Mississippi Sues Insurer for Using False Engineering Reports to Avoid Paying Katrina Claims

This blog has addressed a range of unconscionable practices used by some homeowner’s insurance carriers to evade paying legitimate Hurricane Katrina claims.  A number of insurers have been sanctioned by state regulators and condemned by members of Congress for the practice of falsifying engineering reports and covering up reports that run counter to the insureds’ interests.  The Mississippi Attorney General has now weighed in by filing a lawsuit claiming that State Farm Fire and Casualty Co. cost the public millions of dollars with a scheme involving non-disclosure and manipulation of engineering reports.

The lawsuit reportedly alleges that State Farm “maliciously” denied Hurricane Katrina claims for wind damage while letting the federally funded Homeowner’s Assistance Program (HAP) absorb the loss.  The lawsuit claims, “State Farm in effect converted a program designed to help Mississippians who were devastated financially by Katrina into a subsidy for itself.  State Farm benefited substantially and illicitly from HAP.”

The objective of the HAP program was to provide relief to homeowners for losses not covered by insurance policies.  The court filings indicate that State Farm delayed paying legitimate wind damage claims, so the government could step in and cover losses that should have been paid under State Farm policies at the time of the loss.  The lawsuit claims that the State Farm scheme resulted in the state covering five times more in Katrina wind losses than State Farm.  While State Farm reportedly paid out almost $99 million in such claims, the state disbursed over $522 million in compensation for Katrina wind claims.

The scheme used to shift the financial responsibility for paying these wind claims involved two distinct strategies according to court filings.  State Farm first characterized Katrina wind damage claims as “water” losses, which were covered under the National Flood Insurance Program (NFIP).  This effort allegedly was supported by coercing engineering firms to distort reports.  When reports came back indicating that the losses were covered losses from wind damage, the insurer then ceased ordering the engineering reports entirely.

A spokesman for the Mississippi attorney general’s office indicated that they filed the lawsuit against the insurance carrier because they have “proven evidence of its fraud,” and the insurer is the largest homeowner’s carrier in the nation.  The assumption is that given State Farm’s share of the market for homeowner’s policies, the carrier has caused the greatest loss of public funds.  However, the spokesman indicated that lawsuits against other insurance companies are being considered.

The willingness of insurance carriers to falsify, hide and fabricate expert reports to avoid paying claims should serve as notice to policyholders that they need to hire their own engineer, contractor or other relevant expert.  If you do not work with an independent expert and/or Miami insurance claims attorney, you might end up walking away with less than you are entitled to receive under your homeowner’s policy.  If your insurance company refuses to process your claim in a timely fashion or refuses to pay the full value of your claim, you might have a legal claim for financial compensation.  My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM. 

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