Hurricane Damage Overbilling Lawsuit Unsealed, May Prompt Department of Justice Involvement
In other Hurricane Katrina-related news, the U.S. Department of Justice has announced it is considering whether to intervene in a lawsuit that accuses some insurance companies of overbilling the federal government for flood damage, according to a judge who unsealed the case.
The whistle-blower suit was filed last year by a team of lawyers led by high-profile litigator Richard “Dickie” Scruggs, representing two sisters who worked for a company that helped State Farm Insurance Co. adjust policyholder claims on the Mississippi Gulf Coast after the hurricane. The lawsuit was required by law to remain under seal so the Justice Department could investigate and consider intervening in the case.
Yesterday, U.S. Magistrate Judge Robert Walker in Gulfport, Miss., ordered the case unsealed, despite the government’s argument that its disclosure would compromise its ability "to conduct an adequate civil investigation of this case." In his one-page order, Walker wrote “The government gives no explanation for how the investigation would be compromised by unsealing the case."
Named as defendants in the suit are State Farm, Nationwide Insurance Co., Allstate Insurance Co., USAA Insurance Co., and several engineering firms that contracted with the insurers.
The suit alleges the insurers pressured engineers to falsify reports so storm damage could be blamed on floodwater instead of wind, thereby shifting responsibility for paying claims to the National Flood Insurance Program.
According to the insurers, their homeowner policies cover damage from wind but not rising water.
Published on August 7, 2007
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