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Thursday, September 28, 2006

State Farm Investigation

1/20 - From Gary - Letter from Rep Gene Taylor
http://www.realcities.com/multimedia/sunherald/archive/0119Insurance.investigation.request.pdf
1/20 From Gary
Insurance industry under more scrutiny
By ANITA LEEcalee@sunherald.com
U.S. District Court Judge L.T. Senter Jr.'s opinion that State Farm Fire & Casualty Co. failed to investigate a policyholder's claim has sparked another congressional inquiry into the insurance industry's response to Hurricane Katrina.
U.S. Reps. Gene Taylor and Bennie Thompson, D-Miss., have supplied ammunition for hearings planned by U.S. Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee.
Taylor's ultimate goals are an all-perils policy that would eliminate the need for separate coverage for wind and water damage, removal of the insurance industry's exemption from anti-trust laws and federal rather than state oversight of the industry.
Spokesmen for industry-sponsored organizations maintain insurers have paid what is owed under their policies and did not collect premiums to cover damage from Katrina's unprecedented surge.
Joseph Annotti, a spokesman for the lobbying group Property and Casualty Insurers of America, said the industry handled more than 90 percent of claims promptly and fairly.

1/19 From Janet
Katrina insurance suit settled only days before trial
Michael Kunzelman / Associated Press
State Farm Fire & Casualty Co. settled out of court Friday with a Mississippi policy holder whose lawsuit over Hurricane Katrina damage was scheduled to be tried next week in federal court. State Farm settled with Richard Tejedor of Long Beach only eight days after jurors awarded $2.5 million in punitive damages to a different policy holder-- a couple who sued the Bloomington, Ill.-based insurer for denying their claim after the Aug. 29, 2005, storm. Terms of the settlement in the Tejedor case will not be disclosed, said State Farm spokesman Fraser Engerman. "We are pleased that we were able to resolve this issue before it went to (trial)," Engerman said. Jack Denton, one of Tejedor's attorneys, confirmed that the case has been settled but declined further comment.
Tejedor was one of hundreds of homeowners on Mississippi's Gulf Coast who sued their insurers for refusing to cover billions of dollars in damage from Katrina's storm surge. Katrina destroyed his home, leaving nothing but a slab. A federal flood insurance policy paid him the maximum $200,000 for the home and $80,000 for its contents. Tejedor, however, said State Farm refused to pay for an additional $263,190 in damage to his home and its contents. State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water.
State Farm invoked that policy language to deny a claim filed by Norman and Genevieve Broussard of Biloxi, whose lawsuit was tried last week in afederal court in Gulfport. U.S. District Judge L.T. Senter Jr. took part of that case out of jurors' hands, ruling that State Farm is liable for $223,292 in storm damage to theBroussards' home. Jurors awarded the Broussards an additional $2.5 millionin punitive damages.
The trial for Tejedor's lawsuit was scheduled to start Monday. State Farm attorneys had asked for the trial to be postponed, but Senter refused. State Farm attorneys argued in court papers that a "barrage of publicity" about last week's multimillion dollar verdict may have tainted the jury for Tejedor's case. Senter, however, said postponing the trial would needlessly disrupt the court's schedule. State Farm also is the defendant in the next four Katrina insurance cases set for trial in Gulfport. The first is scheduled to start March 12. http://www.wwltv.com/local/northshore/stories/wwl011907jbinsurance.57a7759a.html

1/18 From Gary
Lott's Katrina Lawsuit, Others Sent Into Mediation
GULFPORT, Miss. -- A federal judge Wednesday ordered into mediation dozens of lawsuits filed against insurance companies after Hurricane Katrina, even as expert witnesses told a jury that the storm's water, not its winds, reduced a Biloxi home to a slab.
Several of the cases sent to mediation by U.S. District Judge L.T. Senter Jr., were involved in recent settlement talks between State Farm Fire and Casualty Co., Mississippi Attorney General Jim Hood and policyholders' lawyers.
The case on trial this week was not part of the settlement talks.
The timing of Senter's order appeared to be a coincidence.
Lawsuits filed against State Farm on behalf of Sen. Trent Lott and Rep. Gene Taylor are among the cases that Senter ordered into mediation Wednesay. Katrina destroyed Lott's home in Pascagoula and Taylor's home in Bay St. Louis. Each sued State Farm for denying claims.

