Consumer Fraud

State Farm appeals verdict in whistleblower lawsuit involving Hurricane Katrina damages

whistleblower State Farm appeals verdict in whistleblower lawsuit involving Hurricane Katrina damagesNEW ORLEANS, La. – The 5th U.S. Circuit Court of Appeals will hear oral arguments Feb. 5 as Illinois-based State Farm Fire and Casualty Co. appeals a verdict that it pay $3 million in damages and legal fees stemming from a whistleblower lawsuit.

A Mississippi jury sided with sisters Cori and Kerri Rigsby of Ocean Springs, Miss., in 2013, who filed a lawsuit under the whistleblower provisions of the False Claims Act, which authorizes private citizens to sue on behalf of the federal government. The sisters accused State Farm of manipulating damage reports after Hurricane Katrina hit the Gulf Coast in 2005 to blame damage on storm-surge floods instead of wind damage.

The Rigsbys, who worked for an Alabama contractor hired to assess property damages after the devastating hurricane, said that by attributing damage caused by high winds to flooding instead, State Farm could shift its liability to the federal government, which provides flood insurance and covers flood-related damages where private insurers do not.

The complaint alleged State Farm’s fraud was widespread along the Gulf Coast, but federal judge Halil Ozerden pared the case down to one State Farm claim filed by a Biloxi, Miss., couple who lost their home in the storm. The judge allowed that case to move forward because the Rigsbys possessed evidence and first-hand knowledge of how the company handled the claim, which resulted in the National Flood Insurance Program paying policy limits of $250,000 when the claimants had a State Farm Wind Damage Policy that provided more than half a million dollars in coverage.

Damages automatically triple under the False Claims Act, and Judge Ozerden ordered State Farm to pay the federal government $750,000 in damages.

The judge also ordered the company to pay $2.6 million in legal fees and expenses of $303,078.

State Farm denies any wrongdoing in the case. In addition to appealing that ruling, the company filed a motion asking the judge to void the jury’s findings. The company seeks a new trial.

Sources:

The Associated Press, Katrina whistleblower case set for arguments
The Associated Press, State Farm appeals Katrina fraud ruling in whistleblower lawsuit (updated)