Legal Ethics

Battling Misconduct Claims in Katrina Case

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As if the ongoing insurance coverage battle involving Mississippi’s attorney general, a well-known plaintiffs lawyer and a national insurance company weren’t already contentious enough, explosive new allegations have just been made public.

Attorney General Jim Hood allegedly threatened to indict the CEO of State Farm Insurance Cos., as well as lower-level employees, as leverage to get them to settle Hurricane Katrina claims with policyholders, reports the Associated Press today. The claim is made in an earlier deposition included as part of a State Farm federal court filing on Friday seeking an injunction to prevent Hood from further pursuing a criminal investigation of the company.

As of yesterday, a temporary restraining order had been issued to prevent the criminal investigation from moving forward, and attorneys, including Hood, were meeting in closed-door sessions, an earlier Associated Press article notes.

In the deposition, AP reports today, Mississippi Deputy Insurance Commissioner Lee Harrell says he heard Hood say of State Farm’s chairman and CEO, in 2005: ‘If they don’t settle with us, I’m going to indict them all, from Ed Rust down.”’

Hood, on his side, says State Farm is misusing the federal court system in an attempt to derail a legitimate investigation, the AP reported in another story, before the latest State Farm salvo against the attorney general was publicized.

“These are some really serious allegations but I’m going to reserve judgment until I see evidence. I think there are some troubling issues about whether somebody can bring a private lawsuit and threaten people to behave in a civil litigation with threats of criminal indictment,” David Rossmiller, a lawyer in Portland, Oregon, who has been following the case, tells the AP today. “That is always an ethical gray area for a lawyer, but you hope the attorney general of a state has a higher standard.”

Hood, who pursued a case on behalf of the state concerning Katrina policyholders, has been closely allied with Richard Scruggs, a Mississippi plaintiffs lawyer representing hundreds of Katrina claimants in private civil litigation. He has also become embroiled in controversy concerning the insurance coverage litigation.

As discussed in an earlier post, Scruggs is facing an ongoing contempt case, for refusing to turn over to the insurer internal State Farm documents obtained by two of his clients, in defiance of a judge’s court order. (As of mid-October, a trial date in the contempt case hadn’t yet been set, according to the Wall Street Journal Law Blog.)

Concerning what apparent was a different conversation contained in the same deposition relied on by State Farm in its filing against Hood, Scruggs tells AP, “Lee Harrell has a fundamentally different recollection of the conversation than mine.”

Hood didn’t respond to AP’s requests for comment today.

(Hat tip: Insurance Coverage Law Blog.)

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