Insurance Law

Suit: Insurer Issued False Katrina Reports


A federal whistleblower lawsuit ordered unsealed today claims that State Farm Insurance Co. pressured engineers investigating homeowner claims to falsify reports about the cause of damage from Hurricane Katrina.

Instead of saying that wind damage from the August 2005 storm, which is covered by homeowner policies, destroyed insured houses on the Gulf Coast, State Farm allegedly pushed engineers to say that flood damage, which is not covered by homeowner policies, was responsible, reports the Associated Press. The suit is a whistleblower claim in which the federal government potentially could chose to intervene because it contends that the allegedly falsified damage reports led to the government being overcharged for flood clean-up costs.

Meanwhile, the suit, brought by two sisters represented by Richard F. Scruggs, has led to an ongoing criminal contempt case against the well-known Mississippi personal injury attorney and his law firm. After the local U.S. attorney declined to pursue the case, U.S. District Judge William Acker named Charles E. Sharp and Joel Williams to serve as special prosecutors, AP reports in an earlier article.

As discussed in an earlier ABAJournal.com post, the sisters, who worked as claims processors for a company hired by State Farm, took documents that they say shows the insurer acted improperly. Acker ordered the documents returned to State Farm, but Scruggs instead gave them to the Mississippi attorney general.

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