Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

A current problem regarding the disclosure of such activities is that catastrophe firms and insurers usually make the individual catastrophe adjusters sign confidentiality and non-disclosure agreements preventing whistle blowing from ever taking place. These agreements should be illegal. Can you imagine any reason society should tolerate contracts that prevent employees from disclosing improper claims conduct? What if the mafia could enforce such agreements? Yet, that is largely why Renfroe sued the Rigsby sisters--to shut them up about State Farm’s multiple engineering reports indicating excluded flood rather than covered wind caused damage to State Farm's customers.

Last night, a former Liberty Mutual adjuster, who is now a public adjuster, told me that while he was reviewing estimates from Pilot Catastrophe Services regarding damage to structures in Texas following Hurricane Ike, he noticed the amounts always seemed low. He took a Pilot adjuster to estimate a structure using the same Means software and the same measurements. He said the estimates were made on computers next to each other. He used the Means database and the other adjuster used the Pilot Means database provided by Pilot. The Pilot estimates were 30 percent lower than the unchanged Means database. I do not know why, but I will call Rodney Pilot to see if he knows. I will report on what I find. Maybe there is a good reason for this and the experienced, insurance industry trained public adjuster is mistaken.

Until then, the lesson policyholders should learn from this:

Get your own estimates and professional help anytime you have a significant loss.

The parties bringing the action, Kerrie and Cori Rigsby, are two former independent adjusters that worked catastrophe claims for Sate Farm,. The hearing is being covered extensively by Slabbed and Anita Lee of the Sun Herald. I wrote a comment a couple days ago in response to SLABBED Daily – May 20 (qui tam Hearing), which sets out how I feel about the Rigsby sisters:

“The Rigsby sisters deserve a big “thank you” from many along the Mississippi Coast. It is a very courageous action to go against one of the largest and most powerful corporations in the world.

As with any that leave a culture complaining of unethical conduct, the first attack is from the company they leave. It is an awful position to be in as a whistleblower.

The information that the Rigsby sisters suggested existed is what lead us to follow up with clients and then engineers that claimed that second reports were far different and limiting than the first reports which indicated different opinions supporting more coverage. In an early lawsuit, we attached both the first and then second report to quiet insurance industry spokesman, Bill Bailey, who challenged and disclaimed the existence of two reports.

Whatever the outcome of this action, the Rigsby sisters decision to leave State Farm and bring this action have significantly helped many of their friends and neighbors. My hat is off to them and to their new counsel.”

I met and spent considerable time with Kerrie Rigsby. She is a very nice and polite person. She is not the rumble and tumble stereotypical catastrophe adjuster that I so often deal with. She looks and acts like a soft spoken third grade teacher. I am certain that the State Farm attorneys will try to show her in a different light. However, if you are a nice person, Kerrie is the type you want to call your friend.

As indicated in Judge Senter’s Order the current hearing concerns the following issues:

“My reading of the Amended Complaint and the documents submitted in
connection with the pending motions leads me to the following conclusions:

1. The merits of this action depend on evidence that the defendants, acting
in concert, systematically submitted false flood insurance claims to the
United States, claims that were not valid under the terms of the Standard
Flood Insurance Policy (SFIP) used in the National Flood Insurance
Program (NFIP).

2. It is the amount of the flood insurance claims that the Relators allege to
be false, i.e. the allegation is that the defendants acted in concert to
submit flood insurance claims in an amount greater than the flood
damage that actually occurred.

3. The Relators allege that the motive for the submission of these false
claims was the defendants’ desire to reduce the exposure under State
Farm homeowners policies, which covered wind damage, by exaggerating
the extent of the flood damage where both types of policies were in force
on the same property.

4. The Relators allege that the defendants had the opportunity to submit
these false claims because the insurers are authorized to evaluate and
settle claims for both wind damage and flood damage, and the adjustors
and engineers the insurers hired were in a position to inflate the amount
of flood damage they observed.

5. There is no allegation that the defendants ever submitted claims to the
United States that were fabricated, only that the defendants acted in
concert to inflate or exaggerate the amount of the legitimate flood insurance claims that they submitted.”

