A federal judge in New Orleans tossed out an $8 billion lawsuit yesterday that accused insurers of defrauding the National Flood Insurance Program by improperly shunting Hurricane Katrina damage claims onto the federal program.
Alan Kanner, the New Orleans attorney for the whistleblowers suit brought by a group of adjusters, said after the ruling by U.S. District Judge Peter Beer, "We can appeal. We may appeal."
He added that there were a number of legal options he was considering, but he did not want "to tip my hand" to insurers. He said Judge Beer dismissed the case on procedural grounds and didn't rule on the merits of the allegations.
The lawsuit naming eight insurers and five adjusting firms, which was revealed in May, had been under seal while the government decided whether it wished to pursue its own action against the defendants. It was filed in August.
Insurers, it was charged in the lawsuit, had their adjusters improperly attribute Katrina damage to flooding, which is covered by the federal program, rather than wind, which their private policies were responsible for.
Mike Siemenas, a spokesperson for Allstate said the company is "pleased that the court agreed that these plaintiffs were not the proper parties to bring these claims. We will continue to cooperate with the government's review of the allegations and remain confident in the integrity of Allstate's claim handling practices."
Judge Beers' decision is some good news for insurers who have been barraged with accusations that their claims handling activities were improper.
Congress has passed legislation requiring the Department Homeland Securities to investigate the Katrina claims handling and a preliminary report found no wrongdoing. The same topic is also being eyed by a U.S. grand jury in Mississippi.
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