There are still a number of Hurricane Katrina cases we are actively litigating in Mississippi. One of the cases being followed closely by Slabbed is the Qui Tam litigation, brought by the two Rigsby sisters that worked for State Farm following catastrophes. The Rigsbys claim that the federal government paid more in National Flood payments than what was owed because State Farm altered engineering reports and made outcome oriented adjustments, which maximized flood related damaged so that the amounts paid under State Farm’s policies would be minimized.

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.