Mississippi Katrina Report: No Fraud by State Farm

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State Farm Fire & Casualty Cos. made questionable decisions in handling Hurricane Katrina claims, but a nearly two-year study found no pattern of fraud in Mississippi.

The report by the Mississippi Insurance Department contradicts allegations of widespread fraud that followed the hurricane. Among the report’s findings:

Some claims were not handled appropriately, but there was no specific violation of the Unfair Trade Practices statute and no pattern of violations of the insurance fraud statute.
There were questionable decisions and irregularities, but no scheme or plan to systematically mistreat policyholders.
After numerous complaints and accusations by policyholders, State Farm agreed to reopen some cases and paid an additional $88 million.

State Farm spokesman Jonathan Freed said the report “clearly shows that examiners found no violations of state law or regulations, allegations of fraud and abuse were baseless, and, where mistakes were discovered in claims handling, we corrected them.”

The company came under intense scrutiny after the storm. Attorney General Jim Hood opened at least two criminal investigations. High-powered tort attorneys filed dozens of civil lawsuits.

There were allegations that the company used fraudulent and conflicting damage assessment reports to deny claims.

The insurance department’s report, however, said what “appeared to have been designated as changed reports were often drafts or unsigned reports that had not been reviewed by the signing engineer.”

“Not all the changes resulted in conclusions favorable to State Farm,” the report said.

A criminal investigation by Hood’s office appears to be closed, but a federal investigation continues, the report said.

Insurance Commissioner Mike Chaney said that he’s “very aware that not everyone will be pleased with the conclusions reached in the report,” which he said finds State Farm did some things right and some things wrong.

The report questions allegations made by Cori and Kerri Rigsby, two sisters who worked for an engineering firm that provided damage assessments for State Farm. Attorney Richard “Dickie” Scruggs, now in prison, called the sisters “whistleblowers,” and said they had proof that State Farm pressured engineers to change reports.

But the state found the allegations of fraud “deteriorated through the course of the investigation” and were not substantiated.”

While the report found no fraud, it did say that some adjusters were inexperienced, the company sometimes failed to pay for wind damages and it did not always properly document damages.