E-mails sent by officials of an engineering firm that assessed Hurricane Katrina claims suggest that State Farm Insurance Co. wanted engineers to blame damage on flooding so that it could make minimum settlements with policyholders.
The e-mails, obtained by The Associated Press, indicate that Bloomington, Ill.-based State Farm was threatening to dismiss Raleigh, N.C.-based Forensic Analysis & Engineering Corp. less than two months after Katrina hit on Aug. 29, 2005.
Attorneys for homeowners suing State Farm claim the e-mails support their argument that the insurer pressured its engineers to alter their reports on storm-damaged homes so that policyholders’ claims could be denied.
State Farm denies that the company pressured engineers to alter their conclusions.
State Farm and other insurers say their homeowner policies cover damage from wind but not rising water, including wind-driven storm surge.
The e-mails between Forensic president and CEO Robert Kochan and Randy Down, the firm’s vice president of engineering services, outline complaints about the firm’s work from Alexis “Lecky” King, a State Farm manager in Mississippi.
In an e-mail dated Oct. 17, 2005, Kochan says the firm will continue working with State Farm, but discusses needing to “redo the wording” of a report after a discussion with King “such that the conclusions are better supported.”
It also says King didn’t want local engineers to inspect properties because they were “too emotionally involved” and were “working very hard to find justifications to call it wind damage when the facts only show water induced damage.” She also was apparently upset that a report was based upon eyewitness accounts, the e-mail said.
In a reply dated Oct. 18, 2005, Down questioned the insurer’s motivations and questioned if there was an ethical problem with State Farm telling the firm what to put in reports. He also suggested that on another occasion, State Farm asked the firm to remove information from a report because “they would then have to settle.”
“I really question the ethics of someone who wants to fire us simply because our conclusions don’t match hers,” Down wrote in an e-mail dated Oct. 18, 2005.
“But what about the obvious fact that SF would love to see every report come through as water damage so that they can make the minimum settlement,” he wrote.
Chip Merlin, a Tampa, Fla.-based attorney who has sued State Farm on behalf of dozens of homeowners, said the e-mails are “the first paper evidence we’ve got where you can see engineers expressing concern about being pressured to change reports.”
“Whoever Randy Down is deserves a gold star on his forehead for being one of the most ethical individuals,” Merlin added.
Zach Scruggs, an attorney who is part of a legal team that sued State Farm on behalf of hundreds of homeowners, said Forensic turned over the e-mails as part of the pretrial discovery process for one of the lawsuits. The e-mails, he added, “confirm everything that we have always suspected.”
“What it says is pretty shocking,” Scruggs said. “This outlines the whole scheme of theirs.”
Kochan, in an interview, said plaintiffs’ attorneys are taking the e-mails out of context. King “just felt like we weren’t doing a technically accurate job,” but she wasn’t pressuring Forensic to change conclusions so that claims could be denied, Kochan said.
Down, who has since left Forensic and started his own engineering company, said in an interview that he was relying on “secondhand” information about State Farm’s complaints and wasn’t directly involved in Forensic’s work on Katrina claims. He said the threat to fire the firm came “out of the blue.”
“The question was why,” Down added. “The initial internal discussion I heard is that they didn’t like our reports.”
State Farm spokesman Phil Supple rejected the notion that the company pressured engineers to alter their conclusions on storm damage so that claims could be denied.
“Our employees are committed to conducting themselves in an ethical and appropriate manner,” he said. “Any suggestions to the contrary are simply wrong.”
Topics Homeowners
Was this article valuable?
Here are more articles you may enjoy.
JPMorgan Client Who Lost $50 Million Fortune Faces Court Setback 
Allstate Reports $731M in Q1 Pretax Catastrophe Losses 
California Sees Two More Property Insurers Withdraw From Market 
Wildfires Are Upending Some of the Safest Bets on Wall Street 
