Rebecca Mowbray and Anita Lee have done wonderful jobs covering insurance issues in New Orleans and the Mississippi Gulf Coast. Our new readers may be interested to know that Ms Mowbray has recently won a prestigious business journalism award for her story “Same house. Same repairs. Same insurer. Why different prices?”. Not to be out done Anita Lee, along with Don Hammack, Michael Keller, Joshua Norman and Margaret Baker were recognized as finalists for the 2006 American Society of Newspaper Editors “Deadline News Reporting by a Team” for their coverage of Katrina news here on the coast.
Yesterday and today we are greeted with their reports on the latest State Farm filings in Ex Rel Rigsby, where State Farm filed to have the lawyers disqualified, the case dismissed and the Rigsby sisters charged with fraud. This latest attempt by State Farm to crush Cori and Kerri Rigsby has been largely lost in the shuffle of case analysis but the threat to them is very real. So before we move to tie in these developments with the Branch case in Louisiana lets start with some excerpts from yesterday’s Anita Lee story which comes complete with quotes from the Rigsby lawyer Anthony Dewitt.
Two State Farm insiders who accused the company of wrongdoing after Hurricane Katrina are the ones who have committed crimes, the insurance company alleged Tuesday.
State Farm wants a jury to decide whether former insurance adjusters Cori and Kerri Rigsbyare guilty of conspiracy and fraud. The company also is seeking actual and punitive damages from the sisters, who went public in August 2006 with claims that State Farm was defrauding policyholders.
The company also argues the Rigsbys’ whistle-blower lawsuit against the company and its vendors should be dismissed because it is groundless and based on false allegations.
State Farm says the women conspired with attorney Dickie Scruggs and other lawyers, from at least February 2006 forward, to steal confidential company records and profit from false allegations.
“Since Hurricane Katrina made landfall on August 29, 2005, the Rigsbys have engaged in an unlawful conspiracy to defraud State Farm and to misappropriate the property of State Farm,” the insurance company says in its counterclaim.
“… Objects of the conspiracy included the unlawful misappropriation of State Farm’s property, including documents and electronically stored information, to prepare for and litigate civil actions against State Farm, and to unlawfully extort civil settlements from State Farm through improper use of criminal process and influence over certain prosecutorial authorities.”
The Rigsbys maintain State Farm sought expert reports from vendors that minimized the company’s losses for wind damage by blaming storm surge covered under the National Flood Insurance Program. The sisters sued State Farm under the federal False Claims Act, which allows an employee who uncovers false claims submitted to the government to pursue the case. The U.S. Attorney’s Office has the right to intervene, but is so far undecided about whether to prosecute.
State Farm filed five motions to dismiss the Rigsbys’ lawsuit, supporting memorandums and its counterclaim because the deadline had arrived to respond to the sisters’ lawsuit.
“This is sort of what we expected,” said one of the Rigsbys’ attorneys, Anthony DeWitt of Missouri. “They’ve filed their motions, we’ll file responses. We’ll see what the court decides.”
He said State Farm is attempting to “bury us in paper. I would venture to say their resources in terms of hiring attorneys are virtually unlimited.”
State Farm claims the Rigsbyshave no right to pursue the lawsuit because the company did not employ them. Instead, the insurance company contracted with the Rigsbys’ employer, Alabama-based E.A. Renfroe, to adjust claims after the hurricane. The Rigsbys met with Scruggs in February 2006 because, they said, they realized policyholders were being shortchanged and they wanted to do something about it.
State Farm alleges Scruggs, DeWitt and other lawyers who filed the whistle-blower lawsuit illegally accessed company records on the sisters’ State Farm laptop computers during surreptitious meetings in a Pascagoulatrailer in March and April 2006. The sisters related details of those meetings under oath in response to pretrial testimony elicited by State Farm attorneys.
DeWitt said Tuesday: “I did not go onto State Farm’s system. We will file a response to that that is very factual and very specific.”
State Farm also says the lawsuit should be dismissed because the Rigsbys forfeited their right to sue when Scruggs offered them each “lavish consulting fees” of $150,000 a year after they lost their adjuster jobs in June 2006. They have said their adjuster salaries also were six figures.
Judge Senter ruled last week in a policyholders lawsuit the Rigsbys can’t testify or offer any documents in lawsuits filed against State Farm and Renfroe. Because the Rigsbys were potential witnesses for policyholders, Senter reasoned, Scruggs and his former associates breached legal ethics when he paid them.
