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 againstit dismissed.

The original April 2006 filing by former insurance adjustersCori and Kerri Rigsby is a qui tam case, meaning it wasfiled under seal on behalf of the government as the governmentdetermined whether to intervene.

The government never did file any charges regarding the extentof the damage it believes it sustained as a result of theallegations within the lawsuit—that State Farm and other insurersdoctored damage reports of homes following Hurricane Katrina in2005, proclaiming that a majority of the damage was done by stormsurge, not wind, and thereby shifting the burden of claims to theNational Flood Insurance Program.

State Farm alleged that the Rigsbys and their attorneys violatedthe seal requirement of the False Claims Act under which thelawsuit was filed. However, because the government neverinterceded, “there is nothing in the State Farm submissions tosupport a finding of fact that the disclosures harmed thegovernment’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 spokesmanPhil Supple via e-mail. “We are awaiting the decisions of the otherpending dispositive motions and will consider our options at thattime.”

State Farm still has a motion pending to disqualify theRigsbys.

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

Judge Senter considered a partial lift of the seal in January2007 to allow the Rigsbys to give testimony on an independent casein Alabama. Therefore, the judge only looked at the time period ofApril 2006 to January 2007.

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

However, “since the government has not disclosed its reason forstaying out of the case, it is difficult to gauge what damage, ifany, 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 noevidence in the record that would support a finding that thesedisclosures hampered the government’s investigation or otherwisecompromised the government’s ability to make its investigation,”Judge Senter concluded.

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