US Supreme Court to consider Katrina fraud case in connection with State Farm

Whistleblowing sisters get $227k, carrier pays out over $3.5 million , appeal now centers on aprocedural technicality

Insurance News

By Lyle Adriano

The U.S. Supreme Court is set to hear a case involving alleged fraud against the federal government by State Farm.

The case, State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, argues that the insurer purportedly committed fraud in assigning damage from Hurricane Katrina. Previously, a jury found that State Farm was liable under the False Claims Act.

Claims adjusters and sisters Cori and Kerri Rigsby claimed that State Farm characterized wind damage as flood damage, which would transfer liability burden from the insurer to the federal government instead.

Jurors in the case came to the conclusion that the insurer had defrauded the federal government of $250,000 on damage sustained to a home in Biloxi, Mississippi. The jurors ordered State Farm to pay damages of $758,000. The Attorney’s legal fees in the case added another $2.9 million to the carrier’s costs.

State Farm, however, appealed the verdict, arguing that the Rigsbys’ counsel had violated a part of the False Claims Act that requires the claim to be sealed and not made public for at least 60 days. The insurer asserted that the Rigsbys’ attorney, Dickie Scruggs, made the case public to force the company to settle the case before trial.

The 5th Circuit, however, rejected State Farm’s appeal and acknowledged the lower court’s ruling.

State Farm has asked the high court what standard it would use regarding the privacy issue, as lower courts handled the 60-day seal requirement differently.
According to Southeast Texas Record, the case could have far-reaching effects. The Rigsbys’ have asked for closer scrutiny in the case, maintaining that that the insurer’s fraudulent actions could have affected thousands of other cases.

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