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State Farm Asks Appeals Court to Overturn $5 Million Judgment in Hurricane Katrina Fraud Case

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State Farm Fire and Casualty Company wants a U.S. appeals court to toss out a $3 million judgment against it involving a whistleblower lawsuit that accused the company of defrauding the government in a policyholder claim after Hurricane Katrina.

The 5th U.S. Circuit Court of Appeals has scheduled oral arguments in the case for February 5 in New Orleans, Louisiana, according to Claims Journal.

The plaintiffs in the whistleblower case, who are sisters, are former employees of an Alabama contractor hired by State Farm to provide damage assessments in the wake of the August 2005 hurricane. The Ocean Springs, Mississippi, sisters filed the lawsuit in 2006, Claims Journal reported.

In 2013, a jury found that State Farm denied a policyholder’s claims for wind losses by blaming the damage on storm surge, which is covered by federal flood insurance. The women allege State Farm perpetrated fraud against the National Flood Insurance Program (NFIP) on a widespread scale along the Mississippi coast after the massive storm, according to Claims Journal.

The whistleblowers had pursued cases for several policyholders, but only one of the State Farm cases was tried before a federal judge because the sisters had firsthand knowledge of how the claim was handled.  The case involved a couple from Biloxi, Mississippi, who lost their home in Hurricane Katrina. The sisters alleged documents proved State Farm defrauded policyholders by manipulating engineers’ reports so claims could be denied, Claims Journal reported.

State Farm insisted it assessed the damage properly and never instructed its adjusters to wrongly process claims as flood damage, nor did it hold back a report showing the house had been destroyed by wind, as the sisters claimed, according to Claims Journal.

NFIP paid the couple’s policy limits of $250,000 at the prompting of State Farm. The company initially paid the couple $36,000 for wind damage on a policy that provided more than $500,000 in coverage, court documents viewed by Claims Journal show. State Farm denied any wrongdoing.

U.S. District Judge Halil S. Ozerden ordered State Farm to pay the government $750,000 in damages. The whistleblowers will receive 15 percent of that amount.  In addition, Ozerden awarded the sisters’ attorneys $2.6 million plus expenses in the amount of $303,078, Claims Journal reported. disclaimer: This article: State Farm Asks Appeals Court to Overturn $5 Million Judgment in Hurricane Katrina Fraud Case was posted on Monday, January 5th, 2015 at 3:20 pm at and is filed under Fraud Lawsuits.

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