Jury Finds State Farm Defrauded Govt with False Hurricane Katrina Claims
A federal jury found for whistleblowers in reaching a verdict that State Farm Fire and Casualty Co. knowingly provided fraudulent claims to the federal government under the flood insurance program for Hurricane Katrina regarding damage to at least one home, the San Francisco Chronicle reported on Tuesday. In reaching its special verdict, the jury found that State Farm caused damages to the government in the amount of $250,000. Under the False Claims Act, the relators, known as whistleblowers, may file a motion with the court to triple the amount of damages found by the jury to $750,000. Additional damages, as well as the share of proceeds to be awarded to the whistleblowers, is yet to be determined.
State Farm allegedly paid policy limits of $250,000 for flood damage to Thomas and Pamela McIntosh’s home in Biloxi, Miss. even though the damage was caused by wind. Wind damage would have been covered under State Farm’s policy, while flood damage was covered by a National Flood Insurance Program (NFIP) policy issued by State Farm. Under the NFIP, State Farm would be reimbursed by the government for claims covered by the flood damage policy. By charging the NFIP for losses, State Farm minimized its own payments for wind damage while shifting payment for hundreds of thousands of dollars to the government. The jury found that the house suffered $0 worth of flood damage, and that State Farm overcharged the NFIP the full $250,000.
According to the Sun Herald, this verdict may open the case to potentially thousands of post-Katrina flood claims adjusted by State Farm and paid by the NFIP. The whistleblowers alleged that State Farm trainers told adjustors that Hurricane Katrina was a “water storm” and that all major damage to homes was caused by flooding, all while delaying their own assessments of wind damage claims. State Farm also allegedly pushed the NFIP to relax their rules and requirements for adjusting flood claims.
The suit was originally filed by Kerri and Cori Rigsby under the qui tam, or whistleblower, provisions of the False Claims Act. The False Claims Act allows private citizens with knowledge of fraud committed against the government to sue on the government’s behalf and claim a share of the recovery. The Rigsbys were employees of a contractor hired by State Farm to help adjust the deluge of claims that followed Hurricane Katrina.
The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments. We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud. Read more about our expertise in False Claims Act cases and how you can take action.