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Justice Has Been Conducting Criminal Probe of Katrina Claims, Court Records Show
GULFPORT, Miss. August 10 (BestWire) — The U.S. Justice Department has disclosed, via a filing in a civil lawsuit, that it has been considering a criminal probe of State Farm and possibly other insurance companies for allegedly shifting Hurricane Katrina damages to the National Flood Insurance Program.
Insurers among the defendants in the civil lawsuit are Allstate Corp., State Farm Mutual Automobile Insurance Co., Nationwide Mutual Insurance Co., and United Services Automobile Association Insurance Co.
The disclosure came amidst an ongoing whistleblower lawsuit filed in U.S. District Court in Mississippi. The lawsuit was filed on behalf of the defendants by Richard “Dickie&ndquo; Scruggs, an Oxford, Miss., attorney who gained fame handling Big Tobacco lawsuits and who now represents hundreds of Katrina victims in various lawsuits against their insurance companies.
In a July 23 filing in that case, U.S. Attorney Dunn Lampton and Assistant Attorney General Peter Keisler, head of the U.S. Justice Department's civil division, said it would be more difficult for federal criminal investigators if lawyers in the civil case were interviewing potential witnesses. As a result, on Aug. 7, U.S. District Judge Robert H. Walker halted civil discovery in the case, and told the Justice Department it has until Jan. 31, 2008, to either intervene in the case or tell the court that it declines to do so.
Spokespersons for Allstate, State Farm, Nationwide, and USAA were not immediately available to comment on the filing.
The lawsuit was brought in April 2006 by two sisters, Cori and Kerri Rigsby, who filed a sealed complaint alleging State Farm doctored engineering reports to support claim denials after Katrina. The two sisters worked for a company contracted by State Farm, and had secretly taken thousands of pages of State Farm claims records and given them to Scruggs and state and federal authorities.
State Farm has denied the allegations contained in the sisters' complaint.
The Aug. 7 ruling stemmed from an earlier request by the Justice Department to keep the case sealed. The Rigsbys moved to lift the seal and make the case public, but the government objected. Keisler and Lampton asked the court to stay civil discovery if it lifted the seal “in order to avoid possible harm to an ongoing federal criminal investigation,&ndquo; according to filings made public on Aug. 7.
The Justice Department was asking the court to leave the seal in place “because the government would like to have additional time to conduct a civil investigation of this matter. Unsealing the case would require the government to make an immediate decision as to whether or not to intervene in this matter, and the government is not adequately prepared to make that election at this time.&ndquo;
Justice Department civil attorneys, Keisler and Lampton wrote, “have largely held back from conducting a civil investigation of this case thus far, out of deference to the ongoing criminal investigation, and so the government's civil investigation is not yet complete.&ndquo;
State Farm Fire and Casualty Co. currently has a Best's Financial Strength Rating of A+ (Superior), USAA has a Financial Strength Rating of A++ (Superior) and Nationwide Mutual Insurance Co. has a Financial Strength Raging of A+ (Superior).
In 2006, the top five writers of homeowners multiperil in Mississippi, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 31.6% market share; Southern Farm Bureau Group, with 18%; Allstate Insurance Group, with 11.1%; Nationwide Group, with 7.7%; and Farmers Insurance Group, with 6%.
(By Chris Grier, Washington correspondent, BestWeek: Chris.Grier@ambest.com) BN-NJ-08-10-2007 1559 ET #
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