One of the more interesting twists in our post Katrina insurance saga was the public adjusters suit filed in Louisiana against several insurers in May of last year which contained some very specific allegations of wind claims dumping on the National Flood Insurance Program. Little did the public adjusters know at the time was that Dickie Scruggs has filed a similar suit under seal against many of the same insurers on behalf over several insured here on the coast and the Rigsby sisters. At the time my very non-legal thought was the suits should be joined because they involved very similar issues but involved actions in two states, different kinds of flooding and the differing fact patterns that result from that.
Later we would find out in the world of Qui Tam that it is essentially first come, first served and since Mr Scruggs filed the first lawsuit, the Louisiana suit was dismissed. Again my non legal mind had difficulties comprehending the logic involved in dismissing the Louisiana case which on it’s face involved different issues but my experience in the business world has taught me that logic and the law, while not mutually exclusive, also do not share space on the same page in the book of life.
The cut to the old public adjusters suit was even deeper when we learned that Ex rel. Rigsby was amended to let the other insurers included in the original complaint such as Nationwide and Allstate off the hook in some legal strategizing by the Rigsby attorneys.
Today we learn from Rebecca Mowbray at the Times Picayune the public adjusters have appealed the dismissal of their case citing some of the logic I used above. Following is some excerpts from today’s story:
A group of former insurance adjusters who filed a whistle-blower lawsuit alleging that insurers have been systematically shifting the cost of hurricane damage onto the National Flood Insurance Program have asked the U.S. 5th Circuit Court of Appeals to throw out a lower court ruling dismissing their case.
The appeal by the group of unidentified insurance adjusters known as Branch Consultants LLC was filed less than two weeks after Mississippi lawyer Richard “Dickie” Scruggs, who had a competing whistle-blower suit over hurricane insurance issues, pleaded guilty to federal charges of conspiring to bribe a judge.
Allan Kanner, an attorney representing Branch Consultants, said an appeal was forthcoming anyway, but the stunning downfall of Scruggs, a famed tobacco attorney, underscores why taxpayers shouldn’t have to pin their hopes on one suit to pursue claims of fraud against the federal government.
At issue is a case brought under the False Claims Act, a whistle-blower statute that empowers people with knowledge of fraud against the government to stand up on behalf of taxpayers to try to recover public assets.
The Branch Consultants adjusters, who came to Louisiana as independent adjusters working for insurance companies after the storm and then began working on behalf of individuals, say they started noticing trends of multiple insurance companies shifting the cost of hurricane wind damage that private companies should pay for onto the backs of taxpayers through the federal flood program.
They documented the trend in hundreds of cases and filed a lawsuit backed by a sample of 57 claims in which insurers had paid policyholders more in flood money than the flood damage to their homes warranted, but stiffed them on payments for wind damage to save themselves money.
Their case was dismissed in October after it was revealed that Scruggs had an insurance whistle-blower suit in Mississippi that had been filed earlier than the Branch case.
Neither one knew about the other case because False Claims Act suits are filed under seal so the government has a chance to check out the allegations in private and decide whether to intervene.
U.S. District Court Judge Peter Beer said that because there was overlap in the subject matter, the Branch case should yield to the Scruggs case.
Earlier this month, Allstate Insurance Co. , USAA and Nationwide were removed from the Mississippi suit, known as the Rigsby suit, leaving only State Farm Fire and Casualty Co. as a defendant.
Kanner says the Scruggs suit never should have been viewed as stand-in for the Branch allegations about the overbilling of the federal flood program.
While the Branch suit had a systematic analysis of claims payments and damages by multiple companies, the Rigsby suit was mostly about claims practices at State Farm. It alleged overbilling for flood claims in only two instances, both of them State Farm cases, without even noting whether the properties in question had flood insurance, meaning that the case would be unable to identify any specific overcharge to the federal government and satisfy basic requirements of a False Claims Act case.
“The transactions in Branch and Rigsby are completely unrelated,” the Branch appeal brief says. “The alleged malfeasance of a State Farm manager in Mississippi does not immunize an entire industry in Louisiana.”
The appeal asks the 5th Circuit to reverse the dismissal and send it back to the trial court with instructions.
Since we started the old Insurance Issues Forum now called slabbed, and for the benefit of our many new readers we have covered all the developments from the concept of Katrina wind claims dumping here in Mississippi, the mechanics of how it worked in Louisiana and Mississippi, to dropping the other insurers from the Rigsby suit earlier this month. Many of the legal filings can be found on our legal pages including the Rigsby sister Qui Tam action. As always this twisted road we travel post Katrina does not look to yield to any straight away traveling in the foreseeable future.
Update: The original Branch Consultants complaint is now on our legal pages. Here is the link.