By: Allan M. Siegel
The U.S. Supreme Court recently granted State Farm Fire and Casualty Co.’s
petition to overturn a whistleblower case alleging that the insurer defrauded
a government flood insurance program in the wake of Hurricane Katrina.
The case began when Cori and Kerri Rigsby filed a
qui tam suit in 2006 on behalf of the United States government, alleging that State
Farm illegally attempted to offload its duty to pay for wind damage claims
onto the federal government.
After Hurricane Katrina, many Gulf Coast residents whose homes were damaged
or destroyed filed compensation claims with insurance companies. These
homeowners were often covered by at least two insurance policies: a flood
policy excluding wind damage, and a wind policy excluding flood damage.
Wind policy claims were paid by the insurance company while flood policy
claims were paid out of a government fund. Because private insurance companies
like State Farm administered the claims, there existed a clear conflict
of interest for insurance companies to classify claims as flood, rather
than wind, claims. In 2013, a jury agreed with the Rigsby sisters and
found that State Farm intentionally avoided paying for wind losses by
blaming such damage on storm surge damage, which was covered by federal
flood insurance. State Farm was ordered to pay more than $3 million.
According to State Farm, the Rigsby sisters improperly publicized their
case in the news media after filing their whistleblower lawsuit under
seal. Qui tam lawsuits filed pursuant to the federal False Claims Act
are supposed to be “filed under seal,” meaning that every
document that is filed is kept secret and only the judge, the federal
prosecutor, and certain individuals with the DOJ will know about the whistleblower
case. This allows the government to conduct its investigation and also
protects defendants from premature reputational harm. The Rigsby sisters
“broke” the seal when their attorney told the media about
the pending whistleblower lawsuit before the court formally lifted the seal.
The 5th Circuit Court of Appeals rejected State Farm’s argument that
breaking the seal required dismissal of the case. At issue in the Supreme
Court case is when courts should dismiss whistleblower cases when the
seal is broken and what standards apply to making this decision. State
Farm wants clarity from the Supreme Court about the consequences for breaking
the seal. Federal appeals courts around the country are split on the issue.
DC whistleblower attorneys
with Chaikin, Sherman, Cammarata & Siegel, P.C. will closely monitor
the Supreme Court case (captioned as
State Farm Fire and Casualty Co. v. United States ex rel. Rigsby) and any impact the case may have on whistleblowers seeking to file a
False Claims Act suit. If you have confidential, credible information
that a private individual or company is financially defrauding the government, please
today for a free, confidential consultation. Because strict time deadlines
apply to filing a claim, we recommend contacting us at your earliest convenience.