Illinois-based State Farm and Casualty Co. has asked a federal judge to overturn a Mississippi jury’s finding the insurance company defrauded the U.S. government by allegedly manipulating damage reports after Hurricane Katrina hit the Gulf Coast in 2005 to blame damage on storm-surge floods instead of wind damage.
The whistleblower case originated with Cori and Kerri Rigsby of Ocean Springs, Miss., sisters who worked for an Alabama contractor State Farm hired to assess damages after the hurricane. The borderline category-3 / category-4 storm was the costliest and most destructive storm in U.S. history. It decimated entire cities along the Gulf Coast from Louisiana to Alabama.
The sisters provided the court with evidence that State Farm was allegedly defrauding both policyholders and the U.S. government by fabricating engineer reports so that claims could be denied. By attributing damage caused by high winds to flooding instead, the company could shift its liability to the federal government, which provides flood insurance and covers flood-related damages.
According to the Associated Press, the Rigsbys pursued cases for several policyholders, but a federal judge in U.S. District Court in Gulfport, Miss., where the cases were filed limited the initial trial to just one case “because the sisters have firsthand knowledge of how the claim was handled.”
After nearly three hours, the jury returned a verdict in favor of the plaintiffs. State Farm was ordered to pay $250,000 to the U.S. government in the one case that was tried, involving a house in Biloxi, Miss., that was completely destroyed in the storm.
State Farm filed a motion asking the judge to void the jury’s findings. The company seeks a new trial.
An attorney representing the Rigsby sisters said that State Farm has filed numerous motions in the last seven years in an effort to keep the case from going before 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,” the lawyer told the Associated Press.
“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,” he added. “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,” he said.
The Associated Press reports that State Farm has filed a counter claim against the Rigsby sisters, claiming they took company documents when they became suspicious of what the company was doing with the claims.