State Farm to Pay $100 Million to Federal Government for Hurricane Katrina Claims

State Farm Fire and Casualty Co. and two former claims-adjuster sisters, who more than 16 years ago filed a lawsuit claiming the insurer committed fraud against the government’s National Flood Insurance Program following Hurricane Katrina, have settled.

According to documents in U.S. District Court for the Southern District of Mississippi filed late last week, State Farm has agreed to pay $100 million to the federal government “for the potential liability resolved by the settlement agreement” the court said was reached about a month ago

Cori and Kerri Rigsby, who worked as independent claims adjusters after Hurricane Katrina in 2005, took thousands of claims documents from State Farm that the sisters said proved the insurer doctored engineering reports and submitted fraudulent flood claims to the Federal Emergency Management Agency’s flood program. They turned over the documents to state and federal officials as well as once-prominent plaintiffs’ attorney Richard “Dickie” Scruggs – and became the lead plaintiffs in a False Claims Act lawsuit that made national headlines and appearances on national television programs.

The insurer filed counterclaims against the sisters related to the documents they took and alleged breach of employment agreements. The order signed by District Court Judge Halil Suleyman Ozerden said all claims and counterclaims will be dismissed with prejudice, meaning they can not be filed again – and other terms of the settlement agreement will remain confidential between State Farm and the Rigsbys.

When reached for comment, the insurer sent by email: “State Farm Fire and Casualty Company and Relators Cori and Kerri Rigsby announced [Aug. 19] that they have settled their long-running False Claims Act litigation arising out of State Farm’s handling of flood insurance claims for the Federal Emergency Management Agency in the aftermath of Hurricane Katrina, which struck the Gulf Coast in August 2005. The parties are pleased to bring an end to this 16-year litigation.”

In April 2013, a federal jury in Mississippi found State Farm Fire and Casualty Co. avoided covering a policyholder’s wind losses by blaming the damage on storm surge, which is covered by the NFIP. The case was limited to one home that the judge determined the Rigsbys had first-hand knowledge. State Farm appealed the ruling to the U.S. Supreme Court, which upheld the verdict.