Insurance Coverage Blog

Here are some additional thoughts I promised about the end of the McIntosh case.

-- You may remember my post from last week about the plaintiffs' dismissal of extra-contractual claims, or in other words, bad faith and punitive claims against State Farm.   Well, the entire case is over now.  The insurer announced in a press release Monday that the contract claims were settled for $250,000, and you can look at Judge Senter's order of dismissal and see that each side bears its own attorney fees.  However, seeing as how the McIntoshes got the full federal flood payment for their home, $250,000 seems like somewhat more of a sum than you would suspect would be directly linked to covered wind damage to the house, especially as the plaintiffs admitted in their motion to dismiss the bad faith claims that "State Farm properly tendered payment to Plaintiffs for wind damage covered under their homeowners insurance policy prior to the time that the dwelling was inspected by an engineer."

The way these things often work, the settlement includes some consideration that the plaintiff's lawyer has to eat, and that gets built into the settlement if it isn't otherwise explicitly paid.  I don't know what arrangement the Merlin Law Group had with the McIntoshes -- almost certainly it was a contingency fee case, and contingency fees typically run from around 30 percent to as high as 40 percent. Incidentally, I see nothing on the Merlin Law Group blog about the case.  It's also not unheard of for an insurer to up the amount just a little, giving all possible benefits of the doubt and then some to the plaintiffs, to get something to go away if the insurer gets something it wants out of the deal.  And in this instance, what State Farm gets is the chance to say that the signature Katrina case against it brought by Dickie "I'll Fly Away" Scruggs was bunk of immense, Scruggsian proportions.   

-- Just think again for a moment what the plaintiffs' motion said: "no credible evidence that State Farm engaged in bad faith with respect to the adjustment of Plaintiffs' claims under their homeowners policy."  I mean, that's a heck of a thing to say, isn't it?  That is what is supposed to happen when a lawyer realizes claims are unsupportable -- dismiss them -- but in the real world it happens all the time that lawyers hang onto dubious and even obviously bogus claims until you pry them from their cold, dead hands.  When such claims are dismissed in a settlement, the settlement is almost always a confidential complete release with both sides saying no one makes any admissions about nothin'.  So to see that in writing was startling to me, and could only happen where a) a plaintiff's lawyer had no stake whatsoever in defending the conduct of his predecessor, b) his clients would benefit by distancing themselves from that conduct and c) the claims truly were unfounded and the lawyer would face ethical problems by saying otherwise (if "c" were not true, the lawyer would just be supplying ammunition against himself and other clients in other lawsuits, which itself would give rise to ethical problems). 

-- Let's talk about the State Farm press release for a bit.  The tone of it, to me, is remarkably restrained, considering they could have climbed on top of Scruggs' burial mound and crowed and crowed about this.  Go back and read it again -- it works better to undersell it, don't you think? 

-- I was interviewed last week by Chad Hemenway of A.M. Best about the insurance landscape after Katrina.  Chad, by the way, is one of my favorite interviewers -- great sense of humor and, of course, dude knows insurance. One of the things I told him (I think I did, I tended to ramble on somewhat in the interview) was what I've said before, the State Farm merger of Katrina legal and public relations strategy was the most sophisticated I have ever seen or heard about from a corporation.  And I say this as both a lawyer who knows a few things about insurance and as a former journalist (and current interested observer of press and public relations matters).  No matter what you think of State Farm. I think it's beyond dispute that, beginning about early 2007, they could not have handled the Katrina controversy any better, from their perspective, than they did.   

Let's just take a look in the rear-view mirror at some of what happened.

