Allstate, State Farm Dismissed from Case Charging Katrina Overbilling

February 20, 2009

A federal appeals court upheld the dismissal of Allstate Corp. and State Farm Fire and Casualty Co. from a lawsuit accusing them of overbilling the U.S. government for flood damage in Louisiana related to the 2005 storm Hurricane Katrina.

Wednesday’s ruling by the U.S. Fifth Circuit Court of Appeals in New Orleans, however, revives the lawsuit against several other insurance companies and adjusting firms. These defendants include Fidelity National Insurance Co., Fidelity National Property and Casualty Insurance Co. and Liberty Mutual Fire Insurance Co., among others, the 15-page ruling shows.

Branch Consultants LLC, a claims adjuster, had accused eight insurers and six adjusters in an August 2006 “whistleblower” lawsuit in Louisiana of violating the federal False Claims Act by treating Katrina wind damage as flood damage. It said this resulted in overcharging the federal government’s National Flood Insurance Program.

But the three-judge appellate panel agreed with a 2007 ruling by U.S. District Judge Peter Beer that Allstate and State Farm were properly dismissed because they were defendants in a similar case filed in April 2006 in Mississippi.

This, the panel said, barred the Louisiana lawsuit under the False Claims Act’s “first-to-file” rule even though Allstate faced only “skeletal allegations” in the Mississippi case.

State Farm and Allstate are the largest U.S. home and auto insurers, although only Allstate is publicly traded.

Jeff McCollum, a State Farm spokesman, said: “We are pleased that the appellate court agreed with Judge Beer that Branch had no viable claim against State Farm.”

The insurer remains a defendant in the Mississippi case.

Allstate and a lawyer for the plaintiffs did not immediately return calls seeking comment.

The case is U.S. ex. rel Branch Consultants v. Allstate Insurance Co et al, U.S. Court of Appeals for the Fifth Circuit (New Orleans), No. 07-31191

(Editing by Andre Grenon)

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