WASHINGTON – In their term that begins in October, U.S. Supreme Court justices will consider a case involving alleged fraud against the federal government in the aftermath of Hurricane Katrina.
The case, State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, is an appeal from the 5th Circuit Court of Appeals and focuses on alleged fraud on the part of State Farm in assigning damage from Hurricane Katrina. A jury previously found State Farm liable under the False Claims Act.
Cori and Kerri Rigsby, sisters, worked as claims adjusters with State Farm in the aftermath of the 2005 hurricane that devastated the Gulf Coast. The Rigsbys claimed that State Farm characterized wind damage as flood damage, thereby shifting the liability burden from the insurance company to the federal government.
The False Claims Act is a long-standing law that allows private citizens to file whistleblower-type cases and recoup for themselves part of the monetary savings.
Jurors in the case determined that State Farm had defrauded the government out of $250,000 on damage sustained to a home in Biloxi, Mississippi. The jurors ordered State Farm to pay $758,000 in damages and awarded $227,000 to the Rigsbys for their role in highlighting the fraud. Rigsbys’ attorneys were awarded $2.9 million in legal fees.
State Farm appealed the verdict, claiming that the sisters’ counsel had violated a portion of the False Claims Act that requires the claim to be sealed and not made public for at least 60 days. The insurance company claimed that attorney Dickie Scruggs, had made the case public in an attempt to persuade State Farm to settle the case before trial.
The 5th Circuit rejected the appeal and affirmed the lower court ruling, clearing the way for the case to go before the U.S. Supreme Court.
State Farm has asked the high court to determine what standard it will use regarding the privacy issue, as lower courts had differed on how important the 60-day-under-seal requirement is.
The case could have far-reaching effects. The Rigsbys’ counsel has asked for more discovery in the case, contending that State Farm’s fraudulent actions could involve thousands of individual cases.