• Scruggs and the Scruggs Katrina Group disqualified from Katrina cases.
• The Rigsby Sisters barred from testifying and driven off into the wilderness in disgrace for the "sham consultancy" with the SKG.
• A successful federal court lawsuit against Jim Hood, the Mississippi Attorney General, that forced him to back off further criminal investigations of the insurer.  
• Hood's later dismissal of the civil suit he filed against State Farm for allegedly breaching an agreement with Hood to institute a claims procedure re-evaluating thousands of Mississippi Katrina claims (the agreement fell apart when Judge Senter refused to approve parts of the deal, and State Farm later reached a similar agreement with then-Mississippi Insurance Commissioner George Dale). 
• The Trailer Lawyers were run off Ex rel. Rigsby, the ever-shrinking False Claims Act case.
• Federal prosecutors have apparently ceased their investigation of alleged insurer fraud, which had been pursued for years with an Inspector Javert-like tenacity.  Someone remind me -- how many millions of taxpayer money was spent on that investigation?  

You can probably supply some additional bullet points, but you get the idea.  Some of this, you might say, was luck -- like the conspiracy to bribe Judge Lackey totally discrediting Scruggs and anyone connected with him, and forcing a new look at the "whistleblower" Rigsby sisters and the entirety of the Katrina Follies.  I wouldn't use the word "luck," however.  Chance always plays a part in human designs, but you always have a choice about what to make of the chance.  Also, was it really luck that Scruggs Scruggsed himself, or given the way he'd comported himself since the beginning of Katrina litigation, was it more likely than not that the Scruggs Katrina Group would fall into infighting, leading to The Great Unraveling? 

-- You know, I mentioned last week I heard some journalist is going to write the definitive Scruggs story, and I wish him all the best.  If asked, I'll provide whatever help I can, including possible book titles such as The Rise and Fall and Kersplat of Dickie Scruggs.  

-- How long till that Mississippi Insurance Department market conduct survey comes out on State Farm?  You can tell what it's going to say, if you've been paying close attention to the smoke signals.  It will cite instances where State Farm made mistakes in adjusting, but will find no evidence of malicious intent or a company-wide plan to underpay.  However, it will cast shadows on Scruggs, Hood and the Rigsby sisters, among others. 

-- One thing I hope someone writes about is the mindless tribalism that rode the Scruggs Express down the tracks.  You could paint some other names on the side of that train -- such as Hood, Lott, Taylor.  How stupid do those Congressional hearings look now?  I said as much at the time.  Emotions are hard to contain during times of actual or perceived crisis, I know.  But I also know what Thucydides said about the Peloponnesean War: war is a harsh teacher that lowers the character of men to the level of their fear.  And believe me, it's not just war -- you can see the same thing in the political rantings going on right now.  Things haven't changed much since the time of Thucydides, which is why he called his history a gift for the ages -- because the things that were are the things that will be, as long as human beings are the way they are.   And they ain't never gonna change.  If they were, they'd have done it by now.

-- Hard to believe, I know, but there is still a lot to tell about this Katrina saga.  We'll talk more about this soon.      

Speaking of Lott, is his claim still pending? Didn't W himself tell the LA Times in 2006 that he knew one house that would be rebuilt -- Lott's 154-year-old home on the coast -- and that he, W, was looking forward to sitting on it's porch? What became of Lott's claim? how much did he he get paid for water? How much for wind? Will that porch be ready for an announcement of a pardon of Dickie, if one should be sought from W in January, and granted?

Nice post David.

I still want you to write the "definitive" story/book on this saga.

Here's hoping that a minimum number of mistakes are made on the Texas gulf coast, and that we don't have another three-ring circus erupt in the aftermath. The people down there need all our thoughts, prayers, and whatever help we can send.

Lott's claim was settled last year. Lott was represented by Dickie. Confidential settlement.

Great post, David. So much info and so many things have happened, its hard to recap.

You are the one to write the book on Scruggs and all of this. It will take a lawyer and a journalist to do it correctly. The rumor floating around was that Curtis Wilkie (Ole Miss Professor) was going to be writing book on Scruggs. Here's the problem--when Ole Miss was going thru the issue of whether to pull Scruggs name off some of their buildings, Wilkie said he considers Scruggs a friend and does not think it would be appropriate to change the name of Scruggs Hall.

