Id. at 4054. Rafael Sanchez interviewed Radcliff at his office.

Radcliff learned that many roofing contractors were unwilling to work with homeowners who had State Farm for their insurance company because of the claims-denial issue. Id. at 4056. In fact, contractors put advertisements in the newspaper discouraging State Farm policyholders from calling them. Id. Radcliff, however, wanted to “let people know that there was somebody that would help them” and posted signs in and around Marion County stating that CPM would “fight State Farm.” Id. at 4055–56; CPM Ex. 60. State Farm complained about these signs. Tr. p. 4056.

C. The State Farm Players

Tom Cockerill and Karl Benz are the State Farm employees who allegedly defamed Radcliff and CPM by forwarding their insurance-fraud investigation to the National Insurance Crime Bureau (NICB), which is a not-for-profit organization that acts as a liaison between insurers and law enforcement. The NICB turned over its investigation to the Indianapolis Metropolitan Police Department (IMPD), and a probable-cause affidavit was prepared, which both Cockerill and Benz reviewed for accuracy. Cockerill and Benz work in State Farm's Special Investigative Unit (SIU), which investigates insurance claims involving indications of fraud referred by adjusters. Benz has twenty-three years' experience in the SIU as a certified insurance fraud investigator and certified fraud examiner and is the SIU's Team Manager. Id. at 3557–59. Cockerill is a certified fraud examiner who reports to Benz and was the lead investigator in this case.

D. State Farm's Public–Relations Strategy

Around February 2007, Angie Rinock, State Farm's media specialist for the Great Lakes Zone, learned that Radcliff was meeting with Rafael Sanchez as part of rtv6's ongoing inquiry into State Farm's practices. CPM Ex. 166. Rinock made a note to herself that there would be an investigation into Radcliff and CPM and that there were concerns about the “professional business ethics of this particular group.” Id.

During this same time, Rinock and State Farm Regional Claims Manager Neil Fritze regularly exchanged emails regarding a public-relations strategy. 2 CPM Ex. 161, 163, 167. In March 2007, they received an internal email explaining that State Farm's attempts to defray the negative media attention had failed and [u]nfortunately, th[e] story will not go away.... Our partners are requesting a change to a more aggressive strategy.” Tr. p. 3721–22; CPM Ex. 171.

According to State Farm internal emails, rtv6 ran a story about State Farm on July 16, 2007. See CPM Ex. 154 (“Based on last night's Channel 6 story it appears Ra[f]ael has taken a softer tone regarding State Farm's handling of hail claims. What do you think about approaching Rafael to see if he would like to do a story on ‘mechanical damage to roofs?’ (email dated July 17, 2007)). Rinock responded to this email on July 18 and said that when she had Rafael Sanchez visit the Indianapolis office, they discussed mechanical damage, but at this point in time she thought that it was best “to lay as low as possible in Indianapolis.” Id. Benz, however, responded to Rinock's email that same day, explaining that [s]ome of the negative press that has been occurring in Indy has been generated by ... questionable contractors in efforts to put pressure on us to simply pay ... questionable claims. A good, positive story to indirectly expose some of these practices and help protect consumers could go a long way to helping change the public's attitudes and perceptions.” Id. When Benz wrote this email to Rinock, State Farm had already begun a formal investigation of Radcliff and CPM.

E. State Farm Begins Formal Investigation of Radcliff and CPM

Benz formally opened an investigation into Radcliff and CPM on June 29, 2007. Tr. p. 3480, 3533. Although State Farm says the decision came over a period of time, it was prompted by a single claim on Tom and Julie Moll's Indianapolis home. Id. at 3482.

State Farm adjusters found no hail damage when they first inspected the Molls' roof in May 2006. However, three of the Molls' immediate neighbors received new roofs and “at least” three or four other homes in the neighborhood also received new roofs. Id. at 3031. A year later, CPM obtained the Molls' signed power of attorney and asked State Farm to reopen the claim. Two State Farm adjusters inspected the Molls' roof with Radcliff on June 21, 2007. Afterwards, both adjusters told Benz that Radcliff became agitated when they did not find hail damage and intentionally creased roof shingles in the adjusters' presence, claiming he would have State Farm pay for the roof as wind damage. Id. at 3480–81. In the Molls' claim file is a photograph of someone creasing the shingles, but Radcliff says it is not his hand in the photograph. Id. at 3481–83. In defense of Radcliff, Mrs. Moll...

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