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Witness Says State Farm Didn't Thoroughly Investigate Katrina Claims

May 22, 2009 | Parker Waichman Alonso LLP

A woman who worked for State  Farm on  Hurricane Katrina claims has testified that the insurer did not bother to thoroughly investigate property damage for policyholders affected by the 2005 hurricane's storm surge.  According to SunHerald.com, Kerri Rigsby said at the time that State Farm held that if a house in the path of Katrina's storm surge was a total loss, it was caused by water, not by wind.

State Farm was one of the largest insurers on the Gulf Coast when Katrina made landfall there in 2005. Thousands of homes were reduced to rubble by wind and the massive storm surge created by the hurricane. Normal home owners policies do not cover damages from flooding, only wind. But in the case of Katrina claims, many home owners accused State Farm and other insurance companies of attributing damage to flooding, when in reality it was caused by wind, as a way to avoid paying the full value of claims. Some insurance companies initially made offers to settle claims for only pennies on the dollar, sparking thousands of lawsuits along the Gulf Coast.

Rigsby testified yesterday at a hearing in Mississippi  to determine if  a whistleblower lawsuit against State Farm should go forward.  According to SunHerald.com, Kerri Rigsby and her sister,  Cori, have accused the insurer of conspiring with two vendors to minimize what the company owed for wind damage by overcharging the federal government for water damage.  The sisters worked for independent adjusting firm E.A. Renfro, and Kerri performed work for State Farm after Katrina.

Kerri  Rigsby testified that in  the weeks following Katrina, she attended a State  Farm meeting where adjusters were told to “hit policy limits” on flood claims and tell policyholders an engineer would be sent out to determine whether State Farm owed money for wind damage.  

According to insurancenewsnet.com, Rigsby also said the company told her storm surge preceded Katrina's winds.  "State Farm indicated there was no question, if (a house) was a total loss, it was caused by flood," Rigsby said. She later added, "I believe that we owe the policyholder a thorough investigation. I don't believe we did a thorough investigation down here to determine how much was wind and how much was water."

According to SunHerald.com, she also repeated allegations that a State Farm claims manager ordered reports changed if they failed to conclude that water was the cause of a policyholder’s damage. Finally, Kerri Rigsby alleged that the insurer canceled inspection reports "en masse" if too many reflected wind damage.