Louisiana Attorney General Charles C. Foti Jr. has filed alawsuit against property-casualty insurers in the state allegingthey collaborated in a price-fixing scheme for repairs in the wakeof Hurricane Katrina.

The suit filed Wednesday in New Orleans Civil District Courtnames six major insurers in the state as well as the companies thatprovided claims-processing software or offered advice or datacollection services.

“This alleged scheme gave insurers an unjust advantage overpolicyholders, which they used before, during and after one of thegreatest disasters this country has ever suffered, by reaping hugeprofits from the misfortunes of persons whom they pledged toprotect from the risk of loss,” said Mr. Foti in a statement. “Ibelieve this unjust advantage resulted in the unjust enrichment ofthemselves to the detriment of the state, policyholders andcommerce in Louisiana.”

Among the insurers named were the state's two largesthomeowners' insurers, State Farm Fire and Casualty Co. and AllstateInsurance Co., as well as Farmers Insurance Exchange, Standard FireInsurance Co., USAA Casualty Insurance Co. and Lafayette InsuranceCo., a division of United Fire Group.

The suit alleges the companies violated the state's MonopoliesAct “by rigging the value of policyholder claims and raiding thepremiums held in trust by their companies.”

Furthermore, the suit contends that companies “coerced theirpolicyholders into settling their claims of damages for less thantheir value by editing engineering reports, by delaying payment andby forcing policyholders to litigate claims to receive fullvalue.”

Additionally, the suit alleges that by using the same consultingfirm, the insurers were able to create a plan for reducing claimsand that it was able to make those tactics standard practicethrough the use of claims processing software and the data filedwith the Jersey City, N.J.-based Insurance Services Office, whichis also named in the suit. Also named were Xactware Inc., Marshall& Swift/Boeckh LLC and the McKinsey Co.

Speaking to the Associated Press, Insurance InformationInstitute President Robert P. Hartwig said it was “ludicrous” thatinsurers would be involved in such a scheme.

“Insurers operate independently from one another,” he said.“They do not act in concert with each other under anycircumstances.”

Fraser Engerman, a spokesman with Bloomington, Ill.-based StateFarm, said the company “believes the attorney general's law suit ismisdirected” and that competition remains an important component ofthe company's business model.

He dismissed any notion that the company does not work in itscustomer's best interests. “Customer service has always been at theheart of State Farm,” he added, noting the company has the fewestnumber of complaints per 1,000 of any insurer in the state.

An Allstate spokesman Mike Siemienas said, “This complaint is ahodge-podge of recycled and unfounded allegations. It appears to bethe latest in a string of failed attempts to get traction for somepreviously discredited assertions. Allstate will vigorously fightthis complaint.”

A federal lawsuit claiming insurers conspired to have theirclaims moved into the National Flood Insurance Program through thework of adjusters was recently thrown out in Louisiana. However, afederal grand jury in Mississippi is examining the issue.

A preliminary report from the Department of Homeland Securityexamining this same issue found no wrongdoing.

(This story was updated at 4:37 p.m.)