Adjusters say State Farm inflated flood claim; insurer says pictures prove flood damage [The Sun Herald]

March 27--GULFPORT -- State Farm "flood guru" Lecky King told insurance adjusters Hurricane Katrina was a "water storm," so they should "hit the limits" on federal flood policies for Coast homes that were substantially damaged or destroyed, former adjuster Kerri Rigsby testified in federal court Tuesday.

Kerri and Cori Rigsby, sisters who adjusted State Farm Fire & Casualty Co. claims, contend in a whistle-blower lawsuit the company conspired with two engineering firms to defraud the federal government by inflating flood claims. Because they are suing on the government's behalf, they would collect a portion of any damages recovered in the civil case being heard by a six-member jury.

Their case against the insurer has been limited in pre-trial rulings to one Katrina loss, the home of Thomas and Pamela McIntosh on the Tchoutacabouffa River in Biloxi.

Rigsby said she initially believed State Farm when she, as a team manager, accompanied an adjuster to the McIntosh property. She assumed they were inspecting a flood loss.

The adjusters did as State Farm instructed, she said, finding flood damage that met the National Flood Insurance Program policy limits of $250,000. They estimated $36,000 in wind damage on a State Farm policy that provided more than $600,000 in coverage.

Rigsby said she grew suspicious about how State Farm was handling claims when the other adjuster brought her an engineering report from the McIntosh property. A sticky note on front said, "Put in wind file. Do not pay bill. Do not discuss." The report blamed wind for most of the damage. In the McIntosh file, she said, she found a second report completed eight days later with a different conclusion: Flooding caused the loss.

She took the reports to King. She testified that she told King, "I don't think I was supposed to see this. (King) said, 'No, you weren't' and took the report and flung it on her desk."

The Rigsbys' attorney said King fired the engineering firm, Forensic Analysis and Engineering Corp. Company owner Robert Kochan drove down from North Carolina to talk King into giving the firm another chance. Kochan got rid of the first engineer, Rigsby attorney Augie Matties said during opening arguments, sending another engineer to write the second report in October 2005.

King was dissatisfied with the original engineering report because she is an expert on flood damage and knew the report did not support the conclusion that wind caused most of the damage, State Farm attorney Mike Beers said during opening arguments.

"There was not one evil motive behind it," Beers said. "It was the reality of what Hurricane Katrina did all along the Coast."

Also in October 2005, Rigsby testified, State Farm distributed a report from Haag Engineering that concluded Katrina's storm surge reached shore before its highest winds. She also said King wanted engineering reports changed if they emphasized wind damage.

Both Forensic and Haag have settled out of court with the Rigsbys.

State Farm attorneys believe post-Katrina pictures of the McIntosh home clearly show most damage was from flooding. The photographs, displayed when State Farm attorney Phil Abernethy questioned Rigsby, showed damage was mostly limited to the bottom sections of dry wall, counters, shelves, a kitchen island and a wet bar. Books and clothing remained on upper shelves. Light fixtures and fans were intact, as were windows and doors on the second floor. Two roof areas were damaged, but most shingles remained in place.

Kerri Rigsby never wavered from her testimony that she does not know, even today, what caused the damage at the McIntosh home.

A neighbor testified that Katrina's winds destroyed her home on the same cul-de-sac while she sheltered in a neighbor's undamaged house. She also said she watched the wind peel bricks off another house.

Kerri Rigsby said State Farm had determined it would pay policyholders only "pennies on the dollar" for wind losses even when the homeowners presented evidence during mediation sessions that they were owed more.

She also said State Farm ordered blanket cancellations of engineering reports after flood claims had been paid. She thought that was wrong, she said, because State Farm adjusters had been told to let policyholders know engineers would assess wind vs. water damage.

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