The U.S. Supreme Court has agreed to hear an appeal by State Farm Fire and Casualty disputing the outcome of a whistleblower complaint accusing the insurance company of defrauding the federal government by misclassifying Hurricane Katrina damage on the Gulf Coast.
The court will review a ruling by the 5th U.S. Circuit Court of Appeals in New Orleans, which last year upheld a 2013 jury finding in favor of the plaintiffs.
Sisters Cori and Kerri Rigsby of Ocean Springs, Miss., filed the lawsuit under the whistleblower provisions of the False Claims Act. The sisters, who worked for an Alabama contractor hired to assess property damage after the disastrous 2005 hurricane, accused State Farm of manipulating damage reports blaming damage caused by high winds on storm-surge floods instead.
By misclassifying damages in this way, State Farm could shift its liability to the federal government, which provides flood insurance and covers flood-related damages where private insurers do not.
A federal jury Mississippi ruled against State Farm in a test case involving a home in Biloxi and a judge ordered the company to pay more than $3 million in damages and attorney fees. The Rigsbys were awarded $227,000 as their percentage for bringing the False Claims Act suit.
State Farm appealed the verdict, arguing it should be overturned because the plaintiffs and their lawyer shared information about the case with the media before the seal on the case was lifted. By law, False Claims Act complaints must remain private for 60 days once sealed, giving the federal government time to look into the complaint and decide whether to intervene.
The U.S. Chamber of Commerce, which has emerged as one of the biggest opponents of the fraud-busting False Claims Act, joined State Farm in pushing for a Supreme Court review of the case, claiming that the number of FCA lawsuits filed by whistleblowers has rocketed in recent years.
SCOTUS will hear oral arguments in the case, but a ruling isn’t expected until the court’s next term, between October and June 2017.