Whistleblower Lawsuit Reinstated for Some but Allstate, Stat

 

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February 23, 2009 Monday 04:11 PM EST

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Whistleblower Lawsuit Reinstated for Some but Allstate, State Farm are Dismissed

Chad Hemenway

NEW ORLEANS

Because the two companies are named in another similar "whistleblower" lawsuit, Allstate and State Farm have been dismissed by a federal appellate court in another suit that alleges many of the same charges.

According to court documents, Allstate and State Farm have been severed from a lawsuit brought by a group of former insurance adjusters, Branch Consultants, under the False Claims Act. The 5th U.S. Circuit Court of Appeals in New Orleans ruled the insurers were already named in another similar lawsuit filed by sisters Kerri and Cori Rigsby, who worked for an adjusting firm following Hurricane Katrina.

Under a "first-to-file" law, Allstate and State Farm cannot be included in the Branch suit because the Rigsby suit was filed first. Both suits allege insurers defrauded the federal government, changing engineering reports to show less covered wind damage and more flood damage, which is covered by the National Flood Insurance Program.

The appellate decision did not go in favor of several other insurers included in the Branch suit, which was dismissed by a lower court in October 2007, under the same "first-to-file" premise. The appeals court has ruled the Branch suit can continue against Liberty Mutual Fire, Fidelity National; American National, Standard Fire and American Reliable insurance companies, as well as several subcontractors.

Court records show the Branch lawsuit outlines 57 specific instances where the insurers allegedly overestimated flood damage for properties in Louisiana following Katrina.

State Farm filed to dismiss the Rigsby suit in April 2008, about two years after the suit was originally filed. State Farm has also filed a counterclaim seeking damages. The insurer alleges the Rigsbys "schemed to abuse and exploit their access to State Farm's confidential computer systems and policyholder records" together with attorney Richard "Dickie" Scruggs and others (BestWire, April 14, 2008).

Scruggs paid the Rigsbys $150,000 each per year for what Scruggs described as consulting work. The sisters secretly copied hundreds of State Farm claims-related documents following the storm.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

February 24, 2009

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