Katrina through the eyes of State Farm: a now familiar story that begins in Bloomington, in a boardroom, awaiting an angry sea. August 29, a third of Mississippi is nuked. In comes a headline-starved lawyer, well healed and ready to “save the people.” State Farm repairs to Birmingham, a Roveside rat’s nest. Alas, the 4 year odyssey begins.
In the meander of this cyclonic tragedy, countless homes, lives, reputations and chattel are ravaged like the spoils of war. A senior federal judge, bent on political revenge, soils the bench he occupies. Two “factory” girls of the Cat adjusting world, forthright and honest-to-a-fault, are savaged by a $56 billion racketeering monopoly and its Hessian body broker. Associated hard-driving plaintiff lawyers, indispensible lifelines to thousands of victims, are systematically slandered by thug corporate lawyers, and then, through no fault of their own, thoughtlessly disqualified by a rudderless federal court. Behind the scenes, lifer law clerks – insidious martinets of the inner sanctum – work the ex parte back channels for ways to advance their impish political agendas. A 30 year pimp politician is stripped bare and lampooned, a righteous comeuppance for the thousands of lives he’s ruined. A neophyte lawyer-journalist who wouldn’t know a hurricane loss if it bit his private parts off, shills and cons his way into the affray, and trafficking on scandal, emerges as a self-ordained insurance expert.
Four (4) years of rampant fraud, $13 million a day in falsely settled claims, without so much as a single uptick on the legal side. Think of the money spent, the millions wasted, the dreadnought trial schedules, as if the whole thing were an interminable English parlor game. Motions, replies, briefs, extensions, sanctimonious trials, an endless procession of mindless bureaucracy, saddling already helpless people with cost in the hundreds of thousands, all just to get a contract debt paid. Unable to deliver even basic service, the court outsources, dumping bereft insureds in the laps of purchased mediator-lawyers, eager to stay in good with their fee paying, corporate check writers. Judged for fidelity of service and “get-er-done” efficiency, the legal system is an antideluvian disaster, a deus ex machina, lacking rope and hoist.
To call it “a ship of fools” would connote mere negligence – that’s not even close to this malodorous affair. In the end, the “system” – if you can call it that – abysmally failed the very people it was created to protect. But they sure got a nice building.
Still, no fatso has sung, and there’s music yet to be faced. The watershed issue in USA ex rel Rigsby v. State Farm et al is: while acting as a fiduciary and fiscal agent of the US government, did State Farm engage in a scheme to fraudulently induce flood program waivers, and disburse unadjusted and often maximum pay outs under the federal flood program to offset its own policy losses?
In dual coverage situations, a flood policy and an all-risk policy are issued on the same “risk” (insured property). The two policies occupy opposite ends of a seesaw equation – what goes up on one end, must come down on the other. For every $1.00 paid under flood, a $1.00 credit is derived under all-risks. This creates a unique opportunity for fraud, especially when a single adjuster, controlled by the WYO, holds a State Farm check in one hand and a government check in the other. Add to this the fact that the WYO can bill the single adjuster’s fees and costs to the flood program, and the adjuster can bag his commission by hitting flood limits. Easy to see where this is leading.
Like all WYO’s, State Farm signed formal documents with FEMA, administrators of the National Flood Insurance Program (“NFIP”). One of them is called a “Financial Control Plan.” Among other things, the Plan document requires WYO’s to “account for and ensure appropriate spending of any taxpayer funds . . . . ” Another agreement State Farm had to sign is the “Financial Assistance/Subsidy Arrangement.” In pertinent part it says: “. . . the primary relationship between [State Farm] and the Federal Government is one of a fiduciary nature, i.e., to assure that any taxpayer funds are accounted for and appropriately expended. [State Farm] is a fiscal agent of the Federal Government, but is not a general agent of the Federal Government. (See Appendix A – 44 CFR, Part 62).
Question of the day: who are the players and what are the facts behind State Farm’s inducing Maurstad (FEMA) to waive the flood program’s proof of loss requirements, within 48 hours of Katrina?
What say we close with Handel’s Water Music, a personal Bam Bam favorite.