1/12 From Dane
Jury Rules State Farm Owes Punitive Damages of $2.5 Million in Denied Katrina Claim Case
GULFPORT, Miss. (AP) -- A jury awarded $2.5 million in punitive damages against State Farm Fire and Casualty Co. for a Mississippi couple for denying their Hurricane Katrina claim. The decision could benefit hundreds of other homeowners challenging insurers for refusing to cover billions of dollars in storm damage.
State Farm said it will likely appeal.
Earlier Thursday, U.S. District Judge L.T. Senter Jr. had taken part of the case out of jurors' hands before they awarded punitive damages to State Farm policyholders Norman and Genevieve Broussard of Biloxi.
Senter ruled Thursday morning that State Farm is liable for $223,292 in damage caused by Hurricane Katrina to the Broussards' home. Senter left the punitive damages to the jury.
Senter's decision to make a directed verdict rather than let the jury decide the entire case appeared to surprise everyone in the courtroom. After he explained his ruling, Senter ordered a recess to give attorneys time "to get over the shock."
After the jury announced its award, the Broussards left the courthouse arm in arm.
"It's a great day for south Mississippi, " Norman Broussard said.
Some of Senter's earlier rulings in other Katrina cases have favored the insurance industry, but his decision Thursday calls into question the companies' refusal to cover billions of dollars in damage from Katrina's storm surge.
The judge's decision and the jury's award also are likely to impact recent settlement talks between State Farm, Mississippi Attorney General Jim Hood and other plaintiffs' attorneys.
Earlier this week, people with direct knowledge of the settlement talks told The Associated Press that State Farm, Mississippi' s largest home insurer, is considering paying hundreds of millions of dollars to settle more than 600 lawsuits and resolve thousands of other disputed claims.
The Broussards' case wasn't directly part of those negotiations, but Hood said Thursday the verdicts only strengthen his position in the ongoing settlement talks.
"Hopefully they will come to their senses and realize that the American people are not going to stand for robber baron companies, like the insurance companies, running over people," the attorney general said.
However, Hood conceded that a company as large as State Farm isn't likely to "blink very much" in the face of a single jury award."I'm sure they're in shock, but that can't hurt them," said Hood, who declined to elaborate on the status of the settlement talks with State Farm.
Randy Maniloff, a Philadelphia- based lawyer who represents insurers and has closely followed the Katrina litigation, said Senter's ruling was a "huge verdict" for homeowners even if the jury hadn't awarded punitive damages.
"That settlement is looking awfully good for State Farm now," he added.
The Broussards sued State Farm for refusing to pay for any damage to their home, which Katrina reduced to a slab. The couple wanted State Farm to pay for the full insured value of their home plus $5 million in punitive damages. The Broussards claimed a tornado during the hurricane destroyed their home. State Farm blamed all the damage on Katrina's storm surge.
State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water.
Senter, however, ruled that State Farm couldn't prove that Katrina's storm surge was responsible for all of the damage to the Broussards' home. The judge also said the testimony failed to establish how much damage was caused by wind and how much resulted from storm surge.
State Farm spokesman Phil Supple said after the jury's verdict that the company is likely to appeal the decision.
"We are surprised and disappointed by both the judge's ruling on the coverage issues and the amount awarded by the jury for punitive damages," he said in a written statement. "We believe the expert testimony supported a different result."
Jack Denton, one of the couple's attorneys, said they are "very pleased" with the jury's verdict but declined further comment."
Obviously we have other trials coming up and don't want to jeopardize those cases," he added.
Thursday's verdict follows another federal judge's ruling that favored policyholders in Louisiana. In November, U.S. District Judge Stanwood Duval Jr. sided with New Orleans homeowners who argued that the language excluding water damage from some insurance policies was ambiguous.
Duval allowed a lawsuit against The Allstate Corp., The St. Paul Travelers Companies Inc. and other insurers to proceed, but said the issue of "flood exclusion" could be appealed immediately by the companies.
In his closing argument Thursday, one of the Broussards' attorneys, William Walker, said State Farm had breached their contract "in a bad way" by denying their claim. State Farm "acted like a chiseler," he said, adding, "The pocketbook is what they listen to."
State Farm attorney John Banahan urged jurors to "use your head and your heart" in deciding on punitive damages and to reject an attempt by the Broussards' attorney to demonize the company as an "evil empire."Robert Hartwig, chief economist for the Insurance Information Institute in New York, said before the jury announced its decision that a punitive damage award would be "distressing" for insurers."
It adds even more cost and more uncertainty to the other problems that already exist in the Mississippi homeowners insurance market," he said.
Associated Press writer Michael Kunzelman contributed to this report..

