Insurance Coverage Blog

The McIntosh v. State Farm, easily the most contentious of the State Farm Katrina cases, has long been dark and bloody ground where lawyers clashed by night.  This is the case where Kerri Rigsby herself approved the flood payment, then turned around and accused State Farm of overpaying flood damage with government money to minimize the company's liability for wind.

It is also the case where those dumb engineer e-mails were so incessantly touted, it's one of the cases with two engineer reports, it's the case with the note in the file that said "put in wind file, do not pay bill, do not discuss." That last part deserves some comment: it was often erroneously rendered as "do not pay claim," which the note did not say. Instead, it seems obvious that it is a reference to the bill of the engineering company for engineer Brian Ford's first report, which strangely (considering Kerri Rigsby approved the flood payment) found no evidence of flood damage, and attributed all the damage to wind. But this schtick worked for quite a while -- just look at this story from CBS from the salad days of the Ride of the Rigsbys --  August 26, 2006: "Sisters Blew Whistle on Katrina Claims."  What a load of Scruggsism! But the media and a lot of other people just ate it up.  Looks pretty silly now, doesn't it? Maybe some editor should go back and revise the headline on the story to: "Sisters Met With Trailer Lawyers, Blew Up Careers."  

You may remember Dickie Scruggs had to withdraw from McIntosh and all Katrina cases after he was indicted (following a big dust-up with the other members of the then Scruggs Katrina Group over whether he was actually going to do so).  Then you may remember the relabeled Katrina Litigation Group being disqualified when Judge Senter ruled they were implicated in unethical conflict involving the Rigsbys' taking of the State Farm documents and the hiring of the Rigsbys, material witnesses in McIntosh and many other Katrina cases, as "litigation consultants."  You might also remember the Katrina Litigation Group had kind of a weird thing going with Brian Ford, where he was in discussions to make some $10,000 a month as a "consultant."  I'm leaving out a lot of weirdness that is an integral part of this case, I know, but honestly, trying to tell the story so it makes any sense in less than 8,000 words is really hard to do. And you wonder why I'm naming my musical The Katrina Follies?

OK, that brings us up to the new news -- Judge Senter dismissed the fraud claim in McIntosh against State Farm and also against the Rigsbys' former employer, Renfroe, an independent contractor claims adjusting service. He said even if the McIntoshes proved their allegations, it wouldn't amount to fraud because they failed to meet the element of reliance.  They didn't rely on State Farm's alleged underpayment of wind damage, instead they rejected State Farm's claims adjusting and sued.  Renfroe, which allegedly aided and abetted fraud, couldn't be liable if there was no fraud as a matter of law in the first place, the judge said.

This ruling is not the same thing as saying there is nothing wrong. Senter said if the allegations were proven, it would constitute bad faith and would justify punitive damages. So he made no factual finding, for example, that the amount of wind payment was correct, or that amounts owed for wind damage were not wrongfully pushed off on the federal flood payment.  Still, this is a  significant development in this case, and in Katrina litigation.  Part of the continuing deScruggsification of remaining Katrina cases.  

Oh, by the way -- here's a copy of the judge's decision.

In defending State Farm's ordering of the second report, AND CONCEALING THE FIRST ONE, Mr. Rossmiller goes a step too far. If "do not discuss" isn't classic scienter, I don't know what is. Certainly a reasonable person could infer that SF ordered the second report to obtain a favorable conclusion, and would've ordered a third (or more) until it got the conclusion it desired. But let's assume that SF was simply getting a second opinion, and that it genuinely believed the first one was seriously flawed in its methodology, analysis, etc. There is still no justification for hiding the first report.

Also, "do not pay bill" may not mean "deny claim," but it certainly looks like retaliation. Or a clear lesson: SF will not pay for unfavorable assessments.

Senter's opinion looks solid. The bad faith claim needs to be decided by a jury. I have no idea if SF's conduct was an isolated instance, or part of a pattern of systematic misconduct. But SF would not want me on the McIntosh jury.

I provided a link within one of the links, so people can read both reports. So, am I to understand you think the first report, the Brian Ford report, was accurate?

Detox -

It is quite possible the "Do not discuss" message was meant for the lower tiered claim handler not to discuss their refusal to pay the vendor's bill for that estimate as it would better for upper management to handle that conversation. What we do know is that we'll never know the true intent of the words on the post it note.

and "Do not pay bill" does seem understandable. For instance would you pay a contractor to install a countertop when all they did was remove the old one? Ok so my example is not that great but doesn't State Farm have information indicating that there was water damage in that area and if so how can reasonable accept any assessment advising 100% wind damage?? Simply appears to be a case of a lazy engineer.

But that's just my opinion.

Maybe Brian Ford was laying the groundwork to join the Scruggs party as a faux consultant. That doesn't matter to me.

What matters is State Farm's awful decision to conceal the first report. SF is entitled to order as many reports as it likes. But hiding that first report leaves the door wide open for punitives.

BTW, let's not pretend that State Farm doesn't have some sordid history when it comes to wrongful claims denails - see State Farm v. Campbell.

After again reviewing the first and second reports, at Mr. Rossmiller's suggestion, there is absolutely no way that I can figure out which report is closer to the truth. Maybe Briscoe is senile, for instance, and the interviewer put words in his mouth and distorted the geographic relationship between the McIntosh and Briscoe houses. I wasn't there, I've never been there, and frankly I don't care.

What I know is that State Farm has a financial incentive to deny the claim, the first report was inconsistent with that incentive, and a second report was ordered, which yielded a favorable conclusion. The second report was touted while the first report was concealed- "do not discuss."

Eric suggests that perhaps the post-it note innocently means that it "would [be] better for upper management to handle that conversation." That's corporate Newspeak for: the slick dudes with bigger bonuses at stake have the experience to spin this better to the McIntoshes and keep em from asking too many questions. Plus the slick dudes know exactly what to say about the first report: nada. Doesn't exist. Never heard about anything like that. Here at State Farm we are proud to adhere to the highest ethical standards in the industry.

With epistemological resignation, Eric laments: "What we do know is that we'll never know the true intent of the words on the post it note."

True enough. Of course, minds are not accessible like hard drives. That's always been true. Yet our judicial system nevertheless permits jurors to INFER mental states from evidence. It doesn't take much to figure out what was really going through someone's head- and "do not discuss" is all I need. And if that person was an agent of State Farm, then the law may impute that mental state to the corporate entity.

Controversies like this remind me of the greatness of the Seventh Amendment.

Quite an analysis above....of course....Rigsby herself stated that there was significant flood damage and authorized the payment of the full limits under the flood contract.

Campbell appears relevant....a case from the 80s.....

Ah....I love the smell of Corporate Newspeak in the morning...

SND, you wrote "What matters is State Farm's awful decision to conceal the first report. SF is entitled to order as many reports as it likes. But hiding that first report leaves the door wide open for punitives" above, but did they really hide and conceal the report? I know that all this came out from the items that the Rigsby sister's took, but I was under the impression that they took this information off of the SF server, which means this report including the sticky notes had already been scanned into the claim file. If there were such a sinister motive on the part of SF as you say, what possible benefit would they have had to scan it into the the claim file. Would they not have just gotten rid of the report, or the sticky notes that were attached to it? If I were wanting to cover something like that up, scanning it into the claim file to make a permanant record of it wouldn't be the way to do it.

I think I'm missing something. What "awful decision to conceal". The note said to put in wind file. I think that means the claim file related to the sind claim. That doesn't strike me as trying to hide it.

Is there some evidence/testimony elsewhere that suggests State Farm tried to conceal the report? Or is that an assumption based on inference from the postit note only?

Tox, The SF "slick dudes" you speak of who were working the Katrina disaster 24/7 with no power or running water for days on end do not receive bonuses, for the very reason you imply... nor do claim reps or claims management for any other company that I'm aware of. Why not stick to the facts and leave out the speculation and inuendo? Furthermore, paying "bills" are altogether different than paying "claims."

Well said boogiewoogieman....also, out of state adjuster....good catch on the wind file.

To Wow: Campbell is a 2003 decision- for any State Farm groupies, Ginsburg's dissent may be somewhat disillusioning. My point is merely that State Farm is not exactly beyond reproach.

Boogiewoogie: Claims managers don't get bonuses? They don't get promoted? I don't work for an insurance company, but I'd wager that the managers who rise to the top aren't the ones who pay the most claims.

Outofstateadjuster: I see the "wind file" note; did you see "do not discuss"- what does that mean?

Campbell is an auto case that originated in the 80s. It really seems relevant to today's issues. Maybe you could pull some life insurance cases from the 30s in to prove your point as well.

Campbell was a 2003 Supreme Court case, but the underlying conduct was quite old. 80's sounds right.

No claim manager gets promoted for engaging in bad faith behavior. Such behavior is expensive and painful, and those that engage in it, and generate the inevitable bad consequences, are not looked upon fondly.

Generally, carriers want to pay what they owe as quickly as they can reasonably verify that the claim is covered and what it is worth. With new claims always coming in, you have to settle the old ones to make room. Claim people that don't settle cases are of no use to anyone.

BUT, carriers can be quite stubborn about not paying uncovered claims. If the risk or damages weren't covered, many carriers will dig in and refuse to pay on principle.

Likewise, in third party matters, if the plaintiff or claimant is being unreasonable, they will dig in and resist.

But the road to success in Claims is not in refusing to pay what you owe. Far from it.

Detox: don't ever argue with the blog master. He's got an opinion. It's you're fine for me or you're not - and it just amazes the hell out of me that everybody who go wrecked in those fowl insurance companies are not being pulled into this blog - as if there's no bias and then there's too much licking up to it. If you have time, explain to everybody who reads English, why anti-concurrent isn't a non-sequitur? If it is, how is it language? Yo, pretty harsh, dude.