On Monday of this week, a federal jury returned a verdict finding that insurance giant State Farm Fire and Casualty Company (State Farm) shifted windstorm losses to the National Flood Insurance Program (NFIP), a program administered by the Federal Emergency Management Agency (FEMA), for one of its policyholders. The Associated Press is reporting on this jury verdict and the potential impact it will likely have on thousands of claims that State Farm adjusted following Hurricane Katrina.
The jury verdict arises out of a whistleblower lawsuit brought by Cori and Kerri Rigsby, who both once worked for a contracting company that State Farm hired to prepare damage assessments following Hurricane Katrina. The Rigsby sisters brought the whistleblowers lawsuit due to State Farm’s handling of Hurricane Katrina property claims. Initially, the Rigby sisters brought cases for multiple policyholders; however, a federal judge in Mississippi limited the initial trial to one State Farm claim filed by policyholders in Biloxi that lost their home to the storm. The evidence at trial showed that State Farm paid policy limits of $250,000.00 as “flood damage” and received reimbursement from NFIP for the full amount. The evidence also showed that the damages to the Biloxi home were actually windstorm damage, not flood damages, which should have been covered by State Farm without any reimbursement by NFIP.
In other words, State Farm adjusted the claim and dubbed nearly all the damage as being caused by flooding, which did not trigger the State Farm policy to pay the claim. By labeling the damage “flood damage”, State Farm was able to shift the loss to the government program and pay a minimized amount for windstorm damage. The jury found that State Farm overcharged NFIP for the full amount of the flood claim ($250,000.00) and must repay NFIP the full amount, plus additional damages yet to be determined.
Because the Rigsby sisters were involved in the adjusting process with firsthand knowledge of the conduct, and because they brought the lawsuit under the federal False Claims Act on the government’s behalf, they are entitled under the law to a portion of the recovered money. The law is designed to give whistleblowers an incentive for bringing cases of fraud against the government to light.
If you or someone you know has had an insurance claim wrongfully denied or underpaid, or has knowledge of any insurer or other entity defrauding the government, contact the attorneys at Abraham, Watkins, Nichols, Agosto, Aziz & Stogner by calling 713-396-3964 or 800-594-4884.