1/9
SETTLEMENT NEAR?
State Farm may reopen claims
Scruggs also reported close to settling 640 lawsuits
By ANITA LEE
calee@sunherald.com
Thousands of State Farm Fire & Casualty Co. policyholders on the Mississippi Coast could reopen their claims under a tentative settlement the company is working out with Attorney General Jim Hood and private attorney Richard "Dickie" Scruggs, who also is close to settlement on about 640 lawsuits his group filed on behalf of homeowners the company insures.
"I am working day and night attempting to get our Coastal residents a fair shake in the insurance litigation," Hood said in a written statement Monday evening, after the Sun Herald broke news of the settlement at http://www.sunherald.com/. "It would not help our negotiations to disclose any details at this time."
Terms are undisclosed in the tentative settlement of the Scruggs cases.
State Farm would reserve a minimum of $50 million to reconsider Katrina claims filed by thousands of other South Mississippi homeowners, said a source close to the negotiations. The company would notify the policyholders in writing that they can have their claims reconsidered.
Policyholders who decided to participate would go to binding arbitration with State Farm if they were unable to agree on settlement amounts.
State Farm would consider claims within the parameters of its homeowners' policy, which the company maintains does not cover damage from tidal surge. However, thousands of policyholders in areas subject to tidal surge are still trying to collect for what they believe was wind damage to their properties.
The source said a settlement hinges on Hood's signature. Weeks after Katrina, Hood filed a lawsuit against State Farm and other major insurers for refusing to fully cover Katrina property damage. Hood also launched a criminal investigation at least one year ago over how State Farm and other insurers handled Katrina claims.
The source said Hood would have to agree to drop both the civil and criminal proceedings for State Farm to accept the settlement. No charges have yet resulted from the criminal probe.
Not everyone is happy about the settlement negotiations. Biloxi attorney Judy Guice, who has her own lawsuit pending against State Farm, said after hearing the news:
"I think it's really important for the public to understand what they're trying to do here. To link together dismissal of a criminal investigation with insurance claims that should have been paid months and months ago is extremely troubling. It just shows more and more the need to investigate what State Farm did, who was involved and what the details are.
"I won't be a party to (a settlement). I will not be bought off by State Farm."
Two State Farm policyholders who also are represented by Scruggs, U.S. Sen. Trent Lott and U.S. Rep. Gene Taylor of Mississippi, have said they believe the company denied or minimized claims by blaming water rather than wind. Taylor thinks insurers charged the National Flood Insurance Program for damage they should have covered.
However, State Farm says it has investigated each claim on its merits and paid what is owed under its policies. The company has paid $1.1 billion on 84,000 claims filed statewide.
The company also has relied on language in its policy that purports to say wind damage is not covered when water contributes. U.S. District Judge L.T. Senter Jr. has ruled that that language is ambiguous and can't be enforced.
Senter has urged attorneys on both sides to find just and timely ways to resolve more than 1,000 Katrina cases pending in his court against insurance companies.
A spokesman for State Farm, Phil Supple, said: "At this point, we have no settlement. We continue to talk and to search for ways to bring these events to a resolution consistent with Judge Senter's call earlier this fall. We continue to pursue a just, prompt and efficient resolution."
In addition to the Scruggs lawsuits, State Farm has more than 100 other lawsuits pending. Supple said State Farm would "absolutely" like to see the cases resolved.
He said, "We see it as in the best interest of policyholders, the Gulf Coast of Mississippi and State Farm."
Scruggs could not be reached to comment. The noted attorney previously worked with Attorney General Mike Moore on the historic, multibillion-dollar settlement with Big Tobacco in the 1990s.
11/23 Market Conduct Exam by State
http://www.gulfcoastnews.com/GCNnewsKatrinaInsReviewStateFarm.htm
Jackson-Insurance Commissioner George Dale announced today that the Mississippi Insurance Department (MID) is conducting a market conduct exam of State Farm Insurance Company regarding Hurricane Katrina insurance claims. This is just the first of several market conduct exams that MID will be executing on property insurance companies that wrote business on the Mississippi Gulf Coast. State Farm, having the largest market share of those companies, was selected for the first exam.
"We have been working on claims since Katrina made landfall. Through these efforts and our mediation programs we have been able to settle over 5000 mediation cases or property claims for Mississippians. However, there are still claims that have not been resolved. I have a statutory obligation to gather the truth on the conduct of any insurance company doing business in Mississippi. These exams will be looking at how Mississippians' claims were handled. We will be interviewing many individuals and reviewing thousands of claim files," said Dale.
He added that MID does not know how long the process will take, but once the State Farm and other examinations are completed, the department will be providing public reports in addition to taking whatever corrective actions are deemed necessary.
"We have to get to the bottom of this and we will, so Mississippi can move forward," Dale said.
The main purposes of a market conduct exam are to address consumer related issues, detect inappropriate practices and non-compliance with insurance laws, and to verify that insurers are fulfilling their contractual obligations. The MID has a history of conducting extensive exams, for example, it was just such an exam that unraveled the Martin Frankel case, which at the time, was one of the largest insurance scams in United States history. MID will be using some of the same examiners that broke the "Frankel" case to assist in the market conduct examinations. The State Insurance Commissioner has the authority to order market conduct exams. The Commissioner also is required to do financial examinations of all domestic insurance companies doing business in the state every three years.

