State Farm Close to Settling Katrina Claims in the Gulf

By Brian Ross And Joseph Rhee

Jan 9, 2007 1:10pm

More than one year after Hurricane Katrina ravaged the Gulf coast, State Farm is on its way to settling 639 lawsuits brought by Mississippi homeowners for about $80 million, the insurance company confirmed to Reuters earlier today after a New York Times report citing lawyers familiar with the case. According to Reuters and the Times, under the proposed settlement, those who have filed suits against the largest home insurer in the U.S. could see an average payment of $125,000, although payments could range from $2,000 to $2 million.  In addition, State Farm would reportedly agree to review and potentially increase damage payments to as many as 35,000 additional homeowners, which some lawyers said could increase the total pay-outs by State Farm by hundreds of millions of dollars. THE BLOTTER RECOMMENDS State Farm ‘Outraged’ by ABC News Report That It Cheated Katrina Homeowners Whistleblowers Say State Farm Cheated Katrina Victims Click Here to Check Out the Latest Brian Ross Webcast Insurance experts interviewed by "The New York Times" said a final agreement would likely include a statement that State Farm by settling was neither acknowledging nor denying that it had engaged in any objectionable practices. Lawyers familiar with the case say the final settlement is awaiting agreement from Mississippi’s Attorney General Jim Hood that he would end a criminal investigation of State Farm for its handling of Katrina claims and drop a pending civil lawsuit against State Farm and other insurers. Click Here for Full Blotter Coverage. Mr. Hood told "The New York Times," "I am working day and night attempting to get our coastal residents a fair shake in the insurance litigation." As first reported by "The Blotter" on the first anniversary of the destructive hurricane, the lawsuits against State Farm include claims by two independent adjusters who worked at the State Farm offices in Biloxi and Gulfport, Miss., that supervisors there demanded that damage reports be buried, replaced or amended to benefit the insurance company financially. Kerri and Cori Rigsby (pictured above), independent adjusters who had worked for State Farm exclusively for eight years, told ABC News they had turned over thousands of internal company documents and their own detailed statements to the FBI and Mississippi state investigators as well as to lawyers representing homeowners suing State Farm. In an exclusive interview with ABC News that was broadcast on 20/20 and World News, the Rigsby sisters said they saw supervisors go to great lengths to pressure outside engineers to prepare reports concluding that damage was caused by water, not covered under State Farm policies, rather than by wind. Cori Rigsby said she recalled a senior coordinator ordering that an engineering company be told to alter the findings in its report so that State Farm would not have to pay.  "’Tell them if they don’t change their report, we’re not paying their invoice,’" she recalled the supervisor saying. A lawyer for State Farm, Wayne Drinkwater, told ABC News State Farm had not cheated policyholders or pressured outside engineers to reach particular conclusions in their damage reports. A State Farm spokesman said that the company was cooperating with state and federal authorities investigating the claims of wrongdoing and said, "Our claims associates are committed to operating at the highest level of business and ethical standards." Hundreds of homeowners along the Gulf Coast filed lawsuits against State Farm and other insurance companies accusing the companies of wrongly denying or low-balling their claims.  The Rigsby sisters’ allegations became a key part of suits filed against State Farm by well-known Mississippi lawyer Richard Scruggs, famous for taking on the tobacco companies.    "The New York Times" reported today that Scruggs said he hoped a settlement of the claims against State Farm could be finalized by the end of this week.

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