I would strongly suggest that those with an interest of how State Farm operates its catastrophe operations read the Lecky King deposition.

Slabbed has a number of articles on this case including a recent one suggesting that State Farm has invited me to sue it for “settlement fraud.”

To the extent I can, I will comment more on this topic of flood adjustment later.

One of the central figures in many of the State Farm cases is Lecky King, a State Farm adjuster. For a period of time, she invoked her Fifth Amendment privilege and said nothing at depositions relating to her role in adjustments. There were criminal investigations underway after dozens of altered engineering reports surfaced; each initial report was changed to reflect greater flood damage and less damage that would be covered under State Farm policies. Lecky King was allegedly at the center of this controversy, in part, because she reviewed a stack of engineering reports that were subsequently modified.

State Farm did not voluntarily reveal the original engineering reports showing greater wind related damage to its policyholders or the federal government. A State Farm claims executive has rightly indicated that those reports should have been disclosed to the policyholders, along with the "modifications." While Slabbed has a tendency to poke and demonize insurers, there are many in the claims function that understand honesty and good faith mean a complete explanation of the truth, not just a disclosure of information supporting denial or less payment.

In a recent post, Slabbed noted an email from the Rigsby’s counsel that the deposition of Lecky King had been taken. It should be interesting, and we will attempt to get a copy of it. This is a coverage related case worth following because it provides some glimpse at the pressures that claims supervisors demonstrate when faced with a claims organization that never wants to "overpay" a claim. If you never "overpay," there is only one way to go.

We get told similar stories by other adjusters so long as it is "off the record."

A person with significant experience in the insurance industry, Deborah Moroy of Dimechimes,  wrote in response to Playing the Float and the Wisdom of Warren Buffett:

"I am fiercely committed to improve claims handling in the insurance industry while maintaining positive networking environments. I do not allow any negative posts or adjusting firm or carrier specific "blasting" among our members. I promote the discussion of claim handling in general but regularly post links to great blogs and articles found on the Internet. It has been 3 years of extremely hard work since I cannot post carrier information or ask adjusters to upload file samples so they don't violate carrier code of conduct requirements. So, my sole source of info is through training info I find on the web. The info found on the majority is worthless except in generic format........"

It should be against public policy for insurance companies to have any trade secrets regarding claims practices and there should be even a stronger public policy regarding any codes of conduct which prevent any adjuster or employee from disclosing improper methods or activities of claims adjustment. If we allow insurers to hide behind these shields, all we do is silence the otherwise courageous adjusters because the attorneys for the insurers will threaten them with civil action.

The classic example is the civil prosecution of the Rigsby sisters. They told a story of a State Farm adjuster holding numerous reports which were not being sent to policyholders but were "revised." The revised reports were always worse for the policyholders because they allowed for State Farm to deny claims. Had their story stopped there, they would have been terminated. But their actions went further with Dickie Scruggs, and the rest has been fodder for demeaning posts by the insurance industry.

Still, the message is clear from the insurance industry: We have a Code of Silence that you violate at your own risk.

We have initiated discussions with legislators at the state and federal level regarding these concerns. I could probably use the experience of Congressman Gene Taylor as an example. I took one of the Rimkus engineers to Washington to explain and show how his report was changed and signed without his permission. He did this in front of Taylor. In the civil action, the engineer called just before his deposition to tell us that Rimkus was getting him an attorney. At the deposition, he could barely recall the meeting with Taylor.

While there are legitimate reasons for adjusters and insurance company vendors to remain silent regarding the private information of customers and claimants, laws and contracts which further goals or activities of claims misconduct should never be allowed and there should always be exceptions to any arguments of privacy. The insurance industry should never be allowed to take any retribution against those that publicly make others aware of wrongful claims conduct. Otherwise, the insurance industry is acting like another illegal industry with a code of silence. 

If the insurance industry were really trying to stop bad claims practices, they would be up with me in Washington and in Tallahassee trying to help. I will write and call them to let you know where they stand. Stay tuned.