DeWitt said he saw Senter’s ruling as an admonition to Scruggs and the policyholders’ attorneys, not the Rigsbys.
“Corporate America doesn’t treat whistle-blowers very well,” he said. “Certainly, it has an impact on their ability to become employable later on.
“It’s OK to hold the belief that they shouldn’t have done that. But if I were a policyholder with State Farm and I did not know I was being treated unfairly, I would hope someone would have the moral courage to come forward and tell me that.”…..
The Rigsbys’ employer, E.A. Renfroe, is suing them in its home state of Alabama, claiming the sisters breached their employment contract to keep State Farm’s records confidential.
Today Rebecca Mowbray weighs in with a report which ties in the implications of developments here in Mississippi in Ex Rel Rigsby with those in Louisiana and the public adjusters whistle blower suit there. For our readers that unfamiliar with “Ex Rel Branch” Ms Mowbray wrote an excellent story in May of last year on the complaint which can be found here. Also we wrote a recent post on their appeal to the Fifth Circuit Court of Appeals and have the original complaints and case docs on our legal pages. Here are some excerpts from today’s report by Ms Mowbray.
State Farm Fire & Casualty Co., the sole defendant remaining in a Mississippi whistleblower lawsuit alleging the overbilling of the National Flood Insurance Program, has asked a federal court in Mississippi to dismiss the case and hold the two former insurance adjusters who brought it accountable for fraud……..
A much more detailed whistleblower lawsuit filed in New Orleans was dismissed last October because the Rigsby lawsuit had been filed first. The case filed in New Orleans alleged that insurers overbilled the federal government for flood damage to lighten their burden for paying for hurricane wind damage covered by homeowners insurance policies.
The Rigsby lawsuit had focused on the underpayment of wind claims, but because the case included allegations about the overbilling of the flood program, U.S. District Court Judge Peter Beer of New Orleans ruled that the Rigsby case should be the vessel for handling any questions about insurers submitting inflated bills to the government for payment……….
Separately, other companies that had been named in the Rigsby case were severed from the proceedings last month because there was no evidence of fraud against them.
With the problems in the Rigsby lawsuit, the Branch Consultants, the former insurance adjusters who filed the New Orleans whistleblower suit, have asked the 5th U.S. Circuit Court of Appeals to reinstate their case.
Allan Kanner, attorney for the public adjusters in Ex Rel Branch sees the potential issue here. Remember when Judge Senter denied State Farm’s first motion to disqualify the Scruggs Katrina Group he noted in his opinion:
State Farm has identified February 2006 as the date that Scruggs first engaged in the conduct State Farm contends to be unethical. By August 2006, the relationship between Scruggs and the Rigsbys was public enough to include an appearance on ABC’s 20/20 television program. Thus, State Farm has known of this relationship and of its alleged impropriety for at least a year prior to the filing of this motion. During this time State Farm has defended hundreds of claims in which Scruggs represented State Farm’s policyholders; State Farm and Scruggs have successfully negotiated mutually satisfactory settlements in most of these cases; and State Farm has negotiated with Scruggs and his law firm in an attempt to fashion a class action settlement of all State Farm-Katrina property damage claims. Given this history between Scruggs and State Farm, I am at a loss to understand why State Farm has waited so long to invite the Court’s attention to the issues raised in this motion. While State Farm’s motion might be timely if this particular case were considered in isolation, I cannot close my eyes to the fact that State Farm has proceeded in hundreds of other similar cases without raising the issue of Scruggs’s alleged misconduct and seeking his disqualification.
Ms Mowbray’s finishes her report with quotes from Mr Kanner that draw the logical conclusion:
Their attorney, Allan Kanner, said State Farm is playing “musical chairs” with the judicial system in filing a motion to dismiss the Rigsby lawsuit. Because State Farm and other insurers argued six months ago in New Orleans that the Branch lawsuit shouldn’t stand because the allegations about the flood program were covered in Mississippi, the company shouldn’t now be allowed to argue that the Mississippi lawsuit is deficient in supporting allegations about the flood program.
“This proves that Judge Beer should not have listened to State Farm in his court when they said, ‘The Mississippi court will deal with this.’ I think it’s outrageous,” Kanner said. “The headline should be, ‘State Farm in favor of frivolous lawsuits when they provide corporate immunity.’ “
The developments seem to be one of attempting to have the best of both worlds. This much is clear, the latest State Farm push against the Rigsby sisters results in pull with our friends over the state line in Ex Rel Branch.