The nation’s highest court agreed Tuesday to hear an appeal by
State Farm contesting a previous ruling that the insurer defrauded the federal government when assessing damage caused by Hurricane Katrina in 2005.
The US Supreme Court said it will review the July 2015 ruling, issued by the 5th US Circuit Court of Appeals in New Orleans.
The lawsuit – filed under the federal False Claims Act, which allows people to sue over allegations that the government has been defrauded – was brought by Cori and Kerri Rigsby, two sisters and claims adjusters that worked with State Farm after the hurricane.
The sisters testified that they witnessed State Farm pressure engineers to rule that damage to homes along the Mississippi Coast following Katrina was caused by flood waters – not wind. Their statements were instrumental in securing a 2013 victory for a Biloxi, Mississippi family, who won a fraud case against the insurer after State Farm falsely denied claims for their damaged home.
The court held that State Farm defrauded the US government of $250,000 over that house, and would have to pay $758,000 in damages.
Similar allegations were widespread during the aftermath of the storm, the Associated Press reports, though with many homes destroyed to the very foundation, proving a case against insurers was difficult.
If the Supreme Court upholds the Circuit Court’s decision, the Rigsbys will be entitled to a portion of the damages. In the Biloxi case, the sisters were awarded $227,000.
State Farm has argued that the lawsuit should be thrown out because the Rigsbys’ former attorney, Dickie Scruggs, has distributed information about the lawsuit to members of the media. According to the False Claims Act, lawsuits are required to be filed under seal and remain private for 60 days.
The Supreme Court will hear oral arguments in the case and then issue a ruling during its next term, which begins in October and ends in June of the following year.
Its decision goes against the advice of the Obama administration, which urged the court to reject the appeal without a hearing.
The case is State Farm Fire & Casualty v. United States, ex rel. Rigsby, 15-513.
