NU Online News Service, Jan. 26, 7:39 a.m. EST

A federal judge in Mississippi has denied State Farm’s request to have a Katrina-related lawsuit against it dismissed.

The original April 2006 filing by former insurance adjusters Cori and Kerri Rigsby is a qui tam case, meaning it was filed under seal on behalf of the government as the government determined whether to intervene.

The government never did file any charges regarding the extent of the damage it believes it sustained as a result of the allegations within the lawsuit—that State Farm and other insurers doctored damage reports of homes following Hurricane Katrina in 2005, proclaiming that a majority of the damage was done by storm surge, not wind, and thereby shifting the burden of claims to the National Flood Insurance Program.

State Farm alleged that the Rigsbys and their attorneys violated the seal requirement of the False Claims Act under which the lawsuit was filed. However, because the government never interceded, “there is nothing in the State Farm submissions to support a finding of fact that the disclosures harmed the government’s interests,” wrote Judge L.T. Senter, sitting in U.S. District Court for the Southern District of Mississippi.

“We are disappointed the court failed to acknowledge plaintiffs’ repeated abuse of the False Claims Act,” said State Farm spokesman Phil Supple via e-mail. “We are awaiting the decisions of the other pending dispositive motions and will consider our options at that time.”

State Farm still has a motion pending to disqualify the Rigsbys.

In court documents, State Farm outlined four dozen examples of violations of the seal by the Rigsby sisters, their attorney—one-time prominent tort lawyer Richard “Dickie” Scruggs—and others.

Judge Senter considered a partial lift of the seal in January 2007 to allow the Rigsbys to give testimony on an independent case in Alabama. Therefore, the judge only looked at the time period of April 2006 to January 2007.

Judge Senter concluded that the Rigsbys and the Scruggs Law Firm did make several public statements during this time, accusing State Farm of misconduct in its claims practices. The most famous of these was an interview on ABC’s “20/20.”

However, “since the government has not disclosed its reason for staying out of the case, it is difficult to gauge what damage, if any, the disclosures may have done to the government’s interests,” Judge Senter ruled.

“Thus, despite the violation of the seal order by [the Rigsbys’] attorneys before the seal order was partially lifted…I see no evidence in the record that would support a finding that these disclosures hampered the government’s investigation or otherwise compromised the government’s ability to make its investigation,” Judge Senter concluded.

The judge furthermore said that the Rigsbys did not act in bad faith, which is another factor he needed to weigh in making his decision. Judge Senter said the Rigsbys’ role in making the disclosures “was not an active one,” and that no evidence exists to suggest the disclosures in violation of the seal were made with the sisters’ authorization or at their suggestion.

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