An important evidentiary hearing concerning alleged wrongful claims practices is taking place in Mississippi. Since the allegations partially involve an insurance company obtaining altered or biased reports from experts, it should be studied by those with similar concerns in other areas of the country. The primary issue in this case is whether State Farm adjusted flood losses so that the Federal Government paid too much on those flood claims through the National Flood Program. The lawsuit contends that State Farm had a motive for doing so because it could minimize the amount owed under its own all risk insurance policies which exclude flood damage.
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
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.