Judge in La. Won’t Force Prosecutor to Enter Katrina Whisteblower Case

A federal judge in New Orleans on June 9 withdrew an order challenging U.S. Attorney David Dugas for not intervening in a whistleblowers’ lawsuit that accuses insurance companies of overbilling the federal government for flood damage in Louisiana from Hurricane Katrina.

Last month, U.S. District Judge Peter Beer directed Dugas’ office to enter the case by July 9 or else appear in court on July 11 to explain why it isn’t intervening.

However, Beer reconsidered and agreed to withdraw his earlier ruling. In a one-page order, Beer said he now believes Dugas’ office has “shown cause for its current position in this litigation.”

In an interview, the judge said he would prefer that the U.S. Attorney’s office participates in the case so that he isn’t “stuck with being the watchdog” for taxpayers’ interests.

“But I can understand their position,” Beer added.

The lawsuit accuses insurers of misrepresenting claims to the National Flood Insurance Program so they could limit their financial losses in Katrina’s aftermath – a charge that the companies have repeatedly denied.

An attorney for a group of former insurance adjusters filed the suit last year in federal court, but it was legally required to remain under seal while federal officials reviewed the case.

Beer unsealed the suit in May, after Dugas decided that his Baton Rouge-based office won’t intervene. However, Dugas has said he will continue to monitor the case.

In court papers, Dugas said his court-ordered intervention in the suit wasn’t necessary or appropriate. No court, he added, has apparently ever required the government to intervene in a whistleblower suit.

“The United States remains highly interested in the progress of this particular case and intends to remain heavily involved in its development,” Dugas and Assistant Attorney General Keisler wrote in an eight-page memo to Beer.

Charles Miller, a spokesman for the U.S. Department of Justice, said Dugas would not comment on Beer’s ruling Monday.

Instead of having Dugas intervene, Beer said he may seek to appoint a special master to help oversee the case.

“I don’t want to do that prematurely,” he said, adding that he wants to see “more factual evidence come forward.”

“When I get a view of that, I’ve got to really do some thinking about what is the next step,” Beer said.

In the suit, a group of unnamed former adjusters say they inspected hundreds of properties in southeastern Louisiana after Katrina and gathered evidence that insurers underpaid for wind damage and inflated flood damage estimates.

Flood insurance policies are written and sold by insurance companies but subsidized by the federal government. Insurers sell separate homeowner policies that cover damage from wind but not flood water.

New Orleans attorney Allan Kanner filed the lawsuit in August 2006 on behalf of Branch Consultants, identified in court papers as a Georgia-based insurance and construction consulting firm with an office in Metairie, La.

Allstate Insurance Co., State Farm Fire and Casualty Co., Liberty Mutual Fire Insurance Co., Fidelity National Insurance Co., American National Property & Casualty Co., Scottsdale Insurance Co. and St. Paul Travelers Cos. are among the companies named as defendants in the suit.

Although he welcomed the government’s intervention, Kanner said the case could move faster without it.

“It just means we can get to the merits faster than if we had to go through this song and dance,” he said.