Mississippi: Insurer Wants Sisters to Pay for Providing Katrina Claims Records to Scruggs

April 10, 2008

State Farm Fire and Casualty Co. wants a federal judge to sanction two sisters who secretly copied Hurricane Katrina claims documents and gave them to a Mississippi lawyer whose clients were suing the company.

Cori and Kerri Rigsby copied thousands of pages of internal State Farm claims records in 2006 while working for E.A. Renfroe, an Alabama-based company that helped assess storm damages. Tort lawyer Richard “Dickie” Scruggs later sued State Farm on the sisters’ behalf, claiming they had insider knowledge of fraud.

In at least eight court filings on Tuesday, State Farm asked a federal judge to sanction the sisters and dismiss the lawsuit filed against the Bloomington, Ill.-based insurer.

State Farm said the sisters and their attorneys used the documents “to unlawfully extort civil settlements” from the company.

The sisters gave the records to Scruggs, who made a name for himself in the 1990s after using a corporate insider to help states secure multibillion-dollar settlements with tobacco companies.

Similarly, Scruggs attempted to use the Katrina documents as leverage in high-profile lawsuits against State Farm. Scruggs claimed the engineering reports showed that State Farm fraudulently attributed wind damages to water, which would have passed along the costs to the National Flood Insurance Program.

But Scruggs has since pleaded guilty in an unrelated bribery scheme and is no longer representing the sisters. And just last week U.S. District Judge L.T. Senter Jr. in Gulfport disqualified the sisters as witnesses in lawsuits that storm victims filed against State Farm.

Now State Farm wants Senter to impose on the sisters “punitive and exemplary damages, sanctions, penalties or other relief as may be appropriate.”

The company also wants a permanent injunction that would prohibit the sisters from possessing or disclosing “information concerning State Farm which they garnered via wrongful acts.”

A State Farm spokesman would not comment on the filings. An attorney for the sisters did not immediately respond to a message left Tuesday by The Associated Press.

Tuesday’s filings by State Farm are just the latest development in an ongoing legal battle that began soon after the Katrina devastated the Gulf Coast on Aug. 29, 2005.

The dispute has intensified in recent weeks, especially since Scruggs and several associates pleaded guilty earlier to charges that they conspired to bribe a judge. They were indicted last November and accused of offering to pay the judge $50,000 for a favorable ruling in a dispute over $26.5 million in fees from a mass settlement of Katrina cases.

After his indictment was made public, Scruggs withdrew from the Scruggs Katrina Group, a team of attorneys that had lawsuits pending on behalf of dozens of storm victims.

The remaining attorneys changed the name to the Katrina Litigation Group and continued with the lawsuits. But last week, Senter disqualified any of them from suing State Farm over Katrina damages.

Senter said Scruggs had made “improper” payments to the sisters when he paid them salaries of $150,000 a year while also touting them as his “whistleblowers.” The judge disqualified the other lawyers involved because they knew of the payments to the sisters.

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