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Supreme Court to Hear State Farm's Appeal of Whistleblower Case Alleging Hurricane Katrina Fraud

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.

Whistleblower / Quit Tam Lawyer in DCAfter 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.

Our 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 contact us today for a free, confidential consultation. Because strict time deadlines apply to filing a claim, we recommend contacting us at your earliest convenience.