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State Farm Ordered to Pay Whistleblowers

A federal judge in Gulfport, Mississippi has ordered State Farm Fire and Casualty Co. (“State Farm”) to pay treble damages, as well as the two whistleblowers’ costs and attorneys’ fees, in a qui tam lawsuit after it was found to have violated the False Claims Act.   In 2013, a federal jury found that State Farm knowingly submitted false claims to the National Flood Insurance Program (“NFIP”) after Hurricane Katrina in violation of the federal False Claims Act. 

Two independent insurance adjusters, sisters Cori and Kerri Rigsby, filed a lawsuit under the qui tam provisions of the False Claims Act alleging that State Farm caused falsified documents to be submitted to NFIP.  The false documents allegedly made it appear that property damage caused by wind damage (covered under the State Farm policy) was caused by flood waters (covered under NFIP.)  According to the Complaint, State Farm’s motivation in creating the false reports was to pay less for wind damage under the policy, and be able to charge the NFIP for more of the loss.

The complaint filed by the whistleblowers in 2006 asserted claims on behalf of a number of policyholders. Judge Halil Suleyman Ozerden, however, limited the whistleblowers’ case to the insurance claim that the pair had independent, personal knowledge about for homeowners Thomas and Pamela McIntosh of Biloxi, Mississippi.  The Judge dismissed all of the whistleblowers’ other claims, a decision they have since appealed to the 5th Circuit.  The government declined to intervene in the whistleblower’s lawsuit.

According to the Sun Herald, an engineer initially concluded that the damages to the McIntosh’s home were caused by wind, but was pressured by State Farm to re-examine the claim and blame the loss on Katrina’s storm surge.

The Judge ordered State Farm to pay treble damages of $750,000 to the government, a civil penalty of $8,250, the whistleblowers’ attorneys’ fees of $2,610,149, and costs of $303,078.  As their reward under the qui tam provisions of the False Claims Act, the whistleblowers will share in 30% of the $750,000.

To read more about how to determine whether you may have a viable case as a whistleblower under the qui tam provisions of the False Claims Act, click here.