Rehearing Request Denied in State Farm Katrina Fraud Case

A federal appeals court has decided that last month’s upholding of a jury’s insurance fraud ruling will stand, allowing whistleblowers who sued State Farm Fire and Casualty Co. to seek more evidence of fraud after 2005’s Hurricane Katrina.

The Sun Herald reports that the 5th U.S. Circuit Court of Appeals this week denied State Farm’s request for a rehearing before the full court.

A three-judge panel of the U.S. 5th Circuit Court of Appeals upheld a jury’s finding that State Farm defrauded the National Flood Insurance Program through a false claim that Katrina’s storm surge destroyed a North Biloxi home. The jury concluded State Farm should have covered the loss because it was caused by wind. Instead, the jury found, State Farm submitted a false claim to the NFIP, saying storm surge destroyed the house.

The panel’s ruling included a directive that presiding Judge Sul Ozerden allow the whistleblowers, sisters Cori and Kerri Rigsby, to examine other State Farm Katrina claims for fraud. Ozerden had limited the case to one claim, that of Thomas and Pamela McIntosh of North Biloxi, because the Rigsbys had direct knowledge of how it was handled.

The Rigsbys, who worked as independent adjusters for State Farm after Katrina, maintain State Farm’s fraud was more widespread. State Farm has denied any wrongdoing.

The case returns to U.S. District Court in Gulfport to be broadened to include other claims State Farm adjusted for homes subjected to Katrina’s winds and storm surge. Private insurers adjust their own claims to pay wind losses, but also adjust claims for NFIP, which covers losses from flooding.

Critics say the dual adjustments represent an inherent conflict of interest.