The past few weeks have seen the end of the first phase of important litigation that has been raging on since shortly after Hurricane Katrina made landfall in southern Mississippi. While the full details of the story would take many volumes to adequately address, the litigation arose over two State Farm whistleblowers, Cori and Kerri Rigsby, who brought to light what they believed to be the insurer’s attempt to systematically defraud policyholders. According to the sisters, State Farm and its managers directed claim investigators and engineers to find that damages were caused by flood, thus limiting any potential payments under the State Farm wind policies.
After years of litigation and one trial, the jury found State Farm guilty last year and ordered State Farm to pay $750,000 in damages. The Court also recently awarded the Rigsby’s attorneys an additional $3 million in attorney’s fees and costs.
While a number of issues will be appealed, likely on both sides, the case brings up an important point for policyholders: who exactly is investigating your claim?
As I have noted before, good faith claims handling often requires an insurer to retain experts to assist in the investigation. It is equally important, however, that these experts be adequately trained and unbiased.
Like many insurers, State Farm retained HAAG Engineering to investigate Katrina claims. While the Dallas based engineering firm has been around for quite some time, they almost always seem to end up at the center of controversy. In Katrina alone over 700 policyholders filed suit against State Farm and HAAG over their investigations and claim decisions.
HAAG’s problems were not limited to Katrina litigation. On the contrary HAAG has a long history of run-ins when working for insurers. As far back as 1989, HAAG was investigated by the South Carolina board of engineering for signing and sealing reports on for insurance carriers without being licensed in the state. In 1999, one of HAAG’s Principle Engineers was sued by a Texas policyholder for allegedly altering documents during an appraisal process. And in 2006 an Oklahoma jury found that State Farm had “recklessly disregarded” its duty to deal fairly with its policyholder and in good faith by hiring HAAG and relying on their opinions in denying coverage for tornado claims (resulting in a $9.9 million punitive damages verdict).
Things got so rough for State Farm that its top level executives ordered a nationwide “moratorium” preventing the use of HAAG until an internal investigation could be conducted.
While there are certainly good insurance carriers that hire qualified and unbiased experts, these examples evidence why it is important to know who is investigating your claim and research their qualifications. Often a simple Google search will reveal a lot of information. If you have concerns about the people hired by the insurer, call the adjuster and let them know. If they do not agree to retain a new expert and you believe that the opinions provided are incorrect, you can always retain experts of your own to provide a peer review.
