[StBernard] Insurers accused of milking system

[Westley Annis]

In an explosive speech to a group of New Orleans trial lawyers Friday,
Mississippi attorney Dickie Scruggs charged that insurance companies are
ripping off the National Flood Insurance Program by altering engineering
reports to falsely conclude that Hurricane Katrina damage was caused by
rising water. 

"They instructed the adjusters to max out the flood," Scruggs told attorneys
with the Louisiana Association for Justice, formerly known as the trial
lawyers association. "It's literally a license to steal." 

In some cases, insurance companies have even hired mobile shredding trucks
to destroy original engineering reports that blamed damage at some homes on
wind, he said. 

Scruggs was unable to fly to New Orleans for his speech because of the
inclement weather, but he delivered his presentation by telephone, his voice
booming through a speaker system at the Wyndham Canal Place as roiling
clouds outside the 11th floor meeting room transformed into a blinding haze
of rain and streets began flooding below. 

Much of his remarks focused on State Farm Insurance, with whom he has
settled about 650 Mississippi Katrina claims in which homes were obliterated
by the storm. 

In the Mississippi case McIntosh v. State Farm this week, depositions were
taken from Kerri and Cori Rigsby, the sisters from Ocean Springs who worked
for the adjusting firm E.A. Renfroe & Co. on State Farm cases for years
before they bolted with reams of documents. 

Scruggs said the whistleblower duo testified that adjusters were instructed
to inflate claims to the flood program. Asked whether the actions in
Mississippi could be linked to Louisiana, Scruggs responded, "Given what we
know now about State Farm, it would be inconceivable if it weren't" going on
in Louisiana too. 

The Rigsbys also testified that after Mississippi Attorney General Jim Hood
issued subpoenas, State Farm hired mobile shredding trucks to come to the
Gulf Coast. "They destroyed evidence," Scruggs said. "The paper they
shredded they made into toilet paper. That's what happened to the
engineering reports after the subpoena." 

Because some engineering firms get as much as 90 percent of their business
from the insurance companies, Scruggs said, they're under tremendous
pressure to conclude that flooding destroyed the home rather than wind. 

"Some of the engineering firms are essentially taking orders. The insurance
industry is essentially telling them what to write in the reports," Scruggs
said. 

Reached after the speech, Fraser Engerman, a spokesman for State Farm in
Illinois, declined to respond to Scruggs' specific charges. 

"Mr. Scruggs continues to put out emotional and inflammatory remarks. We
continue to look for ways to resolve claims in the Gulf Coast," Engerman
said. 

While Scruggs has settled about 1,000 cases in Mississippi, the majority of
them with State Farm, he said he has made little progress with Allstate
cases. 

"Allstate has been the most recalcitrant in fighting it out. We've only
settled but one or two of those cases," Scruggs said, adding that the
corporate strategy is to drag out the proceedings. "They're hoping to let
interest in these cases wane." 

On Thursday, Allstate disclosed in a regulatory filing that it expected to
receive a subpoena from the Department of Homeland Security's Office of the
Inspector General as part of a congressionally mandated inquiry into the
allocation of flood and wind damage between the homeowners and flood
policies. 

Allstate has said it is cooperating with the investigation and is confident
about its claims practices. 

Scruggs, who made his name leading the litigation against tobacco companies
and is the brother-in-law of Sen. Trent Lott, said battling the insurance
companies is similar to fighting big tobacco: It requires litigation,
political fights and public relations wars. 

The Gulf Coast's best hope at winning this clash with the titans, he said,
is for Louisiana and Mississippi to band together. "We should coordinate and
cooperate more in our approach to make the companies do right," Scruggs
said.