A total of 699 Gulf Coast homeowners filed suit in federal district court Tuesday claiming that State Farm used a pro-forma engineering report to deny claims stemming from Hurricane Katrina.

The homeowners' suit, filed in U.S. District Court for the Southern District of Mississippi, alleges the insurer denied many claims without investigating whether home damage was caused by water, and therefore exempt from coverage, or wind, which would be covered.

Last September, Mississippi Attorney General Jim Hood filed a similar suit in state court asserting that water damage caused by storm surge was covered under homeowners' policies since it was caused essentially by wind.

The insurance companies failed in their efforts to move the suit to federal court and the case is now back in state court.

Noted Gulfport plaintiff's attorney Richard Scruggs filed this week's suit, alleging that State Farm relied on a “one size fits all” report prepared by Dallas-based engineering firm Haag Engineering Company because it concluded that Katrina's storm surge arrived before its wind could do any damage.

The suit alleges that before State Farm engaged Haag, many company-commissioned engineering reports concluded that much of the damage to State Farm policyholders was caused by wind.

State Farm refused to pay engineering firms for any reports inconsistent with the Haag report, according to the suit.

“Therefore State Farm extorted reports and findings denying evidence of wind damage from its employees and independent contractors through financial incentives including nonpayment of services already provided,” the suit states.

A State Farm representative, Phil Supple, said the suit was totally without merit. “State Farm has evaluated every Mississippi claim individually, and we are committed to paying our policyholders what is owed to them under their contracts with us,” he said.

He also noted that the company has already paid $1 billion to Mississippi policyholders for Katrina claims.

A Haag Engineering representative, David Marguiles, emphasized that the company is not targeted in the suit, and called the “plaintiff's attempt to suggest that experience, research and expertise are evidence of bias is ridiculous on its face.”

“Haag's reports were based on the facts and the application of sound engineering principles to those facts,” he said.

Special Reports /

State Farm Sued On Katrina Claims

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