Radcliff v. State Farm
Background:
After a violent storm in Indiana caused over $1B in property damages, State Farm Insurance received ~50,000 claims for damage and rejected more than 7,000. Joseph Radcliff, an enterprising roofer who formed a company to repair damaged homes, was hired by 300 or so State Farm policyholders. While working on their homes, he saw that some of his clients whose claims State Farm had rejected lived next door to homeowners whose claims had been approved by other insurance companies. Radcliff reported State Farm to the Indiana Department of Insurance. State Farm (the “Plaintiff”) got Radcliff (the “Defendant”) arrested on fourteen felony counts, including corrupt business influence and attempted theft, based on trumped-up evidence that he had vandalized roofs as a basis for fraudulent insurance claims. Radcliff countersued. All of the charges against Radcliff were eventually dismissed, but not before Radcliff’s business was destroyed, thereby eliminating 385 of 400 jobs.
Case Characteristics
Jurisdiction: Indiana, USA
Case Stage: Late stage - on appeal
Case Type: Defamation
Funding Period: 24 months
Case Economics:
Proceeds: $4.5MM
Investment: $2.3MM
Multiple of Capital: 2X
Gross IRR: 41%
Case Overview:
Litigation: Defendant countersued for defamation, abuse of process, and interference with business relationships in response to fraud and racketeering charges by State Farm
Damages: Lost profits and reputational damage
Stage: Jury awarded $14.5 million to Radcliff, but State Farm appealed which is when the litigation finance manager became involved
Manager Assessment:
Case Merits: previous court award; the merits of the Plaintiff’s (i.e. defendant in a countersuit) appeal were weak
Representation: Manager hired one of the best appellate lawyers in Indiana, Julia Gelinas, a fellow of the elite American Academy of Appellate Lawyers (all other Indiana fellows worked for State Farm)
Collectability: large insurance company
Commitment: $2.5MM, of which Radcliff used ~$2.3MM to pay outstanding legal bills
Case Outcome:
Defendant won on two appeal processes and was awarded ~$17MM in damages & interest
Manager was repaid original $2.3MM + an additional $2.3MM + the costs of the appeal lawyer (~200K)
Defendant netted ~$12.5MM (according to press estimates)
Radcliff successfully restarted his roofing business after the verdict
* Source: Various articles in The New Yorker, BuzzFeedNews and Harvard Law School. ND = Not Disclosed