State Farm Appeals Katrina Fraud Ruling in Mississippi

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State Farm Fire and Casualty Co. is asking a judge to void a jury’s finding that the company defrauded the government involving a policyholder claim after Hurricane Katrina.

Motions filed in U.S. District Court in Gulfport, Miss., also seek a new trial

The verdict came in April in a whistleblower lawsuit against the Illinois- based insurer.

The lawsuit was filed in 2006 by Cori and Kerri Rigsby of Ocean Springs, Miss., who worked for an Alabama contractor hired by State Farm to provide damage assessments after the August 2005 hurricane.

The jury found State Farm avoided covering a policyholder’s wind losses by blaming damage on storm surge, which is covered by federal flood insurance.

State Farm was ordered to repay $250,000 to the government. Other damages are to be determined.

The Rigsbys’ attorney, August J. Matteis Jr. of Washington, D.C., said on May 9 in an email that over the past seven years, State Farm has filed scores of motions in its attempt to prevent the Rigsbys’ case from going to a jury.

“Now, after a unanimous jury from the coast decided in less than three hours that State Farm intentionally committed fraud against the United States government, State Farm is making the same arguments that have failed repeatedly prior to trial. The jury’s verdict should stand.

“As you will see from the papers filed by the Rigsbys, this verdict reveals only the tip of the iceberg regarding the depth and scope of State Farm’s fraud. The Rigsbys have now proven that State Farm committed fraud. The only question left is how big was the fraud and how much money was involved,” Matteis said.

While the sisters had pursued cases for a number of policyholders, a federal judge limited the initial phase of the case to one State Farm claim case — that of Thomas and Pamela McIntosh whose Biloxi, Miss., home was lost to the storm — because the sisters have firsthand knowledge of how the claim was handled.

The Justice Department was not involved in the case.

State Farm has a counter-claim pending against the Rigsbys over company documents they took after growing suspicious of how the insurer was handling claims.

The sisters alleged the documents showed the insurer defrauded policyholders by manipulating engineers’ reports so claims could be denied.

In its motions, State Farm said it assessed the damage correctly and never instructed its adjusters to wrongly process claims as flood damage, nor did it withhold a report that showed the home had been destroyed by wind as the Rigbys alleged.

“There is incontrovertible photographic, physical, and testimonial evidence that Katrina inundated the McIntosh house with floodwater and testimony by three former FEMA officials demonstrating that the covered flood damage to the McIntosh property plainly exceeded $250,000, and State Farm’s adjustment of the McIntosh property was fully consistent with FEMA claims-handling practices,” the company said in court documents.

State Farm also said if verdict is allowed to stand it could open for examination thousands of post-Katrina flood claims the company handled and paid before reimbursement by the National Flood Insurance Program.

The company claims that would “effectively allowing juries to set their own standards for government contractors and to disregard the reasoned judgments of the government officials empowered by Congress to implement federal programs, even when those government officials testify that the defendant did not violate its guidelines.”