11/17

Insurance trials delayed Judge may consider consolidating 1,000 lawsuits
By ANITA LEE
calee@sunherald.com
GULFPORT - Six federal trials of insurance companies over Hurricane Katrina damage, set to start in early 2007, have been delayed.
U.S. District Judge L.T. Senter Jr. wrote in a recent court order, "What began as best-laid plans have gone awry."
However, the same order said Senter is willing to consider consolidating some of the 1,000-plus lawsuits clogging the U.S. District Court system.
The Scruggs Katrina Group filed lawsuits against Nationwide, State Farm and Allstate insurance companies. Richard "Dickie" Scruggs, a nationally prominent Mississippi attorney who heads the group, had hoped hundreds of policyholders could be represented in three trials.
The State Farm lawsuit covered 691 policyholders; 310 sued Allstate and 244 were listed in the Nationwide complaint.
However, U.S. Magistrate Judge Robert H. Walker decided the policyholders would have to sue separately. Walker held a status conference with all sides in August to select two cases against each insurance company for expedited trials. The agreement was that the cases would involve simple issues rather than more time-consuming and complex claims.
Scruggs' group then had to amend its lawsuits to represent individual policyholders. The first case set for trial was Wesley McFarland v. State Farm, scheduled to begin Jan. 29. Five more cases were to follow.
When the State Farm pleading was amended with only McFarland as a plaintiff, Senter wrote, a new charge was added accusing State Farm of a companywide scheme to defraud and deceive policyholders. State Farm answered the complaint, denying the scheme.
State Farm also asked that the trial be delayed, based on the new charge. Senter agreed to the delay.
In his ruling, Senter said he does not want to limit the remedies available to policyholders. "At the same time," he wrote, "the court has no interest in watching or umpiring a pleadings game that is played for a particular moment's tactical purpose without regard to the overall goal of a just, speedy and inexpensive determination of every action."
Senter also indicated in the ruling he is willing to consider consolidation of some cases, another reason to delay these trials.
Senter said he expects "real cooperation" between both sides to determine common issues of law that may allow cases to be tried in groups.

11/3 PR
State Farm recently presented a grant to HANDS (Helping Americans Needing Disaster Support). This organization was started my Leisha Pickering (wife of Congressman Chip Pickering of Central Miss._ Great organization. We'll probably continue our support with this organization not only with financial support but volunteer efforts as well.

10/27
Try Katrina cases on the Coast, court urged - Insurers say residents in South Miss. biased
By ANITA LEE
GULFPORT - Fifty-two policyholders, along with current and former public officials, are urging U.S. District Court judges to try a Katrina insurance case on the Coast instead of in North Mississippi.
State Farm Fire & Casualty Co. says the company cannot get a fair trial on the Coast because of "biased" coverage in the Sun Herald, "negative" television reports and a "substantial bias" against insurance companies among registered voters surveyed in South Mississippi.
State Farm filed a motion saying a lawsuit filed by Ed Gemmill, a Biloxi city councilman, should be tried in Oxford. If the court agrees to move the trial, lawyers for policyholders fear other cases will be tried away from the Coast as well.
Biloxi attorney Jack Denton represents Gemmill, but U.S. Magistrate Judge Robert Walker is allowing other attorneys with Katrina cases to weigh in on the issue.
The Gulfport law firm Owen & Galloway has filed sworn statements intended to show the court that insurers can receive fair trials here.
Mayors A.J. Holloway of Biloxi and Billy Skellie of Long Beach, District Attorney Cono Caranna, Hancock and Harrison County supervisors, Jackson County Sheriff Mike Byrd and The Peoples Bank president Chevis Swetman are among 46 Coast residents who have signed statements saying they have read articles about State Farm and other insurers in the Sun Herald and believe insurers can get fair trials in South Mississippi.
In addition, 52 of the law firm's clients say they would be burdened by trials held 332 miles away.
"To move these cases to Oxford would be like these poor people being hit by a hurricane again," said Ben Galloway, who added that policyholders such as the Coast's only thoracic surgeon could be stuck in North Mississippi trials, complicating life for many residents.
Owen and Galloway's motion also says Oxford lacks the facilities to support the trials, including public transportation, an airport with direct flights and hotel rooms, particularly during football season.
State Farm representatives declined to comment Thursday.
Federal court personnel have estimated that 1,100 insurance cases are pending. Harrison County Circuit Court has about 300 insurance cases, while Jackson County reports only a handful of lawsuits have been filed. Hancock County workers were unable to say how many insurance cases are pending there.
In these lawsuits, insurers and their policyholders disagree over how much is owed for Hurricane Katrina damage. U.S. District Judge L.T. Senter Jr. has already declared valid the "water" exclusions in insurance policies, meaning the companies are not responsible for covering Katrina's tidal surge.
But many policyholders who have filed suit believe insurers are minimizing or ignoring wind damage to avoid paying claims. The insurance companies say they are paying what is owed under their policies, pointing out that the federal flood insurance program is responsible for covering Katrina's unprecedented tidal surge.
Coverage of the debate has colored opinions of potential jurors in South Mississippi, according to an expert for State Farm who surveyed 3,600 registered voters statewide. In South Mississippi, the survey said, 55 percent of respondents said insurance companies have been unfair, while only 39 percent felt that way in North Mississippi.

