Expert: State Farm failed to follow fair claims practices [The Sun Herald]

March 30--GULFPORT -- State Farm Fire & Casualty Co. failed to meet its duty to deal fairly and in good faith with policyholders Thomas and Pamela McIntosh after Hurricane Katrina, a claims expert testified Friday in federal court.

Former adjusters Cori and Kerri Rigsby, who are sisters, claim State Farm conspired with two engineering firms to blame Katrina's storm surge for damage the National Flood Insurance Program covered instead of paying wind losses the company owed. The sisters are suing on the federal government's behalf under a whistle-blower law and would keep a portion of any money recovered. Federal authorities declined to prosecute the case.

Claims expert Lou Fye said State Farm ignored industry standards and flood-program dictates, paying flood-policy limits of $250,000 on the McIntosh home without a thorough investigation of what losses wind and water each caused.

State Farm hired Forensic Engineering and Analysis Corp. to investigate the loss after the flood-claim limits were paid and after State Farm paid the McIntoshes an initial $36,000 for wind losses on a $600,000 policy.

Wrong house?

Forensic engineer Brian Ford later concluded wind and wind-driven debris caused most of the damage at the home before Katrina pushed 51/2 feet of water in from the Tchoutacabouffa River.

Ford testified he based his conclusion partly on an eyewitness account of wind and wind-driven debris damaging the home before water arrived. However, State Farm was able to show the eyewitness was talking about a different house. Had he known that, Ford conceded in pretrial testimony in 2010, he would probably have concluded water caused most of the damage.

Unhappy with the report, State Farm ordered a second one from a different Forensic engineer. The second engineer concluded flooding did most of the damage.

A 'water storm'

State Farm Claims Manager Lecky King, who trained adjusters, testified earlier in the week she considered Katrina a "water storm" without winds strong enough to destroy houses. The Rigsbys presented testimony Friday from State Farm claims executive Stephan Hinkle, who also said Katrina's winds alone were too weak to destroy houses.

Fye said the industry standard is to approach losses with an open mind regarding their causes.

The Rigsbys' attorneys also presented evidence Friday that State Farm manager Dave Randel talked in September 2005 with Haag Engineering employee Tim Marshall about a Katrina damage survey Marshall was working on. Marshall had not yet written his report, but shared preliminary findings with Randel over dinner, testimony showed.

Engineers' reports cancelled

Marshall's report, which Randel received Oct. 19 and distributed to claims managers, concluded Katrina's storm surge preceded the strongest winds. About the same time State Farm received the Haag report, engineers' inspections were cancelled for properties with flood and wind damage because, State Farm employees have testified, they felt adjusters had enough information to determine the causes of damage without expert opinions.

The Rigsbys are trying to show State Farm conspired with Haag and Forensic to blame water for wind losses. But witnesses from both companies have testified State Farm did not tell them what conclusions they should reach in their reports.

The Rigsbys expect to wrap up their case Monday with Cori Rigsby's testimony. State Farm will then present its case. U.S. District Judge Sul Ozerden is presiding over the jury trial.

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