State Farm slapped with $3mn in fees

A federal judge has ordered State Farm to pay more than $3mn in fees for defrauding the US government.

Catastrophe & Flood


State Farm must pay $750,000 in damages, plus an extra $2.9 million in attorney’s fees and expenses, for defrauding the US government on a Hurricane Katrina homeowner’s insurance claim, a federal judge ruled Friday.

The suit was brought by former insurance adjusters Kerri and Cori Rigsby, who alleged State Farm minimized its losses for wind damage by blaming storm surge from Hurricane Katrina, instead causing the burden of repayment to fall under the responsibility of the National Flood Insurance Program (NFIP).

Thanks to State Farm’s allegations, NFIP paid homeowners Thomas and Pamela McIntosh up to policy limits of $250,000, while State Farm paid just $36,000 for wind damage.

The insurer denied any wrongdoing in the case, and is deciding whether to appeal the verdict to the 5th US Circuit Court of Appeals.

The case was not a complete success for the Rigsbys, however. The two whistleblowers hoped to pursue a broader case against State Farm after succeeding in this single instance. US District Court Judge Sul Ozerden dismissed the idea, however, ruling that whistle-blower laws limited the lawsuit to the one case the Rigsbys were able to offer “independent, personal knowledge” about.

Had they succeeded, the Rigsbys hoped to prove State Farm engaged in similar acts of fraud along the Coast following Hurricane Katrina.

State Farm is fighting back against the Rigsbys by alleging they violate federal fraud laws by taking company computer and paper files while employed as adjusters. The counterclaim is currently pending.

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