GULFPORT, Miss. – State Farm Fire and Casualty Co. has agreed to pay the federal government $100 million for potential liability over the handling of flood insurance claims after Hurricane Katrina, settling a lawsuit two whistleblowers filed against the company more than 16 years ago.
Sisters Cori, left, and Kerri Rigsby talk to the news media in Ocean Springs, Miss., on August 17, 2006. The two women worked as freelance adjusters for State Farm Fire & Casualty Co. to settle insurance claims after the Hurricane Katrina. Saying they found evidence that State Farm was wrongly blaming floodwater claims that private wind insurance doesn’t cover, they filed a whistleblower lawsuit.
Other terms of the settlement remained confidential in the 2006 lawsuit filed by sisters Cori and Kerri Rigsby, former claims adjusters who lived in Ocean Springs, Mississippi, at the time. State Farm also agreed to dismiss counterclaims that alleged the sisters breached their employment agreements and violated other laws by obtaining company documents while working as independent adjusters.
The cases have been dismissed with prejudice, meaning they can no longer be filed, by U.S. District Judge Sul Ozerden in Gulfport.
State Farm and Rigsbys released a statement accepting the settlement, saying, “The parties are pleased to end this 16-year litigation.”
Insurance expert Robert Hartwig, director of the Center for Risk and Uncertainty Management at the University of South Carolina, called the settlement “unprecedented.”
All but one came in the last 20 years, evidence of how climate change is causing more intense storms
“Given that the NFIP has always had standing authority to audit any and all claims managed on its behalf by private insurers, the magnitude of this settlement and the fact that it took 16 years to reach is truly remarkable ,” he said. He said Katrina remains the costliest natural disaster in US history, with $56 billion in privately insured losses in 2021.
The Rigsbys had already established that State Farm defrauded the National Flood Insurance Program by charging it for flood damage to a policyholder’s Biloxi home when the wind actually caused the destruction. State Farm’s policy was supposed to cover wind damage.
Insurance companies adjust their claims for wind damage and also flood claims covered by the federal program. State Farm withdrew as a carrier from the National Flood Insurance Program in 2010, Hartwig said, as did several other insurance companies.
After the jury’s verdict in 2013, Ozerden ordered State Farm to pay $750,000, or three times the amount of the false claim State Farm submitted in the flood program, and $2.9 million in attorney’s fees and costs to the Rigsbys.
Plaintiffs receive 25% to 30%
Winning a fraud case opened the door for the Rigsbys to review thousands of other State Farm policyholder fraud claims after Hurricane Katrina. The settlement means State Farm will pay restitution to the federal government, not individual policyholders, on any liability the insurer may face for handling other flood insurance claims.
Federal whistleblower law entitles the Rigsbys to 25% to 30% percent of the settlement amount because they had independent knowledge of State Farm’s claims practices and pursued the lawsuit without federal government interference. If the federal government had chosen to intervene in this case, Rigsby’s recovery would have been limited to 15% to 25% of the value of the case.
The settlement money goes to the federal government, not policyholders, because the alleged fraud was against the National Flood Insurance Program.
The Rigsbys were represented by August Matteis of Weisbrod Matteis & Copley, based in Washington, and Maison Heidelberg of Heidelberg Patterson Welch Wright in Jackson.