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U.S. District Judge Denies State Farm Motion to Dismiss Whistle-Blower Case

Source: Sun Herald/Anita Liee

Posted on 27 Jan 2011

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U.S. District Judge L.T. Senter Jr. of Mississippi has denied State Farm Fire and Casualty Co.'s request to dismiss a whistle-blower lawsuit against the company because details were disclosed before the lawsuit was publicly revealed.

Senter note that whistle-blower lawsuits are filed under seal to protect any government investigation of alleged fraud outlined in the complaints.

The government can investigate and undertake prosecution of these fraud cases, but declined prosecution of the whistle-blower lawsuit filed against State Farm by former insurance adjusters and sisters Kerri and Cori Rigsby of Ocean Springs, Mississippi.

The Rigsbys are pursuing the claim through private lawyers, with the possibility of receiving a percentage of any government money recovered. They maintain State Farm defrauded the National Flood Insurance Program (NFIP), an allegation the insurance company denies. State Farm outlined 49 alleged violations of the court's seal order.

The Rigsbys claimed in media coverage, before their 2006 whistle-blower lawsuit was unsealed, that State Farm minimized payments for Hurricane Katrina's wind damage by blaming property losses on storm surge covered through NFIP.

Senter said similar allegations were widely discussed on the Coast after Katrina: "There were literally thousands of damage claims in which this issue was a critical factor, and the public discussion of this issue began almost as soon as the floodwaters receded and adjusters were deployed to begin assessing the damage done by the storm."

Senter said the whistle-blower lawsuit's existence had been disclosed in only three instances before it was unsealed. However, Senter found no indication these disclosures, to members of the national media, had been included in published reports or had harmed the government's investigation.

Senter also noted State Farm's evidence shows the Rigsbys' former attorney, Dickie Scruggs, prematurely disclosed the lawsuit, not the Rigsbys.

Senter is still weighing the Rigsbys' request to expand the lawsuit beyond one claim they personally handled, the McIntosh home on Biloxi'sBack Bay.