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!

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

  1. ???s…Why are public pleadings which are filed in a public courthouse in need of being sealed ?… Public documents are sequestered from the public’s review for what public reason ?…the public, who has a right to see, and wants to see these very same public documents that have been filed in a public courthouse.

    The taxpayers own the building; pay the salaries of the Judge(s) on down; own any and all equipment and supplies that these documents are subjected to for filing, copying and storing…and the public pays to be told by someone whose salary is paid by the very same taxpayer making the request to see these public documents, that as a taxpayer you have no right to see the public record that is sealed !

    Exactly what information is it, that some authority junkie has decided I can’t handle being exposed to ? If it’s public records, I will decide how I deal with it, or if I want to. I pay taxes to pay for public business; I want to see what that public business is about, if I choose to.

    So tell me again, why are public documents sealed ?

  2. Whit, there is a statutory requirement for filing a qui tam complaint under seal – and it remains sealed for an initial 60-day period to allow the government time to conduct an investigation before the defendant is served. The law also allows the government to move the court for extensions of the seal to continue its investigation.

    Otherwise, not only do I agree with your thinking about the public’s right to information, think the courts, at least those handling Katrina litigation, have allowed insurance companies to abuse the process.

  3. Along those lines Nowdy I’d add “The confidential settlement” which allows companies like State farm and Allstate to play these games time and again across this land.

    Imagine the burden lifted off our court system if these companies simply did right by their policyholders.

    sop

  4. The purpose of the seal is to give the U.S. Govt. (the real plaintiff) the opportunity to investigate and determine if it wants to intervene. If it’s a pharmaceutical company ripping off Medicare, the Govt. is interested. If it’s an insurance company ripping off the Govt., not much interest. The real problem is that the Govt. has full control to delay these FCA cases. Some of these cases remain “under seal” for years. Then, the Govt. decides it does not want to intervene. Now I ask you, does that hurt the relator or the defendant?

  5. Sock somewhere back in our archives is a post on a WaPo story on that subject. I think the average case length is something like 7 years with most of the delay because of DoJ.

    sop

  6. There is a huge backlog of cases and DOJ does not have enough lawyers or expertise to do anything about it. They only have the capacity to handle straightforward Medicare claims fraud or contract fraud. Anything that requires investigation or specialized practice expertise gets ignored.

  7. The two LA cases (Denenea and Sonnier) were filed in two different federal court districts – but in each case, the government’s notice to the court that lifted the seal also maintained the seal on the motions, etc. the government filed with its applications to maintain the seal.

    Stark contrast to the “we’re investigating-just take my word for it” (most often untimely) applications to maintain seal in Rigsby filed by the AUSA in southern MS district federal court.

    JMHO:

    No documentation in extension applications to maintain seal in Rigsby =

    No actual investigation of Rigsby =

    No Compliance with statutory provisions related to maintaining seal =

    Politics more important than compliance to the AUSA who is under consideration for promotion from AU to A!

    (per Ashton – SPIT)

Leave a Reply

Your email address will not be published. Required fields are marked *