‘Damaging’ Internal E-Mails Blast State Farm on Katrina Damage Claims

By Joseph Rhee

Apr 12, 2007 12:50pm

Internal company e-mails obtained by ABC News reveal that engineers complained of being pressured by State Farm Insurance to change damage reports of homes ravaged by Hurricane Katrina.  One official of the engineering firm, Forensic Analysis and Engineering Corp. (FAEC), wrote that he had "a serious concern about the ethics of the whole matter."    The FAEC e-mails center on the case of Mississippi Gulf Coast homeowners Thomas and Pamela McIntosh, featured in a report by ABC News "20/20."  An initial FAEC evaluation of the McIntosh property, commissioned by State Farm, concluded, "The interior damage of the structure is primarily the result of the failure of the windows, walls and doors due to the wind."  Wind damage is covered under State Farm policies.  After the report was delivered to State Farm, however, an internal FAEC e-mail stated that State Farm catastrophe coordinator Alexis "Lecky" King told the company it was being fired because "our engineers obviously could not tell the difference between wind and water and our reports were wrong."  State Farm does not pay for water damage.  According to the e-mail, King "said they were not accepting our opinion and would now have to send another firm out to get it right."  In response to King’s action, an FAEC vice president sarcastically wrote, "Lecky…seems to be a very highly qualified adjuster to be making engineering conclusions that are more accurate than ours."  The V.P. added, "I really question the ethics of someone who wants to fire us simply because our conclusions don’t match hers…in my opinion we need a more rational and ethical client to be dealing with." Click Here for Full Blotter Coverage. FAEC CEO Bob Korchan took State Farm’s decision seriously, noting in an e-mail that King felt eyewitnesses and local engineers were biased towards homeowners.  The FAEC V.P. wrote back to Korchan, saying, "Her concern about the emotional element in the engineer’s decision may have some validity (although I doubt it in [this] case).  But what about the obvious fact that SF would love to see every report come through as water damage so that they can make the minimum settlement.  I now see why the Attorney General’s office is already involved down there.  She needs to be careful about what she is doing and saying." Nonetheless, Korchan sent an e-mail to King, stating, "I have directed that future loss investigations will be better supported by photographic evidence."   Korchan told King, "Our engineering staff will be revisiting this site and attempting to further document this loss." 
FAEC then commissioned a second engineering report on the McIntosh home that concluded that water had caused the damage.  As a result, the McIntoshes were only able to collect about $36 thousand on their State Farm claim despite suffering losses of over $1 million. ABC News was able to obtain a copy from State Farm files of the original FAEC damage report, which included the image of an attached "Post-it" note that read, "Put in wind file – do not pay bill – do not discuss" (pictured).  The McIntoshes were unaware of the original damage report until a copy was given to them by ABC News.  The McIntoshes have now sued State Farm and FAEC for allegedly undertaking "a fraudulent, illegal, tortious, and unethical course of conduct." Zach Scruggs of the Scruggs Law Firm, which represents the McIntoshes and hundreds of other Katrina homeowners, called the FAEC e-mails "the most damaging evidence I’ve seen that State Farm coerced, fired, and threatened engineers to get them to change reports."  Scruggs says the e-mails also confirm the accounts of two State Farm insiders who told their story exclusively to "20/20."  Sisters Cori and Kerri Rigsby, who had worked for years as independent adjusters for State Farm, say they saw Alexis King go to great lengths to pressure outside engineers to prepare reports concluding that damage was caused by water, not wind.  According to Cori Rigsby, "She pulled out an engineer report, and she was flipping through it, ‘Can you believe this engineer said wind damage?  Call this company and tell them that if they don’t change their report, we’re not paying their invoice.’" State Farm spokesperson Fraser Engerman said he could not discuss any specific e-mails because of the ongoing litigation.  Engerman, however, noted that the e-mails in general "clearly show that State Farm is looking for dependable engineering reports."  Engerman said State Farm employees are "committed to acting in an ethical manner."    FAEC CEO Korchan has testified in court that he never felt his company was pressured by State Farm to reach a specific conclusion and that engineering reports were redone because the originals relied on faulty information. Meanwhile, the Rigsby sisters’ allegations regarding State Farm’s actions have sparked criminal probes by state and federal investigators.  Last year, in a deposition on an unrelated court case in Oklahoma involving State Farm, Alexis King refused to answer questions about her alleged involvement in cases of altered engineering reports in Mississippi.  Eighty-seven times, King stated that "because of the ongoing state and federal investigation, on advice of counsel, at this time, I must invoke my constitutional right to remain silent."  King repeated the phrase even when asked what route she took to get to the deposition.

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