Scruggs: Whistleblower Helping in Hurricane Katrina Lawsuit

A high-profile litigator in Moss Point, Miss. said that a whistleblower is helping him build a case against insurers that allegedly denied thousands of claims from policyholders whose homes were destroyed in Hurricane Katrina.

Richard “Dickie” Scruggs, who helped secure a multibillion dollar settlement against tobacco companies in the 1990s, told The Associated Press that the whistleblower gave him copies of internal reports prepared by engineers hired by an insurance company to inspect storm-damaged homes.

He did not identify the whistleblower or identify the person’s employer.

The reports indicate the company pressured engineers to change conclusions so claims could be denied, Scruggs said.

Engineers who “gave reports that the company didn’t like were pressured to change their report on penalty of not having their bill paid and being terminated from lucrative business by the company,” Scruggs said.

Working with a legal team, Scruggs is representing more than 4,000 policyholders whose homes were damaged by Katrina. His clients include his brother-in-law, U.S. Senator Trent Lott, a Republican, whose Pascagoula home was demolished by the Aug. 29 hurricane.

Also taking legal action is Mississippi Attorney General Jim Hood, who is suing insurance companies for refusing to cover damage from Katrina’s storm surge.

Robert Hartwig, chief economist for the Insurance Information Institute, said Scruggs’ allegations do not “appropriately or fairly characterize” the industry’s handling of claims in Mississippi.

The state’s top property insurers said this week that they have settled between 82 percent and 96 percent of policyholders’ claims.

“It’s unfortunate that Mr. Scruggs is seeking to portray companies as engaging in some kind of systematic deception of policyholders,” Hartwig said.

Scruggs said it will probably take two or three months for details of the informant’s cooperation to become public. A second whistleblower is also just coming forward, he said.

Scruggs, a Mississippi-based lawyer, is one of the nation’s most renowned litigators. A whistleblower also figured prominently in his fight against tobacco companies, which was portrayed in the 1999 movie “The Insider,” starring Al Pacino and Russell Crowe.