From The Sun Herald
Grand juries looking at State Farm Feds, state investigating insurer's claim practices

By ANITA LEE
calee@sunherald.com
GULFPORT - Federal and state grand juries are investigating the post-Katrina claims practices of State Farm Fire and Casualty Co., according to court documents the company filed.
State Farm included the information in a secret protective order filed in U.S. District Court in an attempt to stop the questioning of four employees by an attorney for policyholder Wesley McFarland of Bay St. Louis.
McFarland is suing State Farm for refusing to cover Hurricane Katrina's destruction of his Bay St. Louis home, which he maintains the wind caused.
McFarland's attorneys will be able to question the four employees because U.S. Magistrate Judge Robert H. Walker recently overruled State Farm's motion for a protective order, which the Sun Herald's attorney says the company illegally filed under seal. The public has no access to sealed documents, but the Sun Herald has obtained a copy of State Farm's motion from a confidential source.
The motion says the four employees are potential "subjects" or "targets" of the grand jury investigations and have hired attorneys as a result.
James Tucker, a longtime assistant U.S. attorney in Jackson who is now in private practice, is representing State Farm in connection with the investigations, the motion says.
"State Farm believes that, if these individuals are (questioned) before the criminal investigations are resolved, they may likely invoke their constitutional privilege against self-incrimination," the company's motion says.
State Farm also said the motion was filed under seal because media coverage might prejudice a jury pool in the McFarland case, set for trial in January.
Attorneys for McFarland, the Scruggs Katrina Group, will be allowed to question the State Farm employees: Dave Randel, section manager for State Farm catastrophe teams handling Mississippi Coast claims; Alexis "Lecky" King, an expert on the National Flood Insurance Program and coordinator of the catastrophe teams under Randel's supervision; King's assistant, Lisa Wachter; and Mark Drain, who McFarland's attorneys claim handled "high-profile" policyholders such as U.S. Sen. Trent Lott and U.S. Rep. Gene Taylor.
An employee who answered the telephone at State Farm's catastrophe office in Biloxi said Randel is on leave. He could not be located for comment. King, Wachter and Drain are not working out of the Biloxi office, the employee said. Insurance companies generally scale back operations as claims dwindle.
State Farm maintains it treats all customers equally. Lott and Taylor also have filed lawsuits against the company.
Mississippi Attorney General Jim Hood has confirmed that his office is investigating the post-Katrina claims practices of insurance companies, particularly the possible use of fraudulent engineering reports to deny claims. U.S. Attorney Dunn Lampton has refused to confirm or deny any federal investigation.
Two sisters who adjusted Katrina claims for State Farm, Cori and Kerri Rigsby, have said they witnessed fraud against policyholders. The women have turned over 17,000 pages of records to federal and state investigators.
The sisters are now working for the Scruggs group and have provided information the attorneys are using for their cases.
They maintain Randel ordered engineering reports to determine the cause of damage for all slab cases on the Coast, including McFarland's, expecting storm surge would be the culprit. However, initial reports found wind and water damage, the Rigsbys said. Wind damage is covered by insurance-company policies, but storm surge is excluded.
Randel and King then decided no more engineering reports should be ordered, McFarland's attorneys say. They say no report was completed for McFarland's property.
State Farm maintains the company has investigated policyholder claims and paid customers what was owed under their policies.
A north Mississippi attorney, Richard "Flip" Phillips, has documented that a State Farm adjuster ordered an engineering report on the waterfront property of Ocean Springs resident Judy Guice, but the report was subsequently cancelled.

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