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Engineering firm plans to settle with whistle-blowers

Two whistle-blowers have reached a settlement with the engineering firm they accuse of altering Katrina damage reports for State Farm Fire & Casualty Co.

The U.S. Attorney's Office must approve the settlement with Forensic Analysis and Engineering Co. before it can be finalized because former insurance adjusters Cori and Kerri Rigsby are pursuing fraud allegations against State Farm under the federal whistle-blowers law. State Farm has denied any wrongdoing.

The Rigsbys' attorneys say in court records that Forensic turned over documents that show engineering reports were altered when State Farm disliked the conclusions used to help determine whether the company would have to cover wind losses, as opposed to damage from tidal surge covered by the federal flood insurance.

"In total, Forensic documents reflect 19 engineering reports for which Forensic changed its conclusions," a motion filed by the Rigsbys' attorneys says. "It appears that in every such case, at least some of the damage that Forensic initially attributed to wind was attributed to flood or otherwise concealed in the revised reports.

"The documents produced by Forensic also suggest that State Farm was working with Forensic in an effort to sanitize its files of any evidence that might defeat its scheme."

The attorneys have secured e-mails that indicate reports were swapped in some cases and that Forensic employees were not to mention the changed reports.

State Farm has acknowledged that its management in some cases questioned reports that blamed wind for property destruction in areas subjected to flooding. In many cases, State Farm claims manager Lecky King has previously testified, a report was questioned when conclusions of wind damage failed to match property inspections and photographs that indicated flooding caused a loss.

David Maurstad, director of the National Flood Insurance Program during Hurricane Katrina, said in pre-trial testimony that "it would certainly be inappropriate for (State Farm) to influence another professional to change their opinion."

State Farm has previously said that Forensic completed only about 100 post-Katrina inspections for the company, which also settled a lawsuit filed by multiple policyholders against State Farm, Forensic and others. Similar allegations against State Farm and Forensic surfaced in that lawsuit, Shows vs. State Farm, which has since been settled on confidential terms.

In the Shows case, Coast policyholders learned that Forensic had hoped to earn up to $1.5 million over three months on Katrina claims adjusting for State Farm. The owner, Robert Kochan, borrowed $150,000 and established a line of credit with State Farm Bank to set up shop in Mississippi.

The Rigsbys are fighting to get additional engineering reports from State Farm, but the company has refused to turn them over, saying the request is overly broad. The Rigsbys' case is limited to one Biloxi policyholder's claim because they have personal knowledge about how it was handled, a requirement of the whistle-blower law.

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