A Mississippi couple that filed a federal lawsuit accusing State Farm of manipulating damage estimates after their home was hit by Hurricane Katrina, has withdrawn the charge.
The plaintiffs–Thomas C. and Pamela McIntosh–had sued for bad faith and sought punitive damages. On Monday, U.S. District Court Judge L.T. Senter approved their application to dismiss those claims.
A spokesman for State Farm, Phil Supple, said by e-mail that the charges in the McIntosh case were never true, but the action had formed "the centerpiece of allegations of State Farm wrongdoing promoted by" now-convicted attorney Richard "Dickie" Scruggs.
Mr. Scruggs–who has been replaced by William Merlin of Tampa, Fla. as the McIntoshes' attorney–pleaded guilty in June to conspiring to bribe a judge. He had filed class actions on behalf of hundreds of State Farm policyholders who disputed the insurer's Hurricane Katrina damage assessments.
He also filed a civil racketeering case in federal court, charging the company with obtaining scientifically dishonest inspection reports in order to attribute losses to policy exclusions for water damage. It also accused the firm of altering reports that had found there was compensable wind damage, and conducting sham re-inspections to falsely obtain reports finding damage due to excluded water damage.
Mr. Scruggs had cited documents provided by two sisters who secretly copied them while working as adjusters for the E.A. Renfroe & Company engineering firm.
His use of those documents was scored by Alabama U.S. District Court Judge William M. Acker Jr., who said the attorney had violated an injunction against disclosing and misappropriating State Farm documents, and ordered him prosecuted for contempt.
The sisters–Corri Rigsby Moran and Kerri Rigsby–had worked for Renfroe in Mississippi after Hurricane Katrina doing adjusting work on State Farm claims.
The women, according to a memo and opinion accompanying Judge Acker's order, witnessed what they believed to be fraudulent practices by State Farm and began copying documents they thought were evidence of "egregious misconduct."
In addition to providing Mr. Scruggs and his firm with thousands of pages, they also provided State Farm documents to Mississippi Attorney General Jim Hood and the FBI, and later became consultants to the Scruggs Katrina Group, the memo states.
As "consultants," Mr. Scruggs was paying the sisters $150,000 a year.
Renfroe was a defendant in the McIntosh case. In their motion to dismiss, the plaintiffs said that after discovery proceedings, they concluded "there is no credible evidence that State Farm engaged in bad faith with respect to adjustment of plaintiff's claims…," adding that there is "no credible evidence of any other conduct that can arguably give rise to punitive damages."
State Farm's Mr. Supple said the case is now reduced to a disagreement over covered loss and payment amounts. He said he could not comment whether there is a settlement pending.
According to the McIntosh motion, the house sustained structural flood damage of at least $250,000, as well as $100,000 to the home's contents.
Mr. Scruggs' charges concerning Renfroe were widely reported and his complaints against State Farm were taken up by a number of public figures, including Mr. Hood, U.S. Rep. Gene Taylor, D-Miss., and U.S. Sen. Trent Lott, R-Miss., who was Mr. Scruggs' brother-in-law. Both members of Congress filed claims and lawsuits against State Farm over damage to their own homes in Katrina, which were both settled.
A spokesman for the company, Jonathan Freed, said in the wake of the McIntosh motion that it was "appalling" that Mr. Scruggs had been able to use unfounded charges to "dupe politicians and prompt scandalous headlines."
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