[StBernard] State Farm managers must testify

[Westley Annis]

By ANITA LEE


calee at sunherald.com

Managers at State Farm will have to testify under oath in a Hurricane
Katrina lawsuit, despite the company's protests that they might incriminate
themselves in an ongoing criminal investigation.
 
U.S. Magistrate Judge Robert Walker has denied State Farm's motion for a
protective order to prevent questioning of five employees by lawyers for
policyholder Wesley McFarland of Bay St. Louis.
 
An attorney for McFarland, Zach Scruggs, said the pretrial testimony will be
scheduled as soon as possible.
 
The Scruggs law firm hopes to prove in the McFarland case and others filed
against State Farm that company management decided to deny all policyholder
claims where Hurricane Katrina left only slabs or pilings.
 
In denying slab claims, the company has relied on policy exclusions that say
water damage is not covered and there also is no coverage for wind damage
when water contributes.
 
Denying a policyholder's claim without investigating the cause of damage
could be considered an act of bad faith by an insurer, which could entitle
McFarland and other policyholders to recover extra damages from the company.
 
State Farm's public relations department insists the company individually
investigated each claim and paid for damage covered under its policies.
 
However, two whistleblowers who adjusted claims for the company say State
Farm at first ordered engineering reports on all slab cases, then canceled
the reports when they failed to show all damage was from water. The National
Flood Insurance Program covers water damage, including storm surge.
 
State Farm managers insisted that engineering reports be changed when they
included wind damage, the whistleblowers said.
 
The whistleblowers, Ocean Springs sisters Cori and Kerri Rigsby, are now
working for Scruggs. Now that Walker has denied State Farm's motion for a
protective order, the Scruggs firm will be able to take testimony from
managers the Rigsbys say were involved in overseeing the claims process and
engineering reports.
 
One State Farm witness on the list handled "high-profile" claims, according
to court records, including those of U.S. Sen. Trent Lott and U.S. Rep. Gene
Taylor, who also are suing State Farm.
 
State Farm spokesman Richard Luedke said all policyholders are equally
important to State Farm.
 
He said the company was trying to protect the privacy of its employees by
filing its latest motion for a protective order under seal, which means the
public has no access to it.
 
Sun Herald attorney Henry Laird said the motion was illegally filed under
seal because no hearing was held to establish a compelling reason for
secrecy and the public was allowed no opportunity to object.
 
Luedke said the employees called to testify have hired their own attorneys
to represent them in federal and state investigations in Mississippi of how
insurance companies have handled Hurricane Katrina claims.
 
Wind vs. water trials set

 
The first Hurricane Katrina cases to be tried in U.S. District Court in
Gulfport will, at the judge's direction, involve wind vs. water claims
against State Farm, Nationwide and Allstate insurance companies.
 
Six cases have been scheduled, two involving each company, to begin Jan. 29
with the case of Dr. Wesley McFarland vs. State Farm. The Scruggs law firm
selected the McFarland case, a Nationwide case and an Allstate case from the
hundreds of complaints it has filed against those companies. The other three
cases were selected by the insurance companies being sued.