Judge L.T. Senter Jr. is weighing whether to dismiss a whistle-blower lawsuit against State Farm Fire & Casualty Co. or expand its scope beyond one policyholder’s Katrina claim.
Attorneys spent four hours in federal court Wednesday presenting their arguments to Senter, who is presiding over his last major Hurricane Katrina case, Rigsby vs. State Farm.
State Farm attorneys argue the case should be dismissed because sisters and former insurance adjusters Cori and Kerri Rigsby have turned up no evidence of fraud during extensive pre-trial investigation, called discovery. Senter limited the scope of discovery to one policyholder claim, McIntosh, because the Rigsbys have firsthand knowledge of how it was adjusted.
Attorneys for the Rigsbys argue they have discovered a pattern of fraud by State Farm and should be allowed to expand discovery beyond the McIntosh claim. The Rigsbys maintain State Farm minimized its costs for wind-damage claims by overcharging the National Flood Insurance Program for losses caused by storm surge.
It takes two to tango but you can’t dance around the fact that an “exemplar case” alone is not the widespread scheme alleged in the Rigsbys’ complaint. In that regard, Judge Vance’s related decision in the Branch Consultants qui tam case is insightful:
In United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009), the Fifth Circuit stated:
We hold that to plead with particularity the circumstances constituting fraud for a False Claims Act § 3729(a)(1) claim, a relator’s complaint, if it cannot allege the details of an actually submitted false claim, may nevertheless survive by alleging particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted. Id. at 190 (emphasis added)….
The Sixth Circuit reached a similar result in United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493 (6th Cir. 2008).
[W]e hold that where a relator pleads a complex and far-reaching fraudulent scheme with particularity, and provides examples of specific false claims submitted to the
government pursuant to that scheme, a relator may proceed to discovery on the entire fraudulent scheme.
Given his careful reading of the pleadings evident in his decisions on pre-trial motions to date, it’s evident Judge Senter is giving every aspect of the case considerable and careful thought.
State Farm, on the other hand, appears to have let have let attorney James “horse-head-in-your-bed” Robie do the Company’s thinking. While even a fly on the wall knows the distinction between “flood damage” and “water damage” but Anita’s report reveals that Robie missed that point:
State Farm attorney James Robie of Los Angeles said the Rigsbys have failed to prove fraud because the McIntosh home on Biloxi’s Back Bay sustained more than $250,000 in flood losses, the policy limits paid for structural damage. He said numerous witnesses, including a FEMA reinspector, have said State Farm’s payment of policy limits was justified. State Farm and other insurance carriers adjust NFIP claims on policies they have sold, but NFIP covers the losses.
“If that claim is not false,” Robie told Senter, “then this case is over.”
Washington attorney August Matteis Jr., representing the Rigsbys, said evidence of fraud includes pressure on engineers to find water rather than wind damage, with engineering reports on the McIntosh property and others altered to meet State Farm’s expectations. But Matteis said the pattern of fraud was most clearly evidenced by State Farm’s departure from FEMA protocol for adjusting Katrina flood claims.
SLABBED addressed the “pattern of fraud” in claims handling following Hurricane Katrina in the scheme and the series makes good reading as we await Judge Senter’s decision.