Hurricane Katrina

Scruggs says Rigsby sisters are the Coast’s ‘Thelma and Louise’

Former insurance adjusters Cori Rigsby, right, and her sister, Kerri Rigsby, are about to begin their 11th year pursuing fraud allegations against State Farm Fire & Casualty Co. over the company’s claims adjustment practices after Hurricane Katrina in 2005.
Former insurance adjusters Cori Rigsby, right, and her sister, Kerri Rigsby, are about to begin their 11th year pursuing fraud allegations against State Farm Fire & Casualty Co. over the company’s claims adjustment practices after Hurricane Katrina in 2005. File

Now that the U.S. Supreme Court has sided with them, the whistleblowing Rigsby sisters head back to U.S. District Court in Gulfport, where they hope to prove State Farm Fire & Casualty Co. committed widespread fraud after Hurricane Katrina in 2005.

“From the day I began representing the Rigsbys in 2008, it was clear to me that State Farm committed a massive fraud in Mississippi after Hurricane Katrina,” said Rigsby attorney August J. Matteis Jr. of Washington, D.C., who specializes in whistleblower cases. “State Farm has tried every trick in the book for the past decade to avoid liability, but it no longer has anywhere to run.

“After a unanimous jury verdict for the Rigsbys and unanimous decisions affirming that verdict by the 5th Circuit (Court of Appeals) and the Supreme Court, we can now finally move forward and prove that State Farm’s fraudulent scheme affected thousands of homes and resulted in billions of dollars of losses.”

The Rigsbys, who adjusted State Farm claims after Katrina, first filed a lawsuit under seal against the insurance company in April 2006, when they were represented by Dickie Scruggs. The former Pascagoula attorney had a nationwide reputation for winning cases against corporations that harmed individuals.

Scruggs’ representation, though, is what landed the Rigsbys before the nation’s highest court. Whistleblower lawsuits, filed by individuals with first-hand knowledge of alleged fraud against the federal government, are filed under seal so the U.S. attorney general can review them and decide whether to prosecute. In this case, the government declined, freeing the Rigsbys to pursue the lawsuit.

Finding fraud

Along the way, though, Scruggs revealed the existence of the sealed case to the national news media.

Then after he was indicted for trying to bribe a state court judge in North Mississippi, he was forced to bow out as the Rigsbys’ attorney. He has since been disbarred and served time in prison.

Scruggs drew up a playbook for working with whistleblowers when he led successful state lawsuits against tobacco companies in the 1990s. He had hoped to see the Rigsby case through, as well as other lawsuits he’d filed for hundreds of policyholders against their insurance companies after Katrina.

Major companies were denying homeowner claims for wind damage, instead blaming storm surge, which is covered by the federal government through the National Flood Insurance Program. In the Rigsby case, a jury found State Farm defrauded the NFIP of $250,000 by coercing an engineering firm to attribute one homeowner’s losses to flooding rather than wind.

In upholding the jury’s fraud verdict, the Supreme Court pointed out, the 5th Circuit opinion noted a “potential conflict” when insurance companies adjust their own claims and those of the federal government. The Supreme Court quoted the 5th Circuit opinion, which said State Farm “had an incentive to classify hurricane damage as flood-related to limit its economic exposure.”

State Farm also argued on appeal the jury verdict should be dismissed because Scruggs violated the seal — the only point the Supreme Court agreed to consider.

The Supreme Court noted that the whistleblower law does not include provisions for punishment when a seal is violated. The justices said they do not believe Congress intended for cases to be dismissed over seal violations.

“Because the seal requirement was intended in main to protect the government’s interests, it would make little sense to adopt a rigid interpretation of the seal provision that prejudices the government by depriving it of needed assistance from private parties,” the opinion said. “The federal government agrees with this interpretation. It informs the court that (State Farm’s) test ‘would undermine the very governmental interests that the seal provision is meant to protect.’ ”

Digging deeper

Now that the appeal is decided, U.S. District Judge Sul Ozerden will allow the Rigsbys to investigate a larger set of wind vs. water homeowner claims and present the evidence to a jury.

Scruggs, who lives in Oxford, has been watching the case. He told the Sun Herald: “I think this is a great victory for the Gulf Coast, particularly for the Rigsby sisters. They are the Thelma and Louise of the Gulf Coast.

“I was apprehensive that my aggressive practice at the time would hurt the case of the girls and the other policyholders of the Gulf Coast, so I was especially relieved that it did not affect the outcome. I was very aggressive with State Farm and, perhaps, overly so.

“I worried that would blow back on the Rigsby sisters and the policyholders with State Farm. (State Farm has) got some answering to do to homeowners on the Coast.”

State Farm doesn’t see it that way.

The company sent the Sun Herald a statement that said, in part: “We are greatly disappointed in the Court’s ruling and will of course abide by its holding.

“After Katrina hit, State Farm employees worked tirelessly and honorably under exceptionally trying circumstances. Despite today’s ruling, we know the legacy of their outstanding efforts will not, and should not be diminished.

“ . . . We are reviewing our legal options and will present the remainder of our case in the District Court.”

Anita Lee: 228-896-2331, @calee99