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Whistleblowers in State Farm false claims case entitled to further discovery


Two whistleblowers who had already won a jury verdict in which they had successfully charged State Farm Fire & Casualty Co. with submitting a single false Hurricane Katrina claim are entitled to further discovery to uncover possible additional violations of the False Claims Act, says an appeals court.

After the August 2005 Hurricane Katrina, Gulf Coast residents whose homes were damaged or destroyed could find compensation under at least two policies, both of which were administered by private insurers: a flood policy whose claims were paid by the government under the National Flood Insurance Program, and a wind policy paid for out of insurers' own pockets, according to Monday's ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in United States of America et rel. Cori Rigsby; Kerri Rigsby v. State Farm Fire & Casualty Co.

The Rigsby, sisters who were claims adjusters hired by a contractor for Bloomington, Illinois-based State Farm, charged the insurer had unlawfully tried to shift its responsibility to pay wind damage claims on homeowner insurance policies to the government through the NFIP. They filed suit under the False Claims Act in 2006. The U.S. District Court in Gulfport, Mississippi, focused discovery and the subsequent trial on a single claim involving a private residence.

The jury issued a verdict in the Rigsbys' favor, awarding them $227,475 plus $2.9 million in attorney's fees and expenses.

The Rigsby appealed, stating they were entitled to further discovery. State Farm also appealed on several counts, including that the jury's verdict was not supported by sufficient evidence.

A unanimous three-judge panel of the 5th Circuit held the sisters were entitled to further discovery in the case.

“The Rigsby's allegations and trial evidence … entitle them to at least some additional discovery,” the panel said.

”At a minimum, the trial record supports a high probability that State Farm submitted more than one false claim,” said the court, adding “we make no judgment about the actual existence of other potential false claims or records.”

The panel also dismissed State Farm's appeal in the case.

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