U.S. Attorney in La. Won’t Intervene in Suit Against Insurers

U.S. Attorney David Dugas says he won’t intervene in a whistleblowers’ lawsuit that accuses several insurance companies of overbilling the federal government for flood damage to Louisiana homes from Hurricane Katrina.

An attorney for a group of former insurance adjusters filed the suit last year in federal court, but it was legally required to remain under seal while federal officials reviewed the case.

A federal judge in New Orleans unsealed the suit recently, after Dugas decided that his Baton Rouge-based office won’t intervene. However, Dugas said he will continue to monitor the case.

“We could come back to it later if we think it’s in the best interests of the government,” Dugas said, adding that this is the first Katrina whistleblower case that has become public in his jurisdiction.

The lawsuit accuses insurers of misrepresenting claims to the National Flood Insurance Program, to limit their financial losses in Katrina’s aftermath – a charge that insurance companies have repeatedly denied since the Aug. 29, 2005, hurricane.

The former adjusters, who aren’t identified by name in the suit, say they inspected hundreds of properties in southeastern Louisiana after Katrina and gathered evidence that insurers underpaid for wind damage and inflated flood damage estimates.

Flood insurance policies are written and sold by insurance companies but subsidized by the federal government. Insurers sell separate homeowner policies that cover damage from wind but not flood water.

Dugas declined to explain why his office isn’t taking over the case from the plaintiffs, who are represented by New Orleans attorney Allan Kanner.

“That would require me to get into details that are still under seal,” he said.

U.S. District Judge Peter Beer unsealed the complaint last week, but he ruled that the rest of the case file cannot be made public.

Kanner filed the lawsuit in August 2006 on behalf of Branch Consultants, identified in court papers as a Georgia-based insurance and construction consulting firm with an office in Metairie, La.

Kanner said he represents four former insurance adjusters from outside Louisiana who worked on claims after Katrina hit on Aug. 29, 2005 and have direct knowledge of the alleged scheme to defraud the federal government. He wouldn’t name his clients.

“They’ve got lives. They’re trying to earn a living,” said Kanner, who also represents many homeowners who sued their insurers after Katrina.

Kanner said he isn’t disappointed that Dugas isn’t intervening because the case could continue quicker without the government’s involvement.

“We think it’s a matter of great public interest,” he said. “We’re cooperating with the federal government, but they’re going to let us start working.”

Allstate Insurance Co., State Farm Fire and Casualty Co., Liberty Mutual Fire Insurance Co., Fidelity National Insurance Co., American National Property & Casualty Co., Scottsdale Insurance Co. and St. Paul Travelers Cos. are among the companies named as defendants in the suit.

State Farm spokesman Fraser Engerman said the Bloomington, Ill.-based insurer followed guidelines that the NFIP set for “expediting” flood claims.

“We stand by the way we handled our claims post-Katrina,” he said.

Allstate spokesman Michael Trevino said the Northbrook, Ill.-based company hasn’t received a copy of the suit yet.

“Allstate remains confident in its claims settlement practices following Hurricane Katrina, and we are committed to resolving all claims fairly and appropriately,” Trevino said.
Other plaintiffs’ attorneys – and some Gulf Coast lawmakers – have accused insurers of overestimating the extent of flood damage so that the federal government would pay for a greater share of claims after Katrina.

Kanner’s lawsuit asserts that the NFIP’s average payment for a Katrina flood claim was $100,000, up from an average of $32,000 per claim in 2004.

“This scheme,” he wrote in the lawsuit, “is pervasive and has caused the government to pay hundreds of millions if not billions of dollars in fraudulent flood insurance claims.”

David Rossmiller, a Portland, Ore.-based lawyer who writes a Web journal on Katrina insurance issues, said he hasn’t seen any evidence that insurers engaged in a “conspiracy to rip off the federal government” after Katrina.

“It seems implausible to me that this type of conduct would occur just now, never before and all at once,” he said.