State Farm Accused of RICO Conspiracy

Attorney Richard Scruggs’ law firm has filed a federal racketeering suit against State Farm and two vendors claiming they conspired to cheat 21 policyholders out of nearly $4 million for Katrina damage claims.

The action is the latest salvo in an ongoing battle between the insurer and the plaintiffs lawyer.

The suit by the Scruggs Katrina Group claims State Farm hired independent contractors to produce false inspection reports that blamed water rather than wind for property damage, the Sun Herald reports. State Farm policies did not cover water damage.

A press release says the suit (PDF) will reveal evidence that tells “how State Farm and its web of surrogate companies conspired to deny claims that should be paid by State Farm and to shift liability to the federal-funded flood insurance program.”

State Farm described the lawsuit as fiction.

Yesterday, State Farm sought Scruggs’ ouster from one Katrina case, saying he was relying on stolen documents.

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