[StBernard] E-mails criticized State Farm - Clarion Ledger

[Westley Annis]

By Chris Joyner
chris.joyner at jackson.gannett.com

An attorney for Mississippi Gulf Coast residents who lost homes to Hurricane
Katrina said Tuesday that e-mail between executives in a North Carolina firm
shows how insurance companies pressured disaster engineers to attribute the
destruction to flooding.

Homeowner policies did not cover flooding.

In the e-mail, Randy Down, vice president of engineering for Forensic
Analysis and Engineering Corp., expressed "serious concern about the ethics"
of demands from State Farm Fire and Casualty that a property be reinspected
after an engineer with the company found high winds were the primary cause
of the home's destruction.

"I really question the ethics of someone who wants to fire us simply because
our conclusions don't match hers," Down said in the Oct. 18, 2005, e-mail to
Forensic CEO Bob Kochan.

Down wrote State Farm "would love to see every report come through as water
damage so that they can make the minimum settlement."

"I now see why the attorney general's office is already involved down
there," he wrote. "She needs to be careful about what she is doing and
saying," he said, referring to the State Farm official.

When contacted Tuesday about the e-mail, Down and Kochan said State Farm
never directly asked them to change a report to financially benefit the
company.

"The basic reason for that e-mail is Randy and I both felt it would have
been improper for State Farm or any other company to specifically change a
report to benefit them," Kochan said.

State Farm spokesman Phil Supple denied the company rigged the outcome of
reports to deny claims. "Our State Farm employees are committed to
conducting themselves in an ethical and appropriate manner. Any suggestions
to the contrary are simply wrong," he said.

In recent months, attorneys for homeowners in Mississippi and Louisiana have
seized on multiple drafts of engineering reports as proof insurance
companies gamed the system to deny claims and push homeowners to file with
the National Flood Insurance Program, a federal plan partially funded with
tax money.

Chip Merlin of Florida is an attorney for several homeowners in claims of
altered engineering reports, none of which involve Forensic. Merlin said the
e-mail shows the insurance industry's attempt to force "outcome-oriented
opinions" from the independent engineering firms that perform initial
inspections before a claim is paid.

"It underscores and shows what our allegations have been, that there is a
culture and mentality of ... stacking the deck for the insurance companies,"
he said.

One report that got Forensic in trouble with State Farm appears to be an
Oct. 12, 2005, inspection of a Gulfport home damaged in the storm. In that
report, the engineer, Brian Ford, concluded damage was "due to wind."
Shortly after that report was filed, State Farm fired Forensic.

In an Oct. 17, 2005, e-mail, Kochan wrote he had "managed to get us back on
the roles with SF but we need to have a very frank conversation with the
boys down south to be sure that we don't fall in the same trap," he wrote.

In the e-mail, Kochan said State Farm believed the engineer relied too much
on eyewitnesses to the home's destruction. Kochan wrote State Farm
catastrophe coordinator Lecky King had expressed her concerns about using
local engineers to conduct the inspections.

"In her words ... they are all too emotionally involved and are all working
very hard to find justifications to call it wind damage when the facts only
show water induced damage," he wrote.

Three days later, Forensic filed a second report on the Gulfport home, using
another engineer, and found the damage "appears to be predominantly caused
by rising water from the storm surge and waves."

Kochan said Tuesday he agreed to reinspect the homes as a condition to
continue working with State Farm. The new conclusions were "based on
additional evidence that was provided."

"She didn't necessarily feel that the conclusions that we reached were
accurate," he said. "I didn't accept her disagreement but I said, 'You're
the boss, and we're going to re-look at it and, if we were in error, we will
correct.' "

Citing pending litigation, Supple would not comment specifically on the
e-mail but provided a transcript of a deposition in which Kochan said King's
only objection with the reports was "the information we supplied with our
report didn't technically justify the conclusions."

Down said in his e-mail response to Kochan he was "raising a flag" about
possible problems.

"All of the sudden we get told we're fired by State Farm," he said. "Had I
become aware of deliberate efforts by the insurance company to alter
conclusions, you would have seen a lot more e-mails than that one, and they
would have been a lot more strongly worded than that."

Kochan said Forensic pulled out of Mississippi not long after that because
the company was not getting enough work. He said there was some suspicion
work was going to engineering firms that had been more cooperative with the
insurance companies.

Immediately following the storm, Kochan said State Farm had told Forensic
10,000 engineering reports likely would be needed to determine claims made
on the Coast and that work would be divided among 10 companies. But Forensic
got only about 150, he said.

"Quite frankly, with the investment we made, I brought my people home," he
said.

The insurance industry's response to Katrina continues to be closely
examined. Mississippi Attorney General Jim Hood is scheduled to testify at a
hearing today before the Senate Commerce Committee.