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Jury returns verdict for the Rigsby sisters against State Farm

Longtime followers of this blog and its predecessor may remember the qui tam suit the Scruggs Katrina Group filed on behalf of the Rigsby Sisters, who were adjustors for State Farm after Katrina.  They alleged that State Farm was fraudulently moving claims from wind damage, which they covered, to water damage, which was covered by federal flood insurance but that State Farm administered.

I’ve glanced at the docket occasionally; it would be a full-time job to attempt to follow it.  The case was narrowed from a broad charge of fraud to a charge involving the one case involving Thomas and Pamela McIntosh’s house.

Anita Lee reports that a jury has returned a verdict for the Rigsby’s on the fraud claim:

A federal jury has found State Farm Fire and Casualty Co. committed fraud against the federal government and submitted a false record to support fraud after Hurricane Katrina.

The verdict came after the eight-member jury deliberated for three hours Monday afternoon in a whistle-blower lawsuit, Rigsby vs. State Farm. The decision potentially opens for examination thousands of post-Katrina flood claims State Farm adjusted and paid before reimbursement by the National Flood Insurance Program.

Before opening their case to other claims, former insurance adjusters Kerri and Cori Rigsby first had to prove State Farm committed fraud involving one property: the North Biloxi home of Thomas and Pamela McIntosh.

The Rigsbys presented evidence that State Farm paid policy limits of $250,000 for flood damage to the house, even though wind covered under the insurance company’s policy was responsible for the loss. The jury decided State Farm overcharged NFIP the full $250,000.

Still remaning are the question how much in damages State Farm will pay above the $250,000 flood insurance payment, and a State Farm counterclaim against the Rigsbys for stealing the documents. 

9 comments to Jury returns verdict for the Rigsby sisters against State Farm

  • I have no clue as to the relevant law, but it seems to me difficult if not impossible to be a whistleblower without “stealing” documents. Some sort of qualified privilege seems in order, at least if you win the suit.

  • Hootie Dasher

    I wish I had followed this case, but I thought it had little chance of prevailing. From what I recall, the Rigsby sisters were alleging they were told by superiors to put as much of a claim into the flood category as possible despite the hue and cry about wind causing the damage.

    I was on the coast during the storm and saw it firsthand. The vast majority of damage was water related. A relatively small portion related to wind. But immediately after the storm many folks realized they should have had flood damage and started wailing about wind, wind, wind.

    I assume SF will appeal which should be infinitely more easy to follow.

  • P.B. Pike

    This may shock you, Hootie D, but some things are not exactly what your lay eyes tell you they are — particularly not in environments as chaotic and disorienting as, say, a Category 3-5 hurricane — and, even more shocking, even if you perceive something accurately in one place that does not mean it is happening uniformly, in precisely the same way, everywhere else.

    If you were able to watch the minute-by-minute process by which structures around you were being destroyed, you were quite lucky to have lived through that storm. Quite lucky indeed.

  • I don’t know the law on such stuff, except that it’s complex, but there are arcane issues as to what’s the coverage when (1) wind damages your house and then (2) water finishes it off. Sustained winds of 120 mph, says Wikipedia.

  • Ben

    So … a major national insurer, State Farm, devising and implementing a nefarious scheme to defraud the national government. I was a mere PE major and obviously don’t know much, but this seems to me to warrant some major major retaliatory action by the federal government. Balls should be crushed. Spines should be snapped. Fines should be suffocating. “Good hands,” my ass.

  • Terminator

    I used to do bad faith insurance claims for plaintiffs. This is a fart in a whirlwind.

  • Brian Martin

    The way I understand it, they had to prove this one case because that is the one they had the true whistle-blowing documents on – specifically, the first engineering report that said wind was the predominant cause of the damage that State Farm then covered up, threatened to fire the engineering firm, and demanded a second engineering report, which not surprisingly found that flooding was the predominant cause. They had to prove this specific case to qualify as whistle-blowers.

    The Rigsby sisters were going to win this if or when the federal courts ever allowed it to be presented to a jury because it is an obvious false claim. State Farm paid the NFIP claim in full, billed to the government, without attempting a legitimate adjustment of the loss. Then a month or so later, they sent an engineer out to determine the “predominant” cause of the damage. The firm was given demands that it not divide damage between wind and flood, but to assign the loss to the predominant cause. This was what they did at every house that was in the surge area – pay flood in full immediately without any investigation, then later have a rigged/coerced investigation to deny the wind claim.

    This particular house was not on the beach. It was north of Biloxi Bay on the Tchoutacabouffa River. It had 4 or so hours of hurricane force winds coming off the bay. It was at the west end of the street so all the debris ripped off the other houses were slammed into it by east/southeast hurricane winds. Then finally there were between 2 and 4 feet of water from the bay meeting the river. Not as powerful as the surge and waves on the beach, but wind-driven tidal surge. There was roof, wall, and window damage obviously not caused by flooding. Parts of the ceiling had fallen in from rain flooding through the roof failure.

    The legal question now is how the Rigsbys’ status as whistle-blowers translates to other cases. To qualify as whistle-blowers they had to have inside information that exposed fraud. They have done that. The question to be argued, if this survives possible appeal I suppose, is what subset of State Farm cases is applicable to their whistle-blower status. My feeling is that it should apply to cases where most of the structure was still standing because those could and should have been legitimately adjusted for wind and flood damage. The slab cases are not false claims. I think most of them also had substantial wind damage and should have been paid by State Farm, but there was no fraud in paying the flood claims.

    It would be outrageous if their whistle-blowing applies only to the specific documents they had. That would make a sham of qui tam.

  • Ben:
    “You’re in good hands with Allstate.”
    “Like a good neighbor, State Farm is there.”
    You need to listen more closely to commercials (:))

  • “You’re in good hands with Allstate.”
    “Like a good neighbor, State Farm is there.”
    Ben, you need to watch commercials more carefully (:-))
    Then again, wouldn’t a good neighbor help you get the government to pay for your damage?

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