NEW ORLEANS (Legal Newsline) - Two insurance giants will be dismissed from a whistleblower lawsuit over their post-Hurricane Katrina practices because they are already facing one initiated by disgraced plaintiffs attorney Richard "Dickie" Scruggs.
Wednesday, the federal Fifth Circuit Court of Appeals affirmed the dismissal of allegations that State Farm Insurance Cos. and Allstate Insurance Co. cheated the federal flood insurance program, yet reinstated the suit against several other defendants.
The suit was filed by Branch Consultants, a group of former claims adjusters, who said several insurance companies misrepresented the amount of damage done during 2005's Katrina by wind (covered by policies) and water (covered by the federal program).
The opinion from a three-judge panel said that forcing Allstate and State Farm to fight a suit in Louisiana similar to one filed in Mississippi would contradict the False Claims Act's goal of preventing "parasitic" whistleblower cases.
A pair of former employees at E.A. Renfroe & Co., sisters Kerri Rigsby and Cori Rigsby Moran, obtained thousands of pages of documents from State Farm, which was working for the company, and Scruggs filed a whistleblower suit against State Farm and Allstate in 2006.
A 2006 order from U.S. District Judge William Acker ordered Scruggs to return the documents to State Farm, but he instead gave them to Mississippi Attorney General Jim Hood, who had filed his own suit against five companies.
He claimed the order allowed him to turn the documents over to a law enforcement official. Eventually, Scruggs and the sisters were held in civil contempt and ordered to pay $65,000.
Scruggs has spent the last six months in a federal prison in Kentucky after pleading guilty to attempting to bribe a state judge, and recently had 2 1/2 years added to his five-year sentence when he pleaded guilty to attempting to bribe another state judge.
Scruggs first made a name for himself in asbestos cases, representing shipyard workers. After that, his work led to the 1998 Tobacco Master Settlement Agreement, which has an estimated worth of $246 billion for the 52 participating territories and states.
The Rigsby sisters' case has been taken over by other lawyers. Wednesday's opinion called allegations raised against Allstate in the Rigsbys' case "skeletal."
Other defendants in the Louisiana case include Liberty Mutual and Fidelity National.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.