Allstate painted (literally) company in a Billion $ Corner – ex rel Sonnier v: FOURTH qui tam Complaint filed against Allstate

And, then there were four – ex rel Rigsby, ex rel Branch Consultants,  ex rel Denenea and, now, ex rel Sonnier v Allstate:

ALLSTATE’s price allowed on wind policy estimates of loss in the State of Louisiana for painting damaged areas was between $0.15 and $0.38 per square foot. However, on NFIP flood policy estimates, ALLSTATE allowed $0.56 per square foot, a difference of between $0.18 and $0.41 per square foot. Thus, if the true and correct cost to repaint flood damaged property was between $0.15 and $0.38 per square foot (i.e., the same cost listed by defendant, ALLSTATE, to paint the same unit of drywall covered under the wind policy issued for the same property by defendant, ALLSTATE, and applicable to the same loss event), ALLSTATE caused the federal government to overpay ALLSTATE between $0.15 and $0.41 for every square foot required to be painted in every NFIP flood policy loss estimate adjusted and initially paid by ALLSTATE but subsequently submitted to the federal government for full reimbursement to ALLSTATE.

Kermith Sonnier, “the Relator is a licensed insurance adjuster with 30 years experience…principal shareholder of Sonnier & Fisher Public Adjusters, LLC, a public adjusting firm based in Lake Charles, Louisiana”.

The allegations in Mr. Sonnier’s recently unsealed qui tam Complaint against Allstate are Plus-Size – over a $1,00o,ooo,000 federal dollars fraudulently by manipulating  multiple costs in claims submitted to the NFIP from multiple disasters in multiple locations over the six year period prior to filing the Complaint under seal on December 10, 2009.

Relator learned the facts and circumstances surrounding the allegations made in this complaint…[from]…flood and wind claims arising out of Hurricane “Charlie” on August 25,2004, Hurricane “Frances” on September 3, 2004, Hurricane “Ivan” on September 16,2004, Hurricane “Jeanne” on September 27,2004, Hurricane “Katrina” on August 28, 2005, Hurricane “Rita” on September 25, 2005, Hurricane “Dolly” on July 23, 2008, Hurricane “Gustav” on September 1,2008, and Hurricane “Ike” on September 13,2008…

Relator is informed and believes, and thereon alleges, that there are hundreds of thousands of flood policy claims in Louisiana and in other…jurisdictions, including but not limited to the states of Florida, Mississippi, and Alabama…

Relator is informed and believes, and thereon alleges, that the total overpayment fraudulently obtained from the federal government by ALLSTATE, on items such as drywall, paint, and overhead and profit contained in loss estimates prepared by ALLSTATE on NFIP flood policy commercial and residential claims in flood zones throughout the United States of America, and submitted by ALLSTATE to the federal govemment within the six (6) years prior to the date of filing of the within complaint is in excess of one billiondollars ($1,000,000,000).

In addition to the Relator’s exemplar case of Allstate’s manipulation of the cost of repainting flood damaged property, the Relator’s Complaint includes two additional exemplar cases:

ALLSTATE’s price allowed on wind policy estimates ofloss in the State of Louisiana for the item “R/R (remove and replace) drywall” was between $0.73 and $0.81 per square foot. However, on NFIP flood policy loss estimates, ALLSTATE allowed $1.53 per square foot, a difference of between $0.72 and $0.80 per square foot. Thus, assuming the true and correct cost to remove and replace flood damaged drywall was between $0.73 and $0.81 per square foot (i.e., the same cost listed by defendant, ALLSTATE, to remove and replace that portion of the same unit of drywall covered under the wind policy issued for the same property by defendant, ALLSTATE, and applicable to the same loss event), ALLSTATE caused the federal government to overpay ALLSTATE between $0.72 and $0.80 for every square foot of drywall called out in every NFIP flood policy loss estimate adjusted in the State of Louisiana and initially paid by ALLSTATE but subsequently submitted to the federal government for full reimbursement to ALLSTATE.

ALLSTATE’s overhead and profit factor allowed on wind policy estimates ofloss in the State of Louisiana was thirty one per cent (31 %). However, on NFIP flood policy estimates, ALLSTATE allowed an overhead and profit factor of forty nine per cent (49%). Thus, if the true and correct overhead and profit factor was the thirty one per cent (31 %) allocated by the defendant, ALLSTATE, to the estimates of loss for the wind policies it issued applicable to the same property for the same loss event, ALLSTATE caused the federal government to overpay ALLSTATE by a factor of eighteen per cent (18%) for every NFIP flood policy loss estimate adjusted and paid by ALLSTATE in the State of Louisiana and submitted to the federal government for reimbursement.

Great job “Who dat Judge Martin Feldman! Can you imagine how grateful Allstate was for his streamlined process that steamrolled policyholders following Hurricane Katrina?

Initially, Judge Feldman also limited the use of streamlined procedures to a single insurer, Allstate, but, subsequently, also included State Farm. and created another precedent-setting thought – deference to these two large companies reminiscent of that shown the “too big to fail” (or too well-connected to fail) AIG.

Imagine what would have happened if Feldman had let those cases go to trial – entire courtrooms of people mumbling, “I knew it, I just knew it”!  Somehow I feel a few choice words will be added to the mumbling as when word of the “what” and “how” detailed in Sonnier’s Complaint reaches courts that heard Allstate policyholder litigation:

The three claims processing software programs most commonly used in the insurance industry are “Integriclaim,” manufactured by Marshall & Swift/Boeckh, LLC. (“MS/B”), “Xactimate,” manufactured by Xactware, Inc., a subsidiary of Insurance Services Office, Inc. (“ISO”), and “Simsol” manufactured by Simultaneous Solutions, Inc.

Relator has been informed and believes, and thereon alleges, that neither MS/B, Xactware, nor Simsol publish a separate unit price list for flood damage and wind damage, and that the unit prices for removing and repairing or replacing damaged items in the Integriclaim, Xactimate, and Simsol software programs are the same whether the estimate is being generated for a flood claim or a wind claim…

In the scheme, SLABBED revealed the functionality of claims processing software programs is the same by any name – and showed evidence indicating Allstate was not the only insurance company playing this monopoly game:

The claims presented by defendant, ALLS TATE, were false and/or fraudulent in that ALLSTATE deliberately allocated higher unit prices on the NFIP flood insurance claims (for which it received reimbursement dollar for dollar from the federal government) than in the loss estimates prepared in response to wind claims (which were paid directly by ALLSTATE with its own funds) despite the claims arising from the same insured property for damage or loss caused at the same time and by the same disaster. Through this process, a single unit at one property – e.g., a single sheet of drywall in a residence — damaged in one event was assessed at two different costs, a higher cost for that portion of the unit attributed to flood damage and a lower cost for that portion of the unit attributed to wind damage. In so doing, defendant, ALLSTATE, defrauded the federal government and breached its duty of reasonable care, duty of utmost good faith and fair dealing, and fiduciary duties as a fiscal agent of the federal government, all to the direct monetary benefit of defendant, ALLSTATE.

Relator is informed and believes, and thereon alleges, that defendant, ALLSTATE,requires its independent adjusters to use the Integriclaim claims processing software to prepare theestimate on an NFIP flood policy claim, and that ALLSTATE can modify the Integriclaim unit price list before adjusting claims, and this Relator is informed and believes, and thereon alleges, that the majority of unit prices for the most common, major repair or replacement items which are found in most residential and commercial loss estimates and add the most to the bottom line of the estimate, were manipulated by defendant, ALLSTATE in the process of preparing NFIP flood policy estimates and submitting them to the federal government for reimbursement. Relator lists, by way of example, the following instances of unit pricing by defendant, ALLSTATE, within the State of Louisiana that evidence this pattern of deliberate, false, and fraudulent manipulation of unit pricing to the detriment and loss of the federal government and to its direct benefit.

Relator is informed and believes, and thereon alleges, that by increasing the unit prices for labor and materials and the overhead and profit factor on NFIP flood policy claims as hereinabove alleged, defendant, ALLSTATE, reduced the amount it was required to payout of its own pockets to its insured claimants under the wind policy, allowing ALLSTATE to take the position with their insureds that they had already received the full value of the insured property, orthat the flood damage had rendered the insured property a “total loss” under the NFIP flood policyand therefore nothing was required to be paid under the wind policy claim.

SLABBED welcomes ex rel Sonnier v Allstate to the slabbednation: Kermith Sonnier and his legal team  – Hunter W. Lundy, Matthew E. Lundy, Rudie R. Soileau, Jr., of Lundy, Lundy, Soileau & South, LLP (Lake Charles, LA); Michael R. Davis, Hymel Davis & Peterson, LLC (Baton Rouge, LA) and Craig Hill (Oberlin, LA).  Great job!