It is clearly evident to me that I am not the brightest bulb in the pack, but there is no way that I could even imagine President Bush granting a pardon to Dickie Scruggs, especially as a favor to Trent Lott, a Senator who was at odds with the President more often than he was in agreement with him.

Curtis Wilkie (Ole Miss professor, friend of Dickie, and crony of Chancellor Khayat) should join the good chancellor in wearing a "Free Dickie" t-shirt instead of writing the book. But Wilkie will get points from the chancellor if Wilkie writes about Dickie's good character and great quality as a individual and what fine people Robert Khayat and Dickie Scruggs are.

It will be interesting to see how insurance companies handle the Ike disaster in Texas. I watched all the videos very carefully to observe the damage from water and wind. Obviously the damage in downtown Houston was caused by wind which blew out the windows that let rain water inside. But the damage on Bolivar Peninsula and Galveston was done by water. It looked as if water got to those two places before the wind. Did the same thing happen on the Miss. Gulf coast?

BREAKING
9/17/2008 9:50:48 AM

Zach Scruggs asks federal court to stop 'permanent' disbarment

OXFORD – Zach Scruggs, serving a prison term for his part in the judicial bribery scandal that brought down his famed lawyer father, Dickie Scruggs, is asking the U.S. District Court to tell the Mississippi Bar Association it can't "permanently" prevent him from practicing law again. The Mississippi Supreme Court approved the Bar's motion July 31 to "permanently" disbar the younger Scruggs, who pleaded guilty to knowing about but not reporting a scheme to bribe a circuit judge. Zach Scruggs' motion to the federal court insists the disbarment rules cited by the Bar do not contain any references to doing so permanently. He's also asking the federal court to hold up on his disbarment until the state Supreme Court rules on his request about the permanency issue.

Has anyone seen this motion? Was it written, by chance, on a napkin?

HAHAHA. Accompanies by a few sweet potatoes.

I haen't seen the motion. Wish someone who has access to PACER would pull a copy and post it.

You are correct on this one David. Chip has a lot of cases against State Farm, and this was a "deal" just like they made with me, and all the other attorneys that found "problems" in their process. Now they are one Federal Judge in Louisiana from a complete victory.

See you guys In Louisiana and Texas in a few weeks. I have the utmost confidence State Fram and company will do it again, and this time I hope there is no Scruggs figure to save their ass.

This case reminds me of the Oklahoma tornado cases and Snake Farm. Jury verdict for $13 million, affirmed by State Supreme Court. Mysteriously, the other dozens of cases suddenly settled, and then dismissed by the judge. No record exists. Hmmmmmmm . . . do you think Snake Farm paid millions to the McIntoshes for silence?

Why do people keep bringing up OK tornado case, but only bring up HALF the story? Wasn't it overturned on appeal? I know it's the "silly season" (political elections) but why do some that post here continually grind the same story, without disclosing the WHOLE Story??

No

Sorry to bother you but can you do a qui tam update?

Mississippi Supreme Court handdown list today:

EN BANC
2008-BD-00486-SCT

The Mississippi Bar v. David Zachary Scruggs; Disposition: Motion for rehearing filed by David Zachary Scruggs is denied. Easley, Graves and Randolph, JJ., would grant.

The luck for State farm is that Scruggs got the evidence and did nothing but attempt to leverage it. Many of us would have put it all on the web and send copies to every newspaper in the country and then worked up the cases. BTW State ferm lied about only canceling policies taht are 1000 feet from water. Just saw the map it is 2500 feet from any water at all, even Gulfport Lake. I assume they intended to reveal this after the elections

Why do you think Dickie did that, Injustice4all? Was he more interested in his own pocketbook than that of his client? Wasn't he already a millionaire time hundreds? Why did Dickie do that?

Still under gag order?