(Bloomberg) -- The U.S. Supreme Court agreed to hearState Farm’s bid to overturn a finding that theinsurance company fraudulently overbilled the government for damagefrom Hurricane Katrina. The case tests the U.S. False Claims Act, the law that letswhistle-blowers sue on behalf of the federal government and thencollect a share of any funds recovered.
|Lawsuit by two claims adjusters
State Farm is fighting a lawsuit by two claims adjusters who saythe insurer improperly classified hurricane damage from the 2005storm as having been caused by flooding, rather than by wind, inorder to collect federal reimbursement. A federal jury ruledagainst State Farm in a test case involving a home in Biloxi,Mississippi, and a judge ordered the insurer topay more than $3 million in damages andattorneys’ fees.
The high court dispute centers on the consequences forviolations of the requirement that whistle-blower lawsuits remainunder seal for the first 60 days. That requirement is designed togive the federal government time to investigate a claim and decidewhether to intervene.
|Federal appeals courts around the country are divided on thatquestion. One court says a violation requires dismissal of acomplaint, while others say it depends on the circumstances.
|Obama admin urged court to reject appeal
Bloomington, Illinois-based State Farm says independent claimsadjusters Cori and Kerri Rigsby and their then-lawyer, DickieScruggs, undertook a public relations campaign before the seal waslifted. A federal trial judge and an appeals court rejected StateFarm’s request to dismiss the case.
The U.S. Chamber of Commerce joined State Farm in arguing forhigh court review, saying lawsuits under the False Claims Act havesoared in recent years.
|The Supreme Court’s decision to take up the case came againstthe advice of the Obama administration, which urged the court toreject the appeal without a hearing.
|The case is State Farm Fire & Casualty v. United States,ex rel. Rigsby, 15-513.
|Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.
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