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No State Farm Conspiracy, Judge Rules, but Jury to Consider Fraud Claims

Source: The Sun Herald

Posted on 08 Apr 2013 by Neilson

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State FarmU.S. District Judge Sul Ozerden has dismissed claims State Farm Fire and Casualty Co. conspired with two engineering firms to defraud the federal government, finding no legal basis for a jury to reach that conclusion.

Ozerden's ruling came Friday after two weeks of testimony was presented in a whistle-blower lawsuit filed against the insurance company over post-Hurricane Katrina claims handling. The jury is expected to deliberate Monday on two other allegations in the lawsuit. State Farm is accused of submitting a false claim to the National Flood Insurance Program and creating a false record to support the claim.

Former insurance adjusters Cori and Kerri Rigsby filed the whistle-blower lawsuit against State Farm on the government's behalf. They say State Farm blamed damage on flooding covered by NFIP to minimize its own payments for wind losses.

The case centers on the home of Thomas and Pamela McIntosh on the Tchoutacabouffa River in North Biloxi. State Farm paid $250,000 policy limits on the flood claim and an initial payment of $36,000 for wind damage.

Ozerden found no evidence Haag Engineering, a Texas-based firm, worked with State Farm to present a false NFIP claim. In October 2005, after the McIntosh claim was adjusted, Haag provided State Farm and other insurers with a damage survey that concluded Katrina's storm surge preceded the strongest winds.

At best, Ozerden said, the Rigsbys presented evidence the second engineering firm, Forensic Analysis and Engineering Corp., acted "unethically and inappropriately."

State Farm Claims Manager Lecky King fired the firm, testimony showed, because the first Forensic engineer to inspect the McIntosh property concluded wind destroyed it. Forensic owner Robert Kochan testified he met with King to win back State Farm's business.

Kochan agreed to send a second engineer to inspect the property. The second engineer, who testified he was unaware of the first report's conclusion, decided flooding caused the damage.

Before Ozerden's ruling, structural engineer Mark Watson testified for State Farm. Watson said his wind analysis showed debris-filled waves battered and breached the southeast corner of the McIntosh house.

"We found out the walls were more than capable of withstanding the pressure of that 130-mph wind," Watson said. He said he used the highest wind measurement claimed by various experts in the case.

NFIP administrators and a flood re-inspector concluded State Farm properly paid the McIntosh claim. The program's chief re-inspector testified Friday flooding far exceeded policy limits.

The Rigsbys argue wind destroyed the McIntosh home before it flooded. They presented testimony from a structural engineer who said cracked brick veneer on an exterior column indicated wind wracked the house and that the force of suction took out first-floor doors and windows. Eyewitnesses also testified about wind-blown debris and a possible tornado.

State Farm evidence focused on the 5-foot water line and photographs of extensive interior damage that conformed to the water's depth. Doors and windows remained intact on the second floor, as did most of the